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What's Wrong With Outsourcing (And How To Fix It)
August 1, 2006
Finance and accounting (F&A) outsourcing deals trail IT and HR handoffs in frequency and dollar amount. That laggard position puts CFOs contemplating F&A outsourcing in the catbird seat. From that vantage point, they can avoid the pitfalls that swallow many IT and HR outsourcing endeavors as they guide finance through the risky terrain of outsourcing decision-making. (See Need-To-Know Terms below for definitions of words and phrases used throughout this article.)
Most of the dangers that have hampered IT and HR outsourcing arrangements also confront finance and accounting initiatives. Although those risks have remained fairly constant, companies' outsourcing strategies are changing. Executives a rung or two below the C level, including procurement executives, are now making outsourcing decisions. Outsourcing advisory firms are leveling the playing field for buyers and providers, and some organizations are beginning to hire full-time experts to better manage their ongoing outsourcing relationships. Overall, outsourcing is now viewed less as a trendy silver bullet for cost reduction and more as a strategy -- like automation, process improvement and shared services -- that can help organizations boost their long-term efficiency and performance.
Need-To-Know TermsOutsourcing: The transfer of responsibility for internal transactions, processes and, in some cases, entire corporate functions to an external services provider that may be located inside or outside the United States. Shared Services: Within a company, the centralization of responsibility for conducting internal transactions and processes and supporting corporate functions. Offshoring: The transfer of a company's business processes to facilities in a foreign country, which may be owned by the organization or by a third-party services provider. The term denotes a geographical shift only. For U.S.-based companies, it refers to locations outside of the United States, Canada and Latin America. Captive offshoring: A strategy that leverages offshore shared services. Nearshoring: For U.S. companies, the transfer of processes to facilities in Canada or Latin America. Greenfield: Undeveloped land that a company purchases to build facilities -- for example, a captive-offshoring operation. The term is borrowed from civic planning. Brownfield: Previously used land, possibly requiring cleanup, that a company owns or leases and targets for redevelopment. In captive-offshoring scenarios, this land is likely part of a larger property that holds existing facilities. Another civic planning term. |
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What's Wrong With Outsourcing (And How To Fix It)
Again, we know unless the business is viable and is running, those arrears cannot be collected. At such points, one finds his prayers at a dead end, evoking no response.