Consider the Source

Where Have All the Managers Gone? Check the Beach

Today's blog on F&A workforce trends comes from Peter Allen, Partner and Managing Director, TPI.

The talent gap may come in a rather sizable wave over the next few years, and the F&A outsourcing industry is coming of age at just the right time to bridge the gap.

I remember a conversation with the Corporate Controller of an F-100 company a few years back in which he asked, “If we outsource our finance functions, where will my replacement come from?”

It’s a very serious matter for companies and succession for key business support functions is a Board-level topic.

So, does outsourcing mitigate the risk of being caught without an acceptable successor to senior F&A leadership, or is it exacerbating the problem by moving the practical, hands-on work to external providers?

Financial Data Perfection vs. Pragmatism

Greg Peterson of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

Striking the balance between data accuracy and time spent data collecting, prior to entering into a sourcing contract, helps determine risk down the road.

When assessing a potential sourcing opportunity, a significant amount of effort is involved in assembling the required financial data to support RFP development and the evaluation process.  Much of this effort involves building a financial base case that represents the current spend for the in-scope services, along with the underlying “units of consumption,” or resource volumes that the base case spend accommodates.

Clients often weigh the trade-off between time spent collecting, organizing, and validating data versus its accuracy.  Relevant data is often not as readily available as clients may hope, which may be due to a variety of factors:

It’s a Government Thing

Shaun Daly of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

Every business has industry-unique requirements that must be attended to when contemplating a business process change as significant as outsourcing.  State government is no different. 

If you haven’t noticed, the state government community is showing an increased level of interest in IT outsourcing and is focused on exploring the leverage potential in data center consolidations.  Several states have already contracted with service providers and several more are currently exploring their options.

From a financial perspective, it is imperative the outsourcing project team address the current and future budget process and ensure continued participation from all agency funding sources. With increasingly tighter budgets, grave security threats, inadequate disaster recovery capabilities, and an aging workforce, state agencies are turning to the market place for help as many currently manage and maintain independent IT shops without taking full advantage of the enterprise opportunities of the entire state. 

Away with Paper!

Today's blog comes from Peter Allen, Partner and Managing Director, TPI.

So many of us are accustomed to the ease with which we run our lives in today’s electronic-enabled and Internet-connected world. The number of us who remember the days of entirely-paper processes, such as check-writing, mortgage applications, and legal gambling, are dwindling. But not fast enough.

I am struck by the urgency some industries are moving to rid themselves of paper-based processes. It’s definitely a good move for the consumer – fewer misplaced forms and less opportunity for error. For businesses, it’s an even better move.  Manual and paper-based work processes are costly, error-prone, and grossly inefficient.

The financial services sector is among the most aggressive in eliminating inefficiencies. That industry has been harkening about straight-through processing for several years, and I can attest to the fact that no stone is being left unturned in the relentless search for process improvements.

Catching Up or Staying Ahead?

Today's blog on the HP/EDS deal comes from Peter Allen, Partner and Managing Director, TPI.

The marriage of EDS and HP is not about catching IBM, as has been commonly reported, but about staying ahead of Google, Amazon and Dell, while emphasizing services over effort.

Look at the bigger picture: there are only two clear leaders covering the broadest spectrum of outsourcing services.  IBM and Accenture cover the gamut of IT and business process services, including many industry-specific processes for airlines, retail, pharmaceuticals, and banking. The nearest pursuers are in India: Infosys, TCS and Wipro.

The combination of EDS and HP is one step short of having the sort of coverage enjoyed by IBM and Accenture, but three steps ahead of everyone else.

European Roulette

Today's blog on European outsourcing comes from Duncan Aitchison, Partner and President of TPI’s operations in EMEA.

You would think that a shift in global outsourcing demand away from the U.S. would be accompanied by an increase in outsourcing activity in Europe. Surprisingly, this has not been the case.

If one looks at the Total Contract Value (TCV) of private sector outsourcing transactions conducted in Europe each year since 2003, the amount has been consistently around the $40 billion level.

What is more interesting, however, is the pattern of outsourcing activity at the country level within Europe.

Europe remains a challenging market for any business. It doesn’t behave as a definable, targetable concentration of homogeneous demand.  It is a collection of diverse countries and regional markets with different cultural and linguistic characteristics, as well as a variety of legal and industrial structures. Together, these factors influence what is bought, where, and how it needs to be sold.

Listening to the Buy-Side

Today's blog on TPI's Americas Sourcing Leadership Exchange (SLE) comes from Peter Allen, Partner and Managing Director, TPI.

Falling quickly on the heels of our Americas Sourcing Industry Conference (SIC) held for service providers, we conducted our latest Americas Sourcing Leadership Exchange (SLE) for buy-side participants last week in Chicago.

What can one learn from spending a couple of days with almost 200 executives who are actively involved in the outsourcing business proposition and battling the recessionary markets of 2008?  Plenty.

Despite some of the popular conjecture about a slowdown in the adoption of outsourcing, this was our largest SLE ever, and the attendees generally expressed a desire to become ever MORE active in using outsourcing to achieve greater variability in their corporate cost profiles.

Many of the attendees, whether in the planning stages or actively managing existing arrangements, were keen on achieving even greater flexibility in their costs.  The discussions around captive operations, shared services and internal optimization received considerable air time when considered in contrast to outsourcing.

Pulling the Renegotiation Levers

Dale Hearn of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

Of the many factors that come into play during sourcing decision-making, financial drivers within the existing contract are critical.

Companies must decide whether to renegotiate their contract with their current provider (re-source), choose a new service provider, or bring the services back in house (in-source). Several clients that I worked with over the past couple of years made a conscience decision to renegotiate with their current service provider based solely on the overall financial implications of the deal.  For more information, check out my colleague's whitepaper.

Service levels, client satisfaction surveys, balance of trade issues, and executive relationships all had an impact in renegotiations, but the most important factors for these clients were based on the NPV (net present value) and profit margins over the term of the deal.

Think Outside the Indian Sourcing Box

Today's guest blog on outsourcing in Latin America comes from Melany Williams, Partner & Managing Director, TPI Innovation Center.

With a wave of buyers of outsourcing services looking to Latin America, the habit of moving your business 7,000 miles away needs evaluation.

The appreciation of the Indian rupee by more than 11 percent against the U.S. dollar this year and the rise of the Canadian dollar is causing many companies to consider diversifying their offshore portfolios. India is facing constraints such as wage inflation, talent attrition and infrastructure strains, and Latin America is increasingly becoming the alternative “go-to” location.

A number of factors support setting up a Latin America operation: most countries in the region have stable social and economic environments, the necessary infrastructure, intellectual property rights, and free trade agreements including NAFTA that make sharing data in core business applications across borders possible. These regions are more appealing now than a few years ago and successfully migrating IT and business service support functions requires a balanced view of risks and opportunities.

Straw Man Arguments of Offshoring

Today's guest blog comes from Paul Duckham, Senior Advisor, TPI.

Should a U.S. bank spend another US$2-3 million tweaking its mature IT systems to squeeze another 5 percent productivity gain out of its U.S. operations, or just move the processes offshore, with the potential for 40 percent saving?

The above surely sounds like a straw model argument; obviously the better business case wins out every time, doesn’t it? Well, not always.

The portfolio of IT projects often takes on the characteristics of ancient law – it must not be questioned or changed. Most of the time this is good since constant churn in the project list causes a huge waste of resources as people start and stop project work.

But when considering BPO opportunities and whole processes outsourcing, shouldn’t everything be fair game?