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Resource | 15 February 2013
It’s a given that finance executives evolve their delivery models over time, but when do they make a change from one model to another, and what drives that change?
In a market first, EXL Service, in conjunction with Outsourcing Center, asked finance leaders representing enterprises of all sizes to describe their finance evolution, giving the industry its first glimpse into the motivations - and the timeframe - for taking the next step on the journey. Here is a summary of responses.
1. Five years is the inflexion point
Across the board, respondents look at evolving their finance and accounting delivery models 5 years after initial adoption. This conclusion is validated by the high number of experienced executives; 61% have been working with their delivery models for more than 2 years. The findings suggest that executives are intent upon stabilizing their delivery models before increasing their adoption of shared services and outsourcing, perhaps wringing out as much efficiency and effectiveness on their own as possible before taking the next step along the transformation journey. However, often these fix then shift initiatives fail to deliver transformation at speed; other priorities can get in the way; or the internal team may lack the methodology, technology and quality tools necessary to make rapid, sustainable change.
And when respondents do take the next step on their journeys, they tend to adopt some form of outsourcing model, expanding outsourcing for the delivery of transactional processes, encompassing more processes, or embracing outsourcing as part of a hybrid shared services model.
2. Cost and process standardization remain the main drivers for finance shared services and outsourcing adoption along the journey
No matter where respondents are in their delivery model evolution, the drive to lower cost and improve standardization remains paramount. In fact, these factors became increasingly important over time; perhaps underscoring the limitations of their initial models or acknowledging that other delivery models could be more transformative. Interestingly, several years in to finance transformation, respondents prioritize the ability to tap into the scale that shared services and outsourcing provide.
3. Shared services is often the first step on the journey
Responses corroborate findings of other studies; finance executives tend to “walk” not run, adopting shared services as a first step before moving to models such as outsourcing where commercial and control structures change more dramatically. Executives may see the extent of change represented by centralizing processes within a shared services center as more saleable to their internal stakeholders, or perhaps they believe that they are initially better equipped to consolidate processes on their own without a provider. In other cases, clients may not have the internal skills necessary to work effectively with an outsourcing provider, lacking expertise in vendor management, governance, and change.
4. Size and scope impacts the choice of model
Notably, respondents from both single country and global organizations indicate a preference for outsourcing over time, while regional organizations prefer to expand their shared services model as a next step on their journey. This finding suggests that outsourcing may be a more effective approach to change in a complex global environment; at the same time, its application to a regional scope may be fraught with more internal resistance.
5. Outsourcing remains focused on
transactional processes Corroborating other studies, when respondents do move complex processes to other models, they prefer shared services as the delivery vehicle of choice. However, the story is different for transactional finance processes, which are split between outsourcing and shared services models. Outsourcing is not yet the model of choice for end-to-end finance and accounting processes; perhaps further evolution is necessary before clients are comfortable moving processes that they see as more critical to the business. While today finance and accounting outsourcing providers have the expertise required to deliver more complex processes, clients are often reluctant to take a hard look at what can be sourced.
6. Size does not matter in model adoption
The survey underscores the fact that smaller organizations (measured in terms of revenue) do not take a different approach to finance shared services and outsourcing adoption. Other variables may take on more importance, such as scope and maturity. However, scale is a factor; smaller organizations will not be able to achieve the same level of benefit without scale, often making outsourcing, as opposed to shared services models, a better choice.
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