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OUTSOURCING EXPECTATIONS SURPASS JUST COST SAVINGS AS CFOs DEMAND MORE - - CFOs see value of outsourcing as a core long-term business strategy says Capgemini

According to today’s CFOs, outsourcing is not just about cutting costs but is key to improving efficiencies and maintaining a focus on core business. Over half, 52 per cent, of respondents in a recent survey by Capgemini*, plan to outsource more of their key operations in the next five years. And 86 per cent say that they have a positive perception of outsourcing because it can help organisations improve operational efficiency and cut costs. But vendors should be aware that expectations of CFOs are escalating as they demand outsourcing service providers make significant improvements to their operations while also improving quality control and compliance.

"Traditionally the main driver to outsource has been to cut costs, but as CFOs’ experience of outsourcing increases, so too does the awareness of outsourcing as a real enabler of change," says David Poole, vice president for Business Process Outsourcing (BPO) Operations at Capgmini. "Managing a specialist provider against agreed criteria delivers an optimum service as opposed to trying to do things internally where too often there is not the same imperative for service excellence, economies of scale, or indeed best practice."

The majority of respondents, 70 per cent, agree that technology plays a very important role in the successful implementation of an outsourcing project. There is a split however between those who expect to outsource back office processes and those who think it is wiser to implement internal shared services centres. 57 per cent of respondents say that their organisation will use more internal shared services for key operations.

"Despite good intentions to consolidate disparate back office functions that were historically spread across several countries, many CFOs are still to understand the benefits of outsourcing as opposed to setting up internal shared services centres," continues Poole.

"The return on investment from a shared services centre may seem impressive, however it is ‘fool’s gold’ if organisations fail to entirely close down their country operations, or fully cost in the new location including the investment in staff retention and management that is required to set it up. Companies that take the decision to go straight to business process outsourcing realise immediate benefit from the investments and infrastructure of a specialist third party."

Capgemini’s survey illustrates that organisations are increasingly looking to outsource their back office functions. But location is not considered a priority at the moment. 57 per cent of CFOs say that it is not important that outsourcing providers have an offshore capability, with just four per cent saying that they felt it to be of key importance. Currently 37 per cent of companies surveyed offshore elements of their finance and accounting, IT, customer care or supply chain/procurement operations. However this figure almost doubles to 71 per cent of respondents when asked about the likelihood of offshoring these operations in five years’ time.