Finance & Accounting Outsourcing Best Practices Assessment

The major challenge in this project was overcoming problems that arose from the fact that executive management, who drove the sole sourcing investigation (based on a vendor promise of substantial savings per share), permitted the vendor free access to the organization to develop its proposed BPO solution before they announced to company employees that the outsourcing investigation was going to take place. Work products being drafted by the vendor were evaluated as an inadequate foundation for outsourcing. Management was upset and the company had begun to lose control of the project to the vendor by the time that TBI and client employees were engaged in the evaluation.

The original scope for the BPO proposed by the vendor was very broad, incorporating all back office services. However, internal assessment had only been conducted in advance in Finance & Accounting (in an earlier TBI engagement). There, needed process and systems improvements and cultural change initiatives had already been identified as internal activities practically required in the short term, prior to outsourcing consideration. Cultural resistance to outsourcing and distrust of executive plans was high. By the time the Outsourcing Evaluation Team was formed and TBI hired to advise the process, the organization was already arguing for withdrawal of most back office processes from the BPO consideration. With TBI advice, the company decided that only the F&A sole sourcing investigation should move ahead at that time. A formal assessment of IT was recommended and undertaken as a prelude to a possible issuance of a competitive RFP for partial or total outsourcing.

TBI took control of development of the F&A Statement of Work (SOW) on behalf of the organization. We identified required service level standards and metrics and crafted a Service Level Agreement for the client. Additionally, we ran workshops for the client Outsourcing Evaluation Team in outsourcing contracting, service level management, and governance. We also worked with the vendor to assure that it provided the client with an adequate service transition plan, prior to contracting.

As the evaluation progressed, client personnel successfully argued that certain F&A functions originally in scope should not be outsourced. As the BPO scope size decreased, it became obvious that only small, routine functions that were “broken” (due to inadequate systems and process) were going to be offered to the vendor in the sole sourcing action. Since these were functions that required substantial investment in order to improve systems and streamline processes, the vendor would have limited opportunity to provide the client with cost savings. Negotiations finally broke down on this point.

Throughout this project, TBI carefully designed all deliverables to be useful to the client regardless of the outcome of the sole sourcing negotiation. We worked with executive management to create an organizational model for the F&A organization that would be useful regardless of whether routine finance and accounting services were outsourced or insourced. Similarly, the work statements and service performance requirements were crafted to be useful in creating the shared services organization or contracting with a vendor for services. And, finally; when the sole sourcing negotiation was concluded, TBI helped the organization to craft a strategy and text for an RFI to gain information on vendor capabilities and recommended approaches to enhancement or replacement of current finance and accounting systems. With this approach, TBI was able to help the client to achieve a successful conclusion to the project, despite the failure of the premature and half-hearted BPO investigation.

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