F&A BPO services: Life beyond lift and shiftViewpoint paper

the benefits of your BPO relationship.There are numerous potential benefits of business process outsourcinggoing beyond cost savings to innovation and greatly expanded capabilities.

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Table of contentsReasons clients believe in BPO...................................1 Making it not just work but thrive ...............................2 Building the foundation .............................................2 Ongoing relationship factors .....................................3 Whats in store........................................................4 The bottom line .......................................................5 About the author .....................................................6

As more organizations look to business process outsourcing (BPO) as a way to support their growth and improve competitiveness, they need to ensure the relationship is built on the right foundation. By answering critical questions and having a shared understanding of goals, you can establish a thriving partnership.In the finance and accounting (F&A) world, BPO has quickly matured beyond pure labor arbitrage for delivering valueand beyond the simple lift and shift of current F&A transactional activities from a client to an outsourcing provider. Ask any CFO what he or she is looking for from outsourcing and although the answer will include cost savings, that response is likely to follow the mention of innovation, taking advantage of new technologies, and global capabilities. Many organizations say they initially decided to engage F&A BPO services to save money, but now they want more. With those initial savings behind them, theyre looking for innovation, efficiencies, and expanded capabilities. The first reason most CFOs initially consider BPO is for the cost savings. Most organizations are able to save 30-40% as a result of labor arbitrage and the scalability afforded by engaging BPO services. In addition, transitioning to a BPO model provides a means to standardize and improve consistency in F&A operations. One HP client, a major beverage producer, said its BPO engagement was the starting point for global standardization in its operations and the lever to expanding its shared services. Large BPO providers like HP also provide a path to support merger and acquisition or expansion activities on a global scale. By leveraging language and regulatory knowledge, an organization can rely on the BPO provider to quickly and efficiently set up the F&A services required in a new market. A major global consumer goods company has said HPs delivery capabilities and cultural similarities enabled it to onboard operations to its shared services in additional countries more quickly than if it had tried to take on the task itself. BPO enables organizations to focus on their competitive advantage while receiving lower-cost services for processes that are not a core competency and where investment is not sufficient to continue past improvements.

Reasons clients believe in BPOThe number of organizations engaging the services of F&A service providers continues to grow. According to Horses for Sources, in 2011 Thirteen percent (of companies) expect to start an F&A BPO engagement for the first time over the next 12 months, while 40% plan to increase the scope of their current F&A BPO activity. (The Finance & Accounting BPO market landscape in 2011, http://www.horsesforsources. com/fabpo_2011_042011) We are seeing increased interest in the mid-size company market in particular. And based on HP experience, we can see that moving to a BPO model can result in significant cost savings for these organizations.

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Figure 1 Progression of BPO value-add offerings

Costs

Value

DecentralizedTime 1990

Regional Shared Services

Global Consolidation and Adoption, Commercial BPO2010

Technology Enablement and Process Optimization

Business Value Add as End-to-End Process Owner201 1

BPO to KPO, Analytics, Technology Optimization and Automation, Cloud Delivery

Making it not just work but thriveDespite the benefits and compelling reasons to engage BPO services, there can still be a note of reluctance on the part of CFOs. Fortunately, there are keys to making a BPO relationship not only work but thrive. As an experienced BPO provider, HP leverages knowledge and experience to establish a strategic partnership that will yield success. Previous lessons learned are built into the methodology for setting up new partnerships. Here are some keys that HP has learned along the way that can mean the difference between an acceptable relationship and a strategic partnership.

What does standard process mean? Do we currently have standard processes, or are we trying to get to a point where we have standard processes? What are acceptable exceptions to the standard process? What is meant by transform? What does innovation mean? What does it look like? Without clear answers to the above questions, the groundwork is set for missed expectations and frustration. It is important for the client and the provider to have a shared understanding of these items. And it is in the providers best interest to work with the client during the transition and set-up phases to get all parties to a shared understanding and agreement on expectations. Because as humans we sometimes have short memories (and staff turnover occurs), it is also important to include a calibration step in the methodology about six months after go-live. This calibration step is an opportunity for all parties to again discuss the critical topics and ensure that everyone continues to agree on objectives.Dont forget change management

Building the foundationMuch has been written about how to set up a BPO relationship. This paper is not meant to be a primer; however, there are two steps within our methodology that have been critical to HP establishing successful BPO partnerships.Say what you mean and mean what you say

It is imperative that the client has clearly defined its expectations and objectives for entering into a BPO engagement and that those expectations are clearly communicated to the BPO provider. Providers must have a methodology in place to ensure their team starts on the same page and stays aligned with the clients expectations throughout engagement. Here are a few of the key items clients and providers must clearly communicate and agree upon: What outcome expectations do we have from engaging partnerfaster, higher quality, better compliance? Which processes are in scope, and which are out of scope? Which tasks stay in-house, and who is responsible for them?

In a recent survey conducted by the London School of Economics Outsourcing Unit, 49% of buyers of BPO services cited the ability to support change management and governance as a critical attribute for a provider. (HfS Research and the London School of Economics Outsourcing Unit, 2011,http://www.horsesforsources.com/facts-aboutoutsourcing-part-7_072111) Change management

and communications often do not get adequate attention from the client or the provider. Yet, they are an important component in the success or struggle of a BPO engagement.

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Figure 2 Management of change model

Stakeholder Enrollment & Alignment Stakeholder analysis Build leadership commitment Align sponsorship & project to business case and vision

Develop MoC Strategy & Plans Conduct MoC orientation MoC program design and structure

Assessment & Analytics Identify key risks, barriers, and enablers Cultural assessment and gap analysis Assess project change impacts

Engagement and Commitment Engage & align management & people Engagement strategy and planning for stakeholders

Management of Change

End User Readiness Impacted employees and end user readiness Vendors/third-party readiness

Client Retained Organization Management of change for retained employees Changes in roles & responsibilities Client retained organization design Minimize change impacts between client and provider

After a BPO decision is made, it often sparks loyalty to the clients staff. The mindset becomes, no one can do this as well as our own staff dideven if previously the mindset was this service is horrible/ inefficient/of poor quality. It is important to address change management; and the providers should be in a good position to support it since they have seen how change management has been handled in other organizations, both well and not so well. HP places a great deal of emphasis on change management, but strong internal executive sponsorship is also critical within the clients organization.

Clients also want to know they are not in this model alone. It is important to have references of other clients using the providers services. Taking this one step further, a BPO provider may sponsor a user forum. This will give clients the opportunity to come together and share successes and challenges faced through the outsourcing process.Transformation

Another important factor in the ongoing relationship is the planning for transformation. The BPO model is a good platform from which to transform a technology, function, process, or activity. This could include everything from process reengineering to automation. These steps in the process are crucial to building a trusting relationship between the client and the provider. As noted earlier, it is important for all parties to understand what is meant by transform and plan for that change. A series of planned targets over time and Ongoing relationship factors comparison against actual results will help track the After the foundation is set, it is important to continue progress of transformation initiative. to nurture the relationship to create and maintain a There must also, however, be flexibility in the plan. strategic partnership. Business conditions change, and so must the solution. Tell me youre going to be here A major communications client noted that although the Clients want to know the BPO provider is going to transformation plan was important, the client felt one continue to be there for them in the future. But more of the biggest value propositions HP offered as a than just be there, they want to know that the provider was the ability to adapt to the clients provider is going to invest in new technologies and changing business model. keep up on trends and best practices. One way to convey this message of being there is through road maps. Road maps show the future vision of technology improvements and how the provider will get to that vision. The road map should be developed in conjunction with the clients organization and tailored to its business goals and needs.Innovation

Every HP client notes innovation as an important factor in customer satisfaction. Often, though, there is not a clear view of what innovation means (again making the say what you mean and mean what you say step so critically important) for both parties.

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Figure 3 Engagement maturity process

Stabilization Production management Documentation Process optimization SLA base lining Define QA methodology Regional/global consolidation Common processes SLA implementation CAPA Kaizens

Process ImprovementsStandard processes Green belt projects Common SLAs Standard controls Value stream mapping and lean

Transformation Benchmarking Process reengineering Process digitalization Self-service web-enabled tools Total automation Agile business process Complement operational process to business process

Streamlining

Consolidation and Improvement

Standardization and Projects

Business Transformation

Adaptive Enterprise

Innovation with HP includes the use of process improvement methodologiessuch as Six Sigma, industrial engineering and lean toolsto take errors and waste out of the processes. Innovation also relies heavily on technology. This often means the exchange of paper for electronics, self-service functionality, and automated workflows. Investment in tools to drive these innovations is critical. Another area of innovation lies in the collection of and ability to use data. The term analytics has taken on huge significance in the business world. Analytics involves studying historical data to identify potential trends, to analyze the effects of certain decisions or events, or to evaluate performance. A BPO provider is in a great position to provide that data to a client and with innovation, can also provide analysis through modeling and simulation. The HP Vertica platform provides sophisticated real-time analytics, which can add a great deal of value beyond the traditional BPO model. The desire for innovation in a BPO relationship and the potential for different expectations about what constitutes innovation between clients and providers heighten the need for ongoing communications, a formal governance framework, andmost importantly a collaborative approach. According to EquaTerra (now part of KPMG), this collaborative approach to outsourcing is critical to foster an environment in which innovation can exist and thrive. (EquaTerra, Eradicating the Innovation Dearth in Business Process Outsourcing: Practical Advice on how to Achieve It,www.equaterra.com/equaterra_position_The Innovation_Dearth_in_BPO_6030_Feb2010.pdf)

Outsourcing Research Unit agrees: Emphasis has shifted toward closer interaction between outsourcer and provider. The focus lies on long-term strategic partnerships where risks and rewards are shared, and vendors are willing to invest for innovation and technology, expecting long-term cooperation and revenues. (Outsourcing Research Unit, Outsourcing Relationships Before and During the Global Financial Crisis, http://outsourcingunit.blogspot.com/2009/11/outsourcing-relationships-beforeand.html)

Fostering a good partnership includes working toward shared expectations but also setting up an effective governance structure. It is extremely important for a methodology to include the setup and definition of governance at the beginning of the model and to provide for changes that happen in the course of the relationship. Governance teams will manage any changes in scope and any major changes in process definition that may occur in the course of business over time. With the proper foundationand nurturing steps along the waya BPO relationship can grow into a great partnership and provide value far beyond that of simply outsourcing.

Whats in storeThough the BPO model is mature, there are trends leading the industry into new, innovative territory. Here are areas where we see growth in the near future:More e activity

In all areas of our life, the Internet is now pervasive. The world of BPO is no different. HPs road map for Partnership the future of F&A BPO includes continuing to increase Throughout the discussion of factors that make an levels of automation. For example, in the procure-toongoing relationship thrive, the theme has been pay space, this includes the expansion of e-invoicing, partnership. Although it is possible to just outsource electronic workflow for approvals, storage, and and treat the outcome as a commodity, our experience archival, and the increased use of a supplier portal for has been that the most effective BPO models have been increased self-service. in situations where HP and the client have a partnership and work as a team to plan and improve service.

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Figure 4 Business analytics

Business ChallengesInternal Transactional Data Primary/ Perception Data Secondary Market Data

Reporting Performance Analysis Trend Analysis Segmentation Benchmark & Gap Analysis Trigger Analysis Key Driver Analysis

Measure as-is Analyze

Predict/ImproveModeling Optimization Simulation

Data-Driven Business Decision SupportMobility

Many business people have smart phones. The latest trend that we are seeing is adding the ability to view, approve, and organize financial documents with the use of a smart phone. With the Internet and mobility, enterprises are instanton. Everything and everyone is connected. Everyone expects immediate gratification and instant results. HP is focused on providing solutions that support the Instant-On Enterprise.Industry focus, vertical expertise

about jumping into the cloud, cloud services offer high levels of availability, flexibility in the consumption model, and a reduction in the total cost of IT ownership. For these reasons, HP is committed to providing safe, reliable cloud serviceshelping clients take advantage of all the benefits that cloud services offer.

The bottom lineBPO services have been around since the 1990s, but the benefits of employing the BPO model are more prevalent than ever. The key to achieving the best possible results is by establishing a long-term BPO partnership that thrives on better business outcomes due to ongoing communications and trust. It is also important to find a global, knowledgeable, and experienced BPO provider that can help your organization take advantage of the latest technology and trends that will lead the BPO model into a successful future.

HP believes strongly in the value of providing services with comprehensive, industry-specific BPO solutions tuned precisely to meet the needs of complex corporations. This means providing a deep, industryfocused knowledge of businesses, processes, and systems. Some providers are starting to talk about this focus, but HP has a proven track record in several industries and sectors.The cloud

To expand the value chain, clients are looking to the next step in the evolution of technology: cloud services. Although there is still some hesitation in CFO offices

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About the authorSuzanne Grouette

Suzanne Grouette is an F&A account delivery manager in the BPO organization at HP. In that role, she has been responsible for many continuous improvement and transformation projects on a global scale. Grouette has specialized in strategic planning, as well as implementing breakthrough changes in the BPO space. Prior to her current role, Grouette was global business process architect on the Request-to-Pay Programme in support of a global automotive firm. She joined HP in 2007 as an SAP consultant, with experience globally implementing the finance, supplier relationship management, and supply chain management modules. Grouette has many years of experience as a business process engineer and earned a Six Sigma black belt and Lean Systems master designation. Her career has consisted of a series of roles with increasing responsibility in the IT and shared services arenas.

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Copyright 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. 4AA3-7417ENW, Created December 2011