Document 6491776

Finance and Accounting
Outsourcing - How to Avoid
Pitfalls and Gain Value
Presented by Karen Ikeda, ACS & Joe Hogan, Alsbridge
May 11, 2011, 11am EDT
Sponsored by ACS, A Xerox Company
Presented & Produced by the Outsourcing Institute
Today’s Speakers
Joe Hogan
Managing Director
Alsbridge
Page 2
May 14, 2011
Karen Ikeda
VP, Business Development
F&A Services
ACS, A Xerox Company
Discussion Topics
• Introductions
• FAO Trends
• CFO Challenges
• Key Challenges Along the Sourcing Lifecycle
•
–
Strategy / Planning
–
Designing / Contracting
–
Execute / Transition
–
Operate / Renew
Questions & Answers
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May 14, 2011
FAO Trends
•For the last three years; there have been over 100 contracts awarded
each year with the major FAO providers
– 2010 there were over 135 new awards
•Approximately 85% of signed contracts are with companies with
revenues of $1 billion or higher
– Over 60% of the contracts are with companies with revenue of $5
billion or higher
•The majority of the contracts have a total contract value (TCV) of less
than $25 million
– Historically, at least 30% of the contracts are over $25 million TCV
– For 2010, that threshold dropped down to less than 25%
• Approximately 45% of the 2010 contracts were three year contracts
– May have had two, one year renewals (mimics 5 year contract)
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May 14, 2011
CFO Challenges
Key benefits sought by most CFOs remains consistent.
Page 5
Cost &
Value
•
•
•
•
•
Reducing direct operating costs
Self funding future investment
Converting semi-fixed costs to variable
Improving business results
Freeing up resources for higher valued, partnering activities
Capacity
•
•
•
•
Flexible business models to address business changes
Capacity to address growth & geographic expansion (build vs. buy)
M&A support and integration
Access to on-demand resource pool
Capability
•
•
•
•
Leveraging global workforce & talent
Access to broad, diverse talent and skills
Implementing best practices
Access to innovative technology
Control
& Risk
•
•
•
•
Successful transition of work activities
Maintaining and improving process controls
Maintaining “ever green” process documentation
Managing global, virtual teams
May 14, 2011
Key Challenges Along the Sourcing Lifecycle
Sourcing Lifecycle
Strategy /
Plan
Design /
Contract
Execute /
Transition
Operate /
Renew
Leadership / Change Management
• Scope definition
• Client technology
• Evaluation
process
• Capturing key
volumetrics
• Negotiating
innovation out
• Pricing
• Team hand offs
• Cultural
alignment gaps
• Client critical
path items
• Understanding
governance
requirements
• Turnover
Strategy / Planning Challenges
• Scope
–
Process vs. functional
–
End to end scope vs. piece part
–
Pilot / proof of concept vs. full program roll out
–
Impact on employee retention / career pathing
• Client technology requirements
–
Leverage current investment; prevent asset
write off
–
How much more investment will client make
• Capturing key volumetrics
–
Gaps in volumetrics – have biggest direct
impact on pricing approaches
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May 14, 2011
Evaluation Process
• Does the evaluation process test for cultural alignment fit and enable
collaboration
– There are many qualified FAO service providers
– Capability & experience records are very close on many attributes
•
Have the selected providers achieved key threshold levels
• Need to be careful that the quantitative analysis is balanced with the
qualitative evaluation
• Leverage the evaluation process to test for compatibility, transparency
and collaborative style and alignment
• Actions speak louder than words
– Innovation versus cost/price
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May 14, 2011
FAO Transformation and Innovation
Clients and service providers need to spend time articulating and defining
the transformation agenda for the relationship.
Process and/or
Functional
Transformation
•
•
•
•
Implementing shared
services /
outsourcing delivery
model
Additional cost
reductions beyond
contract price
“Customer
experience”
improvement
Reduce costs
outside of provider’s
scope (TCO)
Page 9
Technology & Other
Project-oriented
Benefits
Business Outcome
Benefits
•
•
•
•
•
•
Days sales
outstanding
Profit leakage
Revenue per
customer
Asset recovery
Inventory turns
Program spend
May 14, 2011
•
•
•
Implementing new
ERP / significant
ERP upgrade
Completing project
early
Contingent fee
based projects
Idea Sharing,
Networking and
Alliances
•
•
•
Thought leadership,
whitepapers, best
practices
Networking forums
Introduction to
enabling alliances
Pricing Methodologies / Gainsharing
Effort Based
Output /Transactional
Outcome Based
Examples:
•FTE / rate card pricing
Examples:
•Price per invoice
•Price per customer
Examples:
•% of cash collected
•% of spend
Benefits:
•Ease of application
•Low administration
Benefits:
•Aligns w/business
•Scalable
•Predictable
Benefits:
•Aligns with business changes &
performance
•Greater risk / reward
Challenges:
•Requires good volumetrics
•Greater administration
•Need to ensure incentive to
eliminate transactions
•Can be challenging if
significant change is planed
Challenges
•Requires more end to end sourcing
•Requires good volumetrics
•Greater risk / reward
Challenges:
•May be creating a staff
augmentation vs. outsourcing
contract
•Costs still semi-fixed
•Greater governance requirements
•Difficulties dealing with volume
changes
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May 14, 2011
Sourcing Lifecycle
The greatest time, money, and complexity occurs post-contract; but often
receives the least amount of formal support.
Sourcing Lifecycle
Strategy
/ Plan
Design /
Contract
Execute /
Transition
Operate /
Renew
Value leakage mitigation
1 – 2% Spend
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97 – 98% Spend
Strategy & planning
Transition & commencement
Evaluation & contracting
Ongoing delivery
May 14, 2011
Contract expiration / renewal
Service Management & Governance Pillars
Leadership needs to think about the resources & skills required to successfully
manage a sourcing contract.
Page 12
Relationship Management
•Strategic direction & governance
•Growth & innovation
•Customer satisfaction survey
management
•Communications management
•Internal stakeholder management
•Forecasting and demand
management
Performance Management
•Performance analysis & service
delivery management
•Incident, problem, escalation,
change management
•Service requests & authorization
•Risk management
Contract Administration
•Contract administration
•Contract change management
•Contract issue management
•Dispute resolution
•Service provider audit
•Governance library
Financial Management
•Invoice management
•Performance credits, earnbacks, and
critical milestones
•Contract pricing adjustments
•Chargeback
•Value leakage mitigation
•Demand forecasting
•Financial analysis & planning
May 14, 2011
Transition Challenges
• Team hand offs (both sides)
–
Greater emphasis on kick off meetings (may need multiple meetings)
–
Take the time to ground both teams
–
Training to client team
• Cultural alignment gaps
–
Company to company
–
Team to team
–
Culture to culture
–
Demographics to demographics
• Client critical path items (technology)
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May 14, 2011
Governance Challenges
Typically only about 20% of the common
challenges are contract related
(e.g., T&C’s / pricing).
•Understanding governance requirements
–
Acquiring the right skill set
• Co-dependency issues
•Turnover
–
Account turnover
–
Company turnover
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May 14, 2011
Client Intimacy
Not Met Providers expectations are met or exceeded Exceeded
Successful contracts / relationships achieve the right balance of client intimacy.
A Taking Relationship
Client Intimacy
• Possible misperceived client
satisfaction
• Risk of failure to renew – price /
contract
• Erosion of trust
• May be perceived as “not
listening”
• Probable high profit
• Not referenceable
• High client satisfaction
• High level of trust
• Appropriate executive
interaction
• Honest / frequent
communication
• Cooperative contract
interpretation
• Referenceable
• Fair profit
Client Conflict
A Giving Relationship
•
•
•
•
• Possible misperceived sense of
client loyalty
• Risk of failure to renew –
inflated expectations
• Referenceable
• Possibly engaged in
undesirable work
• Communication – inability to
say “no”
• Artificially lowered profit
Contractual disagreement
Low client satisfaction
Not referenceable
Inordinate executive
investment
• Little or poor
communication
• Low level of trust
• Potential / probable loss
Not Met
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May 14, 2011
Client expectations are met or exceeded
Exceeded
ACS is Now a Xerox Company
Page 16
Powerful Brand
and Trusted Partner
Established and respected leader
Serve 50 states and many Fortune 1,000
Global
Delivery
78 global service delivery centers
500 locations/130,000 people
Service and Operational
Excellence
Recognized Leader — IDC, Gartner
4th consecutive J.D. Power Certification
World-class
Portfolio
Comprehensive offerings and expertise
Unique market position and leadership
Technology
and Innovation
9,400+ active U.S. patents
4% of revenue dedicated to RD&E
Enable process breakthroughs
May 14, 2011
ACS - Complete Portfolio of End-To-End FAO
Solutions
Key Metrics
Full Scope FAO Services
Corp. Services /
Decision Support
Record to
Report
Order to
Cash
Source to
Pay
• Treasury
– Cash & Debt Planning &
Management
• SOX Compliance
• Strategic Planning
– Competitor & Market
Analysis
• Decision Support
– Business Performance
– Forecasting
– Business Case Support
• Product Costing & Pricing
• M&A / Divestiture Support
• General Accounting
– Consolidation & G/L
Close
– Intercompany /
Allocations
– Journal Entries
– Reconciliations
• Fixed Assets
• Cost Accounting
• Tax Compliance / Filings
• System / Table
Maintenance
• Reporting
– Regulatory / Statutory
– Management Reporting
• Credit Analysis &
Processing
• Order Management
• Billing Services
• AR/Cash Application
• Deduction Management
• Collections & Dispute
Resolution
• Bad Debt, Reserves &
Write-Offs
• Analytics
– Reporting
– Payment Trending
• Sourcing
– Spend Analysis
– Contract Negotiations
– Commodity & Program
Management
• Procure to Pay
– Vendor Maintenance
– Purchase Reqs / P.O.
– Mailroom Ops / Imaging
– Invoice Processing
– Exceptions & Inquiries
– Payment
– T&E Compliance &
Processing
• Payroll Services*
• 1K forecasts developed
• 6K business analysis
performed
• 22K Component parts –
standard cost development
• Over 100 FTEs
•
•
•
•
•
•
•
•
• $11.6B in “Spend” under
management
• 600+ procurement
professionals
• 40M Invoices
• $421B in Payables
• $1.3M T&E
• Over 3,500 FTEs
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19K GL closes
68K Journal entries
182K GL reconciliations
$900M Inventory managed
in 34 locations
• 500K Fixed assets
• Over 1,000 FTEs
May 14, 2011
860K Customer accounts
$235B Receivables
~53M Collection contacts
Over 18,500 FTEs
Questions & Answers
If you have any questions or further interest
to learn more about finance & accounting
outsourcing please contact:
•Karen Ikeda, ACS, A Xerox Company
Vice President Business Development
Finance & Accounting Services
(206) 276-3706
[email protected]
•Joe Hogan, Alsbridge
Managing Director
214-696-6410
[email protected]
Page 18
May 14, 2011
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•
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•
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•
Trends, Best Practices, Case Studies
•
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•
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•
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•
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•
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Thank you for joining
Finance and Accounting Outsourcing –
How to Avoid Pitfalls and Gain Value
Joe Hogan
Managing Director
Alsbridge
Karen Ikeda
VP, Business Development
F&A Services
ACS, A Xerox Company
This webinar was sponsored by ACS, a Xerox Company in conjunction with The Outsourcing Institute.
Page 21
May 14, 2011