Kevin Lightfoot, vice presidents, external communications,ACS,A Xerox Company offers his perspective on FAO

GS: What are the technology strategies that are being deployed across all FAO?

KL: All FAO providers actively invest in their technology strategy. At ACS we continue to increase our technology functionality along the major business processes (Record to Report, Order to Cash and Source to Pay). These tools are web-based add-ons that can be integrated with the client ERP and/or routine data files can be pushed back and forth, if clients prefer integration-lite technology environment. We are also exploring SAP based BPaaS services/technology for the mid-market in Europe. At ACS we also feel strongly about the importance of service performance and dashboard reporting, so we also promote a web-based dashboard tool to help our clients transition from a F&A Shared Services COE to a F&A governance COE.

GS: What are the upcoming trends in FAO?

KL: We will continue to see smaller size TCV deal. Clients will seek more business performance improvement than cost reduction (which will drive more end-to-end outsourcing). As SaaS ERP platforms improve, we will start to see the mid-market take advantage of BPaaS which will have a positive impact on the G2000 market.

GS: What are the key drivers?

KL: Consistently we see CFO challenged with a common set of pressure that often lead them toward outsourcing:

Cost/Value

CFO organization has to reduce costs and also drive more business value / benefits for the organization
CFO seeking way to self-fund F&A investments
CFO wants to convert semi-fixed costs to variable to create more flexibility, nimbleness

Capacity

Flexible business models/capacity to address future & rapid business changes/events
Capacity to address growth (buy vs. build)
Access to on-demand talent pool
M&A support and integration

Capabilities

Leveraging global workforce; while mitigating social impact & separation costs
Implementing best practices
Gaining access to more Six Sigma/lean capabilities
Access to innovative technology

Control & Risk

Freeing up key resources to evaluate and assess business risk vs. just focus on compliance
Maintaining and improving process controls
Maintaining “ever green” process documentation
Successful transition of work activities
Managing global, virtual teams

GS:What are the inhibitors to finance & accounting process outsourcing adoption?

KL:Perception of loss of control if not doing the work. Current recessionary pressures are forcing clients to seek cost reduction but large layoffs may not be perceived as tolerable. Which may drive more piecemeal outsourcing/pilots to keep sourcing programs small, under the radar. Clients make investment in technology; but has not achieve planned benefits; bt they feel they have to stick to plan until any recorded asset is amortized off their balance sheet / or client require use of existing technologies often impairing larger productivity benefits

Client has so many critical project/programs they cannot get out ahead of their transformation curve; does not have capacity to take on outsourcing program

GS: What are the benefits that can be achieved from finance & accounting process outsourcing?

KL: ACS delivers a wide range of benefits to our clients:
Cost reduction (via labor arbitrage and contractually committed productivity improvements)
Business outcome improvement, which often can drive more benefits for our clients than the cost reduction benefits (e.g., reduction in DSO, asset recovery, spend reduction/cost avoidance., etc.,)
Speed to Market, we have examples where we have helped our client integrate M&A activities and exit out of bankruptcy early, which have real strategic business value for our clients.

While we do not get to see our clients total business case, we believe in the original first contract term most of our clients are likely realizing a net business case (net of all of their implementation costs) benefit of 15 – 19% and in a typically 5 year contract, we believe they are achieving a year 5 run rate benefit close to 25 – 35% depending on how high their internal costs were prior to outsourcing. So on an on-going, renewal basis, we believe our clients have achieved their business case and continue to be pleased with the overall value FAO is delivering.

In addition to the tangible benefits our clients also achieve other core benefits:
Frees up key client talent for more value added activities
Access to new and additional technologies the client would not have invested on their own
Converted our client’s semi-fixed cost base into a variable cost structure
Scalability to address new growth, especially in regions around the world the company does not have significant presence
Improved and evergreen process documentation; improved control environment

GS: What are the critical success factors?

KL: Developing a holistic enterprise wide sourcing strategy

Clients can implement in a phased manner and/or start with pilots, but those companies that really develop their sourcing strategy as an enterprise and as a functional business owner reduce value leakage as compared to those that approach
outsourcing more ad hoc/one offs and/or siloed.

Leap into 3rd – 4th Generation governance practices

Companies that have outsourced for a while and are on their 3rd/4th renewals have learned a lot about the importance and the best practices of robust and strong governance/service management capabilities

Newer companies are not taking advantage of leveraging these key learnings; which often due to they have not approached outsourcing strategically as they could have/should have (see first bullet)

Not investing in a robust change management program. We see a lot of value leakage (e.g., client misses critical deadlines; FAO contract converts cost to transactional based pricing, but client is not managing demand, service level performance has not achieve targets, but it is due to client delays and not service provider delays, etc.,) on the client side due to they have not developed a robust change management program for their sourcing program

Use 3rd party advisors strategically. We are seeing a lot more internal procurement led FAO programs and in many cases, we can observe while the internal sourcing team has a lot of outsourcing experience, they often do not have some of the nuances of FAO outsourcing; thus some companies are not optimizing their programs and are introducing value leakage into their programs and contracts.