To outsource or not to outsource in the age of technology
Processing invoices is rarely a company’s core skill, and nor should it be. But if invoices are going unpaid or being paid in duplicate, the success or otherwise of such back office functions will inevitably have an effect on the bottom line.
Many organisations have opted to outsource such functions so that efforts can be concentrated on the profit earning front end of the business. The advantages of BPO (business process outsourcing) include being able to tap into a third party’s specialist knowledge, leveraging economies of scale that the BPO provider has garnered, and taking advantage of lower cost locations that the BPOs favour.
But is the ever increasing adoption of enabling technologies watering down the appetite for outsourcing?
I was recently talking to a European Finance Shared Services Director about the transition his company made to automated invoice processing, and their choice to implement technology rather than outsource the function.
“Just two years ago the technology wasn’t good enough to support our business functions”, he explained. “Back then, outsourcing was more feasible [for our business]. But with technology picking up at the rate it is, in a few years manual labour won’t have a play in the P2P process at all”.
He suggested, however, that implementing a technological solution was not always straightforward. It took the company three years to roll out their invoice processing solution across Europe. Results have been positive, but a little on the slow side, largely because of cultural issues bubbling up and the requirement to knowledge-up on legislative aspects for solutions concerning invoices.
“We predict a cost reduction of 10 – 15% on a new solution we are rolling out. By regularly monitoring the project and staying flexible in our approach, we can act quickly to meet business demands. If we had outsourced invoice processing, we doubt we would have had the visibility of important management information”.
Whichever method you choose for your business, the argument will revolve around cost efficiency and efficacy. Both outsourcing and the implementation of software require investments in terms of implementation and maintenance, but the returns are nearly always there.
In an age where developments in technology are arguably outpacing the developments offered by most BPOs, it will be interesting to see how the BPOs upgrade their own technological offerings to compete with stand-alone technologies.
What results have you had with outsourcing business processes within your organisation? Has your attitude changed with technological advances?