By Art Shanfeld, Senior Advisor, TPI
Order to Cash (OTC) outsourcing has typically been on CFOs’ lists of “potential outsourcing opportunities,” but it has not risen to the top of the list until recently. TPI is seeing more interest and activity in OTC outsourcing this year in spite of - and possibly because of - the depressed economy.
Several emerging trends in OTC are catching CFOs’ attention and changing their priorities on that list of outsourcing opportunities. These are the TPI Top 5 reasons why OTC is growing in popularity:
1. The shift from function-based to process-based (“end-to-end”) outsourcing. In the past, OTC outsourcing solutions have focused on just two or three functions within the OTC process (e.g., credit, collections or cash applications). But in the past few years, sourcing service providers have invested in developing “end-to-end” OTC capabilities that offer integrated solutions (tools and processes) across order management, credit management, invoicing, cash application, dispute resolution and reconciliation and analysis. These end-to- end capabilities drive higher efficiency in transaction processing as well as resolution of order entry mistakes, pricing disputes, billing errors and credit or collection issues. The benefits of transparency and accountability that come with service provider investments in end-to-end capabilities are paying off with increased buyer interest and confidence.
2. Shifting buyer interest from offshoring to transformation. The “lift and shift” model has been the backbone of most OTC solutions and has driven cost savings for most companies. Most service providers have established networks of offshore centers with the technology and telecommunications infrastructures that are necessary to support customer requirements. Separate from and beyond offshore capabilities, though, some service providers have made investments to quickly broaden their offerings by making strategic acquisitions of niche companies with deep OTC capabilities. These providers have combined the proprietary tools and methodologies from those acquisitions with their other service delivery resources and capabilities to provide robust OTC transformation capabilities to their customers. The providers are offering much more than just “labor arbitrage” and are differentiating themselves from their competitors in the early stages of customers’ RFI/RFP processes.
3. Increased focus on customer service requirements. Buyer concerns with service provider offshore capabilities in customer service and support are not uncommon, given the language barriers and timing in getting issues resolved. This sensitivity is particularly high for companies that require higher levels of customer communication and contact. Given these sensitivities, TPI is seeing situations where customers are choosing onshore and nearshore solutions to gain better support and higher customer satisfaction (internal and external customers) by foregoing higher-level cost savings from offshore options.
4. Shift from customized to standardized OTC solutions. As part of the drive to “end-to-end” OTC outsourcing solutions, service providers are leveraging their investments in technology by pushing to their customer bases standardized tools and methodologies that require lower costs to implement and maintain. This trend will likely take hold in the more transaction-based areas of invoicing and cash applications, while demand for more complex and customer-facing activities (such as order management) will still require higher solution customization.
5. Focus on cash flow. Companies are evaluating OTC outsourcing opportunities with several goals in mind, including obtaining cost savings while balancing customer support and satisfaction requirements. A benefit that has always been part of the discussion is cash flow. Service provider capabilities to reduce days sales outstanding, to improve receivable agings or to reduce receivable write-offs have typically been a part of the “benefits” discussion. But with demonstrated end-to-end capabilities by service providers, the cash flow benefits are even better, more visible and more attributable to the changes and improvements brought by service providers’ OTC solutions.
The net effect of these five trends is that OTC is not just one of the topics on CFOs’ lists of outsourcing opportunities . . . it is quickly becoming the area of focus.
TPI’s CFO Services experts can help your organization produce an objective assessment of your current sourcing strategy and develop a roadmap for your future strategy with objective, risk-balanced, and forward-oriented solutions for maximizing value during economic uncertainty. To learn more contact
Art Shanfeld, Senior Advisor, TPI.