For the purpose of this article – so that readers could get a sense of the current “best” approach to outsourcing – I sought the opinions of two global outsourcing service provider executives who deal regularly with CFO issues. I interviewed FAO Research clients Krishna Nacha, Chief Sales & Marketing Office of EXL Service, and “Tiger” Tyagarajan, Executive VP of Genpact. Both subject matter experts have daily interactions in a related landscape with CFOs and other sourcing decision makers seeking improvements in their operations.
My EXL colleague, Nacha, believes that the next step jump in FAO is by integrating transformational F&A services with transactions outsourcing. Today, the transactions offshoring approach provides economies of scale that enable cost reduction. It enables integration with a set of uniquely defined finance function-transformational services, such as risk advisory, process excellence, research and analytics. The key to this approach is the ability to bring to the customer an Integrated Transformational Outsourcing model, through one contract, one set of SLAs, one program management and governance mechanism, and eventually one integrated blended price.
Why does he believe that EXL’s integrated approach has worked for its CFO customers better than just the standard, labor arbitrage only model?
- Process excellence is embedded into all stages of the process outsourcing
- Don’t have to wait to “fix” a process before you can engage in outsourcing / offshoring
- Knowledge sharing across the “consultants” and “operations” is inherent
- Single point of responsibility for operations, ongoing improvements and transformation
- Dual-shore global delivery model follow the sun model for integrated services.
In my discussion with Genpact, Tiger believes that rather than transformation being a one-time, “Big T” event, it should be comprised instead of a series of “little t’s.” A multiyear roadmap with milestones of transformation has a better chance for success. By taking this approach, buyers could look at their businesses down the road and think, “Gosh, we really have changed things!” This latter model to FAO lowers risk, accelerates payback and delivers certainty of transformation.
He believes that transformation should be a continuous journey, one that Genpact has taken with its customers given that 80 to 85 percent of its growth comes from existing customers. His philosophy is that if an outsourcing service provider builds a successful relationship with its customers, then the customers are likely to continue to hand over additional responsibilities to the provider. When the provider has ownership of a larger process, it can “connect the dots” and help the customer achieve business impact. He believes that the more you undertake (as a service provider) – “to completely encircle the customer” – the more you can bring real value over time.
My overall conclusion is that there is no one, “best” approach to outsourcing. Companies have different cultures, operating environments and industry requirements to warrant standards as related to the FAO lifecycle. Especially in an economically constrained environment, companies should strive for the best transformation via outsourcing in which they partner with a provider who shares common driven goals. The provider-customer relationship should always be viewed as a journey.
Lisa is the CEO and founder of FAO Research, an independent research firm focused exclusively on the FAO and procurement outsourcing markets. As a leading analyst in the outsourcing industry for more than 12 years, she works closely with customers, advisors and providers of outsourcing services.