CFO insights

CFO Insights Achieving High Performance Through Finance Business Process Outsourcing STEWART CLEMENTS MICHAEL DONNELLAN IN ASSOCIATION WITH CEDRIC READ John Wiley & Sons, Ltd 00rdpre.indd iii 02/04/2004, 08:44:34 00rdpre.indd ii 02/04/2004, 08:44:33 CFO Insights 00rdpre.indd i 02/04/2004, 08:44:33 00rdpre.indd ii 02/04/2004, 08:44:33 CFO Insights Achieving High Performance Through Finance Business Process Outsourcing STEWART CLEMENTS MICHAEL DONNELLAN IN ASSOCIATION WITH CEDRIC READ John Wiley & Sons, Ltd 00rdpre.indd iii 02/04/2004, 08:44:34 Published in 2004 by John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): cs-books@wiley.co.uk Visit our Home Page on www.wileyeurope.com or www.wiley.com © 2001–2004 Accenture All rights reserved Visit the Accenture Finance Solutions at www.accenture.com/fi nancesolutions or contact us at fi nance.solutions@accenture.com All Rights Reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to permreq@wiley.co.uk, or faxed to (+44) 1243 770620 This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold on the understanding that the Publisher is not engaged in rendering professional services If professional advice or other expert assistance is required, the services of a competent professional should be sought Other Wiley Editorial Offices John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 33 Park Road, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 22 Worcester Road, Etobicoke, Ontario, Canada M9W 1L1 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0-470-87086-9 Typeset in 11/13pt Rotis by Sparks, Oxford – www.sparks.co.uk Printed and bound in Great Britain by CIP Bath Press, Bath This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production 00rdpre.indd iv 02/04/2004, 08:44:34 Preface In writing this book, we’ve witnessed a global phenomenon: Executives around the world have shown an insatiable appetite for information on business process outsourcing (BPO) This enormous interest is being fuelled by a surge in the outsourcing of back-office functions: Every week, somewhere in the world, for example, a major new fi nance and accounting outsourcing deal is being completed What began as a trickle of activity by a handful of pioneering companies in the 1990s, with BP leading the way, has become a huge wave – a corporate tsunami Today, many leading companies are actually in a race to use business process outsourcing as a means to achieve market leadership and redefi ne their competitive position in the global economy The CFOs of these companies have made a strong commitment to BPO and moved aggressively to exploit the benefits that it offers Some see BPO primarily as a costreduction tool, others as a path to radical business transformation Many CFOs, however, are still considering outsourcing as an option Whatever their goals or industry, we found that they were asking the same fundamental questions: ‘I’ve seen so much in the news about outsourcing – what’s it all about?’ ‘Can you tell me who’s doing what? I hear a lot and I want to know the truth.’ ‘What’s behind the rush to India?’ ‘We already have a shared service program or we’re thinking about one – why should we outsource?’ ‘Won’t I lose control if I take this route?’ ‘Where I actually start and how far I go?’ ‘Can you give examples of companies that have outsourced or even gone offshore with sophisticated areas of their business?’ CFO Insights was written with precisely these questions in mind It traces the entire lifecycle of the outsourcing process, from building a business case, achieving stakeholder buy-in, and selecting the right outsourcing partner to pricing and shaping the deal, choosing where to v 00rdpre.indd v 02/04/2004, 08:44:34 Preface locate outsourced business services, managing implementation, reducing risk, and keeping the deal working By drawing on the experience of high-performance companies with well-established programs, our goal is to assist CFOs in moving up the outsourcing learning curve as quickly as possible The practical, timely information offered here provides a strong foundation for planning a cost-effective outsourcing strategy, winning success quickly, and avoiding the mistakes of early adopters This book breaks new ground in charting the outsourcing landscape As our case studies show, the path to success is surprisingly well traveled BP, for example, offers the classic case of a company that has adopted a 24/7 ‘follow the sun’ F&A outsourcing strategy Procter & Gamble has gone global by outsourcing its IT, HR, and property management functions In North America, BC Hydro has outsourced HR and payroll Canada’s BC Hydro has outsourced its entire back office Neptune Orient Lines, one of the largest logistics companies in the world, is now served from a thriving multi-service global hub based in Shanghai In interviewing the CFOs of these and other leading-edge companies, we were impressed by the innovative, far-reaching ways in which they have used business process outsourcing as a tool to enhance overall corporate performance Among our most important fi ndings are the following Many companies have progressed well beyond using outsourcing simply to reduce costs; today they are using it as a tool to promote enterprise-wide change Companies like BP and Thomas Cook have turned to business transformation outsourcing, which is one step along from BPO, as a way to generate sustained profitability and attractive returns so that they can invest back in their core business In fact, mature players don’t view outsourcing as a commodity cost play, but as a means to revitalize their businesses and as a strategic weapon for transformational change Many companies are concerned that outsourcing will lead to less control over their business and therefore expose them to greater risk However, the opposite is true Our research clearly reveals that, far from diminishing control, outsourcing actually increases it A company that outsources selected functions doesn’t give anything away; instead, it is buying a set of defi ned, measurable outcomes and a predictable service that leads to greater control and transparency, not less The outsourcing industry has reached a surprising level of maturity in its service delivery model – and emerged as an industry in its own right Today’s mega-service providers have at their disposal truly interconnected delivery networks that provide a full spectrum of services, global vi 00rdpre.indd vi 02/04/2004, 08:44:34 Preface sourcing, resilience and disaster recovery backup, and consistent, highquality support We’re now seeing the death of the ‘captive’ in-house shared services model and the rise of a global one-to-many delivery service model, in which multiple clients and multiple industries are being served by a network of centers By 2007, the outsourcing industry will double in size, driven by the rapid innovation and large-scale investment of mega-service providers This rapid growth will prove enormously beneficial to clients It will enable them immediately to reap the economic advantages of scaled shared services and next-generation technologies Companies will no longer invest in improving back-office administrative productivity and will expect enterprise benefits far beyond cost reduction Some very sophisticated enterprises are even outsourcing their business analytics Soon, mega-service providers will create a new branch of fi nance BPO around decision support and complex business analysis The bottom line? More and more companies will use outsourcing as a path to greater profitability and leaner capital consumption They’ll redirect their capital into areas that excite their customers and lead to faster growth and more innovation than they could achieve with the drag of a back-office anchor By cutting the links of that anchor, they will release valuable energy and time – and free themselves so they can become far more entrepreneurial CFO Insights: Achieving High Performance through Finance BPO has been written not only to help finance executives, but all decision makers, as they embark on their outsourcing journey It offers original research, hands-on advice from the CFOs of leading companies, detailed case studies, and a wealth of best-practice data – everything necessary for planning and implementing a successful outsourcing strategy Writing this book was both challenging and rewarding We wish to thank and acknowledge the talented CFOs and senior fi nance executives who generously shared their insights and ideas with us: Alan Eilles of BP, Lauralee Martin of Jones Lang LaSalle, Clayton Daley of Procter & Gamble, Bob Davis of Dell, Dennis Kooker of BMG, Ron Dykes of Bellsouth, Wolfgang Reichenberger of Nestlé, Gary Chan and James Dollive of Kraft, Michel-Marc Delcommune of MOL, Lim How Teck of Neptune Orient Lines, Ian Ailles of Thomas Cook, David Harrison of Accenture Business Services of British Columbia (ABS-BC), Pierre Prot of Rhodia and Paul Van Beveren, formerly of Rhodia and now Accenture, Thomas Buess of Zurich Financial Services, John Palmer of Sainsbury’s, John Coghlan of Exel, and Peter Moore of Lincolnshire County Council vii 00rdpre.indd vii 02/04/2004, 08:44:34 Preface From Accenture, we wish to thank the following people for contributing their expertise and experience: Michael Sutcliff, Chapter 2; Adam Johnson, Chapter 3; David Rowlands, Chapter 4; Daniel Lipson, Chapter 5; Stephen Ferneyhough, Chapter 6; J Scott Laughner, Chapter 8; Alan Healey, Chapter 9; Anoop Sagoo, Chapter 10 and Jane Linder; Susan Cantrell; Justin Jenk; and Alison MacKenzie We must also give special acknowledgement to our external advisors and contributors and to the team that helped us put this publication together Special thanks go to Christy Kirkpatrick who produced the diagrams for CCR Partners, and who contributed substantially to the research and coordinated the individual chapter contributions into a cohesive end product In addition, we would like to thank Sarah Thomas, Accenture Finance Solutions marketing director, and her team for their tireless efforts on our behalf This book would not have been completed without their help Finally, thanks also go to our editor, Karin Abarbanel, and the team at John Wiley, especially Rachael Wilkie and Chris Swain viii 00rdpre.indd viii 02/04/2004, 08:44:34 11rdch11.indd 300 02/04/2004, 12:24:31 Biographies CHAPTER 1: THE FINANCE OUTSOURCING LANDSCAPE CHAPTER 11: FINANCE BPO – THE FUTURE Stewart Clements is president of Accenture Finance Solutions (AFS), the unit responsible for Accenture’s fi nance and accounting outsourcing business In this role he is responsible for AFS business strategy; development of Accenture’s delivery center network; fi nance- and outsourcing-focused assets and tools; and the management and development of organizational capabilities Mr Clements is a Chartered Accountant and has a degree in Accountancy from Glasgow University Based in London, he has been with Accenture for nearly 20 years CHAPTER 1: THE FINANCE OUTSOURCING LANDSCAPE CHAPTER 7: STAKEHOLDERS: ACHIEVING BUY-IN CHAPTER 11: FINANCE BPO – THE FUTURE Mike Donnellan is a lead partner in Accenture’s outsourcing and consulting business He has more than 20 years’ experience in the professional services industry Mr Donnellan has also worked extensively on the research, development, and deployment of innovative operating models In 1997, he co-authored CFO: Architect of the Corporation’s Future, which resulted in the adoption of new fi nance and accounting organizational models by numerous corporations around the world 301 12rdbiog.indd 301 02/04/2004, 12:31:34 Biographies CHAPTER 2: CREATING AN OPERATING MODEL FOR HIGH PERFORMANCE Michael R Sutcliff is the global managing partner for Accenture’s Finance and Performance Management group In this role, he develops new service offerings and alliance relationships, and manages Accenture consulting services of interest to senior fi nance executives Mr Sutcliff has extensive experience in strategy, business architecture, systems integration, business transformation, and business process outsourcing; and has assisted companies from most major industries, including automotive, chemicals, consumer goods, and transportation, with their fi nance transformation programs CHAPTER 3: SUPPLIERS: OPTIONS FOR SERVICE DELIVERY Adam Johnson is the global lead for Business Process Outsourcing (BPO) growth in Accenture’s Products operating group, which includes the automotive, health and life sciences, industrial equipment, retail and consumer goods, and transportation and travel industries In addition to more than a decade of specialized experience in outsourcing, Mr Johnson has a strong background in sales and general management Based in London, he is focused primarily on European BPO deals and was part of the teams that closed outsourcing deals with Thames Water, the London Stock Exchange, and La Rinascente, a leading Italian retailer CHAPTER 4: SCOPING: DECIDING WHAT TO OUTSOURCE David Rowlands is a partner with Accenture Finance Solutions, Accenture’s fi nance and accounting outsourcing business Mr Rowland’s particular strengths are providing fi nance shared services and transformational outsourcing assistance to clients in the travel and hospitality industries (key clients include Thomas Cook and Forte Hotels) 302 12rdbiog.indd 302 02/04/2004, 12:31:35 Biographies He also has extensive experience in managing cross-European accounting operations, fi nance strategy and post-merger integration, and core fi nancial process re-engineering and has worked across a range of industries, including chemicals, construction, and aerospace and defense Mr Rowlands is a Chartered Management Accountant and has a Masters degree in Economics from Cambridge University CHAPTER 5: GLOBAL SOURCING OF SERVICE DELIVERY Daniel Lipson is vice president of product development for Accenture Finance Solutions, Accenture’s fi nance and accounting outsourcing business He specializes in architecting pan-European fi nance and accounting outsourcing and enterprise resource planning solutions and has deep expertise in most fi nancial arenas, including budgeting and forecasting, profitability and cost analysis, and management reporting Mr Lipson has more than 11 years of experience in the consumer goods and services industry, as well as experience in the automotive, travel and transportation, and aerospace industries He is a Chartered Management Accountant and has a Masters degree in Chemical Engineering from Cambridge University CHAPTER 6: PRICING AND SHAPING YOUR DEAL Steve Ferneyhough is a partner in Accenture’s Consumer Goods and Services industry group His specialty is developing, selling, and delivering large-scale business transformation outsourcing engagements; he also oversees the development of Accenture standards for outsourcing solutions in the Products operating group, which encompasses the airline, automotive, consumer goods and services, health and life sciences, industrial equipment, retail, and travel services industries In addition to outsourcing, Mr Ferneyhough has extensive experience managing projects for supply chain re-engineering, supply chain planning, network optimization, and systems integration 303 12rdbiog.indd 303 02/04/2004, 12:31:35 Biographies CHAPTER 8: ENSURING A SUCCESSFUL TRANSITION Scott Laughner is a Chicago-based partner with Accenture Finance Solutions, Accenture’s fi nance and accounting outsourcing business In his position as vice president of solutions and sales for North America, he supervises client service delivery, manages the national sales force, and oversees operations Mr Laughner’s client experience includes the design, development, and deployment of shared services capabilities for two major telecommunications providers, a global steel manufacturer, a national water utility, and a global packaging and automotive parts manufacturer Mr Laughner has been with Accenture for fifteen years and holds a BS in Industrial Management from Purdue University and an MBA in finance from the University of Notre Dame CHAPTER 9: REDUCING RISK WITH OUTSOURCING Alan Healey is the lead partner for outsourcing delivery in Europe for Accenture’s Products operating group, which includes the automotive, health and life sciences, industrial equipment, retail and consumer goods, and transportation and travel industries He developed the overall design for a late 1990s outsourcing contract with Sainsbury’s which, at the time, was the world’s largest transformational outsourcing agreement He also oversaw contract negotiations and transition management for Accenture’s fi rst fi nancial business process outsourcing agreement with BP Exploration in 1991 Internally, Mr Healey was responsible for developing Accenture’s best-practice approach to IT transformation 304 12rdbiog.indd 304 02/04/2004, 12:31:36 Biographies CHAPTER 10: CONTINUOUS IMPROVEMENT: KEEPING THE DEAL WORKING Anoop Sagoo is a London-based partner with Accenture Finance Solutions, Accenture’s fi nance and accounting outsourcing business Mr Sagoo specializes in fi nance change programs for multinational organizations and has deep expertise in shared services and outsourcing His more than nine years of experience with Accenture spans numerous industries, and includes the design and implementation of best-practice operating models and processes As vice president of sales for Europe, Mr Sagoo has also been heavily involved in the evolution of Accenture’s fi nance and accounting BPO strategy Mr Sagoo has a joint honors degree from Manchester University in Accounting and Computer Science 305 12rdbiog.indd 305 02/04/2004, 12:31:36 12rdbiog.indd 306 02/04/2004, 12:31:36 Index Accenture 2, 146–8, 259, 284–8, 295 accounts payable (AP) 166 accounts receivable (AR) 166, 291 Amoco asset ownership model 170–73 AT&T 256 BellSouth 56 Bertelsmann Music Group (BMG) 49–52 BP (British Petroleum) 1–6, 96, 256, 257, 259, 260–62 Brazil 142–3 BT (British Telecom) 271–4 business models assessment of effectiveness 52 identify delivery model 53 identify leverageable assets 53 identify sources of revenue 53 identify value propositions 53 change, innovation, reinvention 36, 37, 57, 59–60 defi nition 42–3 differentiated 43–4 direct 38–42 examples of choices 58 global product 43 migration to outsourcing 55–7 business partners 67–70 business process outsourcing (BPO) CFO insights/action 89 announce deal to outside world 91 demand continuing innovation 91 develop spirit of partnership, trust, improvement 90 employment experience for backoffice staff 91 obtain sponsorship 90 proceed at speed 90 strategic ally not conventional outsourcer 90 think corporate transaction 91 transform critical process fi rst 90 changing workforces choosing suppliers 80–84 delivery 85–9 differentiation factors delivery 82 geography 81 process bundling 82 process ownership 82 process transformation 82 target market 81 examples 73–4 future prospects 284–97 growing interconnectedness impact on corporate agenda 6–8 increased organizational scale/ complexity increased scrutiny from fi nancial markets low cost 129–31 multisourcing 77–9 new roles for knowledge/intangible assets 8–9 pervasive low-cost technology power of 131 relationships 84 trailblazing leaders expanding operational boundaries to drive value 72 outsourcing several processes to one supplier 71 307 13rdindx.indd 307 30/03/2004, 19:28:23 Index outsourcing strategic/tactical processes 72 raising the bar 71 trends in 71–4 business transformation outsourcing (BTO) 73, 74–7 buyer values 288 change management 30, 218 strategies 57–60, 63 Chief Financial Officer (CFO) changing role of 10–11 future scenario 60–62 insights/action continuous improvement 276–8 future prospects 298–9 global service delivery 150–51 high-performance businesses 63–5 outsourcing 28–31 pricing/shaping the deal 176–7 risk 247–8 scoping 120–22 stakeholders 197–8 suppliers 89–91 transition process 220–21 China 127–8, 139–40 communication 186, 198 open/honest 179–82 plan 194 stakeholder strategy 193–7 customers 193 fi nance service providers 195 non-executive directors 195 regulators 195 suppliers 195 transition phase 214–18, 221 ConocoPhillips 79 continuous improvement balanced scorecard 277 business value delivered 276 fi nancial growth 276 people 276 process 276 service 276 building on success over time 251–4 case study 272–4 CFO insights/action 276–8 flex/respond to changing business conditions 278 keep score 279 plan for longer term 278 service management discipline 278 co-sourced framework 257–8 keeping the deal working 259, 260–62 phased approach 258 shaping/re-shaping relationship 258–9 evaluate/monitor results 275 automate as much as possible 276 don’t go overboard 276 individual motivation 275 performance should be flexible 275 service provider/end user 275 start early with what you can 275 tie incentives/penalties to make it bite 275 fundamental questions how broad should relationship be 256 how deep should relationship be 256 how much should you change way of working 256 whose assets should be used 257 getting it right from the start 254–6 guidelines it together 269 focus on end-to-end processes 269 focus on outcome 269 get right resources 269 measure, measure, measure 269 refreshment through contract renewal 271 emphasis on added value 271 relationship not price is key 271 restructuring not renegotiation 271, 272–4 start with blank slate 272 relationships 262 build skills/capabilities jointly 263 communicate frequently/informally 263 empower contract managers 262 foster senior peer-to-peer relationships 262 maintain governance board throughout 263 prioritize change initiatives 263 service management framework 264–9 keep focus on 263–4 structured approach 269–71 contractual relationships 159–63, 271–4 core competencies 35 credit risk assessment 114 308 13rdindx.indd 308 30/03/2004, 19:28:23 Index credit/receivables management 111–14 customer service 120 customer-of-one pressures 43 Czech Republic 140–41 decision-making see scoping Dell 38–42 due diligence programs 144–6, 151, 175 electronic bill presentment and payment (EBPP) adoption 112 benefits 111–12 thick/thin consolidator models 112, 113 in utilities industry 114 employment services outsourcing 36 enterprise resource planning (ERP) 103, 108–9, 249, 256 Exel 96, 251–4 fi nance future prospects 296–8 transformation 10–11 technology 10 transparency 9–10 fi nance and accounting (F&A) 1–5 decision-making 96–122 fragmentation of 23 future prospects 284–97 segments analytic services 23 compliance services 23 payment services 23 future prospects 281 case study 294–6 CFO insights 298–9 fi nance/performance mastery 296–8 business performance management 297 capital stewardship 297 earnings transparency 297 fi nance operations 297 risk management 297 frequently asked questions how far you go 281 investment in technology 281 more for less with lower risk 281 innovation insights 281–4 next-generation technologies declining demand for working capital 291, 293 electronic collections will expand 291 impact 288–9 lights-out processing 291 multi-dimensional/animated datarepresentation tool 290 silent commerce 293 user-friendly Web services/superior system interfaces 293–6 wireless connectivity 293 worldwide interconnectivity 284–8 general accounting 115–17, 122 global service delivery case studies 133–4, 144–5, 146–8 CFO insights/action 150 capitalize on shared service center networks as global asset 151 clarify location objectives 151 decide where you are on spectrum 150 determine shared service center location strategy 150 evaluate location risks 151 perform due diligence 151 regulatory, legal, fiduciary constraints 151 checklist 132 cost-impact evaluation 143–4 critical factors favorable government policies 131 highly motivated employees 131 improvements in telecom infrastructure 131 multilingual proficiency 130 skilled manpower availability 130 driving down costs 129–30 due diligence programs 144–6 migrating to 125–8 new technology 148 efficiency tools 149 ERP 149 management tools 149 offshore criteria 134–5 business environment 136 culture 136–7 distinctive competencies 137 infrastructure 137 language 136 physical/time zone displacement 135–6 prevailing labor costs 135 socio-political risk 135 options 128–9 309 13rdindx.indd 309 30/03/2004, 19:28:23 Index order-to-cash processing 130 questions concerning 131–2 risk mitigation 138 have back-up plan 139 keep software code at home 138–9 minimize foreign travel 138 shared service center networks 146–8 sourcing choices 139 Brazil 142–3 China 139–40 Czech Republic 140–41 India 139 Philippines 140 Russia 140 Venezuela 141–2 Hamel, G 37 high-performance company 37 case studies 39–42, 47–8, 49–53, 56, 60–62 CFO insights/action 63 avoid common traps 64 consider characteristics of 63 don’t change business model 64 improve focus 65 reflect on business anatomy 64 review core logic for creating value 64 change/innovation strategies 57–60, 63 competencies 48, 63 coping with major upheaval 49, 52–3 differential operating models 43–5 dimensions create value over cost of capital 45 managing for today/managing for tomorrow 45 revenue growth 45 shareholder returns 45, 63 globalization effects 63 innovation in consumer goods/retail 45–8 networked model 53–5 qualities core competencies 38 managing paradoxes 38 uniqueness 38 vision/determination 38 winning the battle for customers 38 reasons for outsourcing 55–7 value chains 53–5, 64 human resource (HR) management 191–3 IBM India 139 innovation see technology intellectual property ownership 229 International Accounting Standards (IAS) (European) 244–7 Jones Lang LaSalle 14–15 defi ning priority F&A processes to outsourcing 18 driving improved profitability 15–16 infrastructure outsourcing 1617 outsourcing procurement 17 Kraft 101–2 leadership 182–3, 221 trailblazing 71–4 transition 218–19 Lincolnshire County Council 267–8 mega-service providers (MSPs) 284 MOL (Hungarian Oil and Gas Company) 93–6, 192–3 multisourcing 77–8 issues integration planning 79 organizational interdependencies 79 technical complexity 79 Neptune Orient Lines (NOL) 125–8 Nestlé 67–70 Nokia 43, 44 outsourcing advantages fi xed/cost capital turned into variable expense 27 growth through business partnering increased innovation need for integration can override other considerations 27 radical transformation sharing of assets among multiple clients 27 back-office activities 98–9 be fair 255 benefits improved customer service 120 support for sales, marketing, logistics 120 upgraded operational efficiency 120 310 13rdindx.indd 310 30/03/2004, 19:28:24 Index can cause discord 19–20 case studies 14–18 CFO insights/actions 28–9 articulate model of the future 29 consider options available 29 create new capabilities 29 defi ne scope clearly 29 don’t underestimate change management required 30 keep deal working 31 shape deal to suit 30 take risks involved seriously 30 treat as M&A transaction 30 understand stakeholders’ needs/ aspirations 30 collaborative 73, 75 commodity tasks fi rst in line 19 concerns confidentiality 21 data falling into competitors’ hands 20 loss of control 21 contract renewals convention 72 as corporate transaction 183–4 cost reductions decision 95–6 facts/figures 22–3 as frightening experience 216–18 gathering momentum 18 golden rule 96 holistic approach internal tasks 96 location 2–3 maintain momentum 255 models 25–6 precise deliverables essential 19 present/future processes 13–14 promise competitive capabilities 24 fi nancial control/visibility 24 fi nancial/fi scal cost reductions 24 operating cost savings 24 speed to market 24 provide fi nancial equilibrium 255 questions concerning reasons why 55–7 reduction in costs 19 reinforces transparency 20 relationships business transformation 25 collaborative 25 convention 25 roles/responsibilities boundary 266 shared services can be fi rst step 20 similar to disruptive technology 48 structuring 3–4 successful 4–5, 21–2, 184–6 supports core competencies 19 sustained management as crucial 20 two-supplier model performance phase adjustment mechanisms 231 fair compensation 231 gain sharing 231 scoping 231 pharmaceutical industry 53–5 manufacturing 54 R&D 53–4 sales/distribution 54 Philippines 140 planning back-up 139 communication 194 having/managing 221 integration 79 long term 278 transition process 205, 207–11 value realization 88 see also enterprise resource planning (ERP) pricing/shaping the deal asset ownership model 170–73 case studies 160–61, 170–73 CFO insights/action 176 build long-term relationship 176 consider all stages in deal lifecycle 177 design regionally efficient operating model 177 follow best-practice principles 177 review options available 177 shape value proposition 177 stakeholder value 177 contracting principles determine increases on a net basis 168–9 develop consumption-based unit pricing 169 don’t accept additional charges 168 don’t get bogged down in detail 168 economics of 166–9 price adjustments not increases 169 311 13rdindx.indd 311 30/03/2004, 19:28:24 Index provide for significant one-time events 169 strategic variables 166–7 tactical/operational factors 167 contractual relationship 159 common purpose/alignment of interests 162 level of risk/certainty of outcome 159 sources of leverage 162–3 strong governance 162 transparency 162 fi xed price 153–7 negotiation lifecycle 174–6 options annual service charges 166 business benefit based 164 choosing 163 considerations 163 fi xed fee 164 input-based fee 164 joint venture investment 165 models 165 open-book 165 per-transaction fees 164 shared risk/shared reward 164 shareholder value 157–9 tax considerations 169–74 Procter & Gamble (P&G) 33–6, 37 radio frequency identification (RFID) 293 receivables management see credit/ receivables management regulatory environment 195, 196 relationship management infrastructure confl ict management 175 due diligence 175 internal alignment processes 175 negotiation preparation/launch 175 request for proposal (RFP) 83 Rhodia 201–3, 256 risk 159 audit 225 awareness of potential 19 case studies 234–6, 238, 240–41 CFO insights/action 247–8 assess adverse decision by regulatory authority 248 be comprehensive in written contract 248 be proactive 248 compliance with corporate laws 248 consider special risks associated with global sourcing 248 employees are biggest asset/headache 248 governance structure for strategic/ operational risks 248 make sure real deal to be done 248 contracting phase 228 intellectual property ownership 229 open-book audit provision 229–30 performance 231 preventing scope disputes 228–9 soft/hard issues 230 termination 231 transition phase 231 unexpected changes in account team 229 what can go wrong 230 country 225 fi nancial, legal, tax 241–3 going global 239 by yourself 239 with partner 239–40 governance structure/relationships 232 design criteria 232–3 original objectives/benefits 233–4 strategic, tactical, oprational 234 identifying 226–8 nearshore location 240–41 operational 225 regulatory compliance 225, 244–7 treatment of provider 236–8 weighing up 223–6 Russia 140 Sainsbury’s 238 Sarbanes-Oxley act 226, 244–7 scoping 97–8 best practice 100 case studies 101–5, 108–10, 111–14 CFO insights/action 120 consider controls/risk 122 defi ne hand-off points 122 design retained organization 121 develop vision for future 121 general accounting processes 122 go end-to-end in process scoping 121 know provider’s strengths/ weaknesses 121 map supply chain 121 prepare business case 122 think about customer relationships 122 312 13rdindx.indd 312 30/03/2004, 19:28:24 Index understand core process 121 complexity/expertise 101 control/risk 99 credit/receivables management 111–14 customer contact 100 dilemma 101–2 general accounting, reporting, support 115–17 integrated F&A proposition 117–20 order-to-cash 106–11 preventing disputes 228–9 process integration 100 purchase-to-pay 103–5 scale/value 99–100 service management defi nition 263–4 discipline 278 framework 264–9 shared service centers (SSCs) 35, 146–8 reasons for outsourcing capability 12 efficiency 11 growth 11 location 11 reputation 12 scale 11 trends expanding in scope 12 greater company flexibility 12 lowering of investment/operating costs 12 more automated 12 serving more than client 12 shareholder value 157–9 stakeholders 177 case studies 192–3 CFO insights/action 197–8 adopt trusted advisor behavior 198 communicate at right time/to right people 198 identify stakeholders 198 involve HR early 198 know stakeholders 198 CFO/CEO relationship 182 accept ambiguity 183 confidentiality 183 impose rigor on process 183 leadership, commitment, sense of priority 182–3 patience is important 183 communications strategy 193–7 employees 188–90 fears expressed by 197 as outsource partner 185–6 outsource partner communication 186 create/maintain healthy/enduring relationship 185 degree of intimacy 186 negotiation/solution development 185–6 respect, commitment, trust 185 reaching through open/honest communications 179–82 regulatory environment 195, 196 role of HR 191–3 third-party advisors 186–7 transition process 210 strategies change/innovation extension 59 realization 59 reinvention 59–60 renewal 59 suppliers CFO insights/action 89–91 checklist demonstrated competencies 83 overall capabilities 83 quality of solutions 83 relationship dynamics 83 track record 83 choosing 80–84 capabilities 80 criteria 82–3 cultural fit 80 delivery strategy 85 business architecture blueprint 88 deal-driven approach 87–8 nature of services provided 85 number of clients 85 number of sites served 85 operating strategy 88 questions concerning 86–7 service operations blueprint 88 technology components 85 value realization plan 88 value-propositions 87 Web 86 shaping relationship 84 arms-length/contractual 84 commodity supplier 84 professional relationship 84 strategic partnership 84 313 13rdindx.indd 313 30/03/2004, 19:28:24 Index tax 169–74, 241–3 technology 148 efficiency tools 149 ERP 149 future prospects 284–97 low-cost management tools 149 wireless, Web, silent commerce 149 telecommunications 55–6 termination phase exit agreement 232 exit economies 232 Thames Water 14 Thomas Cook UK 96, 153–6, 235–6, 256 transformation checklist 132 transition process case studies 213–14, 216–18 CFO insights/action 220 communicate, communicate, communicate 221 craft framework 220 employ right leadership 221 have plan/manage to it 221 service level/operating level agreements 221 start activities early 220 communication strategies communicate the upside 215 effective 215–16 stick to specifics 215 tend to morale 214–15 contract phase asset transfer 231 people transfer 231 service transfer 231 detailed implementation planning 209, 211 connectivity 210 overall business impact 210 people deployment 210 process implementation 210 service impact 210 staff attrition 210 support delivery 210 European shared service center 201–4 framework 204–5 integration 206 mobilization 205 planning 205 stabilization 205–6 ingredients for success 208 leadership 218–19 change leaders 218 operational leaders 218 management accommodate the unexpected 208 best-practice 206–7 develop baseline metrics of performance 207 keep sponsor involved 208 plan/document knowledge before transfer 207–8 remain flexible 208 people strategy 210, 212 build phase 213 design phase 212 value chains 64 value drivers decline in importance of physical assets 44 disintermediation of non-value added processes 44 increased flexibility to reconfigure/ redirect capacity 44 promoting customer intimacy 44 value levers 288 Venezuela 141–2 Wal-Mart 44, 47–8 Wells Fargo 291, 292 World Rally Championship (WRC) 293, 294–6 Zurich Financial Services 223–6 314 13rdindx.indd 314 30/03/2004, 19:28:24 ...00rdpre.indd ii 02/04/2004, 08:44:33 CFO Insights 00rdpre.indd i 02/04/2004, 08:44:33 00rdpre.indd ii 02/04/2004, 08:44:33 CFO Insights Achieving High Performance Through Finance... BPO on the corporate agenda The CFO and finance transformation Why move to shared services? Outsourcing: Who is doing what? CFO concerns The outsourcing promise CFO insights 11 13 20 24 28 Creating... contract renewal Keeping score CFO insights 251 254 257 262 263 264 269 271 275 277 xi 00rdpre.indd xi 02/04/2004, 08:44:35 Contents 11 Finance BPO – the Future Innovation insights Accenture finance