CFOs are becoming increasingly attracted to transformational outsourcing,because it offers reduced risk and improved functions at less cost and time.

by Stewart Clements

In a previous edition of FAO Today, I dedicated my column to the technology trends that are driving the future of F&A BPO and touched on the transformation that can be achieved through outsourcing. In this issues column, I would like to explore transformation further and illustrate why I believe that transformational outsourcing will become the outsourcing model of the future.

For many companies today, outsourcing is simply about transferring current F&A processing operations to someone else, based on the fact that they can do it cheaper and better. However, to best-in-class, high performing companies, outsourcing involves shifting the strategic mindset of the organization, resulting in fundamental improvements in service and quality.

I believe that the very nature of outsourcing demand is changing. As the broader business process outsourcing market matures (in particular the F&A BPO market), organizations are increasingly less preoccupied with having control over the assets or inputs of an accounting or finance function and are becoming more concerned with outcomes.

 In research for the book CFO Insights: Achieving High Performance Through Finance Business Process Outsourcing, CFOs told me and my coauthors that they are attracted to transformational outsourcing because it is faster, requires less capital, offers reduced risk, and can radically improve their finance function. By partnering with an outsourcing provider in this way, they are bringing best practice processes, cutting-edge technology, and transactional excellence to their business and are benefiting from greater transparency and increased control.

By combining the benefits of cost reduction and enterprise transformation, this new approach yields significant results, as described in the Thomas Cook case study, moving the finance function from being a perceived overhead function to a demonstrable value creator. In the future, finance is becoming a lever to transforming the rest of the enterprise.

Transformational outsourcing deals have the following attributes:

*Strategy--Management time is freed from daily transactional concerns to focus on tapping new sources of value.

*Leadership--Enterprise level change requires wider sponsorship at the highest levels, with executives taking on more involved roles.

*Collaboration--Critical processes are handed to a specialist provider that will bring them up to a competitive level, driving change and delivering results rapidly.

*Innovation--The structure of a transformational outsourcing agreement will motivate the business partners commitment by aligning goals, distributing and sharing risks, and promising rewards.

*Transparency--A clear and consistent view of business activities, performance, and opportunities is provided.

*Flexibility--As the deal evolves, a degree of movement is allowed for the evolution and growth of the business.

The outsourcing arrangement of the future will take a more collaborative shape, and as a consequence, buyers of outsourced services will increasingly consider partnering with outsourcersan essential strategic move. In transformational outsourcing arrangements, the focus is on bringing the organizations capabilities, assets, and expertise to bear in an effective and controlled way. This is achieved by partnering with an outsourcing provider to develop a joint vision of where your business is going strategically and aligning the infrastructure, assets, and capabilities required to make it happen.

Collaborative commitment between an organization and its outsourcing partner can form the basis of a high pay-off outsourcing agreement that will transform the organizations enterprise-level performance and outcomes, driving change throughout the business.

Outsourcing can offer a true business transformation opportunity if, like Thomas Cook, you look beyond simple cost reduction. Not only can outsourcing change the way your company goes to market, it can change the markets your company is in. So, look for the far reaching benefits that transformational outsourcing can bring and ignite the strategic potential of your finance function. 

Transformational Outsourcing Case Study: Thomas Cook

Thomas Cook UK, a leading travel company, was unprofitable and was faced with significant potential losses in the coming year.

It was always our intention to transform the business, said Ian Ailles, Thomas Cooks Managing Director of Specialist Businesses. Our losses were so significant we knew change had to be radical.

Accenture Finance Solutions (AFS) was selected as Thomas Cooks partner on an innovative co-sourcing deal. AFS created and took charge of a shared services center and built an integrated SAP platform to consolidate Thomas Cooks UK finance and accounting.

In the first 18 months of the deal, Thomas Cook has seen a reduction of 30 percent in costs, improved operations, a 140-million reduction in their cost base, and a greater customer focus, as employees spend less time on back-office processes. F&A outsourcing has also helped Thomas Cook become more flexible to adjust to business changes and improve operational efficiency by having the lowest cost model in the industry.