Ask FERF about ... sourcing financial operations.Market forces are pressuring companies to provide year-over-year revenue growth and profitability improvements, while increasing the predictability of revenue and profit forecasts. Financial executives also face additional regulatory scrutiny and increasing responsibilities as a result of Sarbanes-Oxley and increasing demands to manage complex financial operations and implement strategic projects. All of this comes at a time when finding and retaining reliable financial and accounting professionals is increasingly challenging. As a result, CFOs and other financial executives are taking a hard look at how to optimize their financial operations, asking such questions as: * Should we consolidate financial operations in-house and develop shared-service centers? * Should we outsource or off-shore some or all of these operations? and * Do we need to augment finance staff during operational and transactional peaks to assist with time-sensitive, critical financial work? Financial Executives Research Foundation (FERF FERF Financial Executives Research Foundation FERF Far End Reporting Failure FERF Far End Receive Failure ) has just begun a research project on "Sourcing for Financial Executives," and has found a few resources that may help answer these questions. Book: Multisourcing: Moving Beyond Outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. to Achieve Growth and Agility. (Cohen cohen or kohen (Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. and Young, 2006: Harvard Business School Harvard Business School, officially named the Harvard Business School: George F. Baker Foundation, and also known as HBS, is one of the graduate schools of Harvard University. Press) The authors, Linda Cohen, managing vice president, and Allie Young, vice president, both at Gartner Research, argue that selecting the right sources for business services, whether internal or external, must be an integral part of enterprise strategy. They call this approach "multisourcing," which they define as "the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business goals." Cohen and Young provide four key themes for successful multisourcing: * You must have a strategy. * Multisourcing governance is the single most important factor in determining success. * Multisourcing is built on a network of relationships -- not transactions. * Multisourcing requires creating measures that matter. Study: Finance Shared Services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. and Outsourcing: Magical, Mythical myth·i·cal also myth·ic adj. 1. Of or existing in myth: the mythical unicorn. 2. Imaginary; fictitious. 3. or Mundane? (IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) Business Consulting Services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , 2005) The IBM Institute for Business Value, in cooperation with the Economist Intelligence Unit The Economist Intelligence Unit (EIU) is part of The Economist Group. It is a research and advisory company providing country, industry and management analysis worldwide and incorporates the former Business International Corporation, a U.S. , conducted a survey of 210 senior finance professionals from 45 countries. Based on this survey, it recommends three sourcing strategies: * Build in balance -- Implement a three-tiered organizational model for finance, designed to provide both stability and flexibility: The top tier, Business Unit Finance, focuses on driving profitable growth. The middle tier (1) Generally refers to the processing that takes place in an application server that sits between the user's machine and the database server. The middle tier server performs the business logic. See application server and client/server. , Central Finance, balances risk and performance. The bottom tier, a combination of shared services and outsourced activities, helps manage complexity through automated reporting and efficient transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. . * Think globally, but execute globally and locally -- Leading companies set standards globally, then work closely with local leaders to address valid deviations. * Blend approaches for faster results -- Accelerate the transformation through a combination of outsourcing and shared services. Report: Achieving World-Class Business Process Operations: A Comparison of Outsourcing and Shared Services. (Kathleen Brumme, Hewlett-Packard Development Co, LP, 2005) Brumme provides an analytical framework for the "make" (captive shared-services center) versus "buy" (outsourcing providers) sourcing decision. This framework is segmented into three categories: operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. , business focus and risk and controls. Operating Model: Organizations that use shared-services centers do not generally charge market prices, so are seldom able to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. "profits." Outsourcing providers can reinvest their profits in their core business, optimizing business process operations. Business Focus: Shared-services centers are often considered to be "back office/overhead" functions, and therefore not a core business. At outsourcing providers, back-office functions are the core business, so they can focus their full attention and resources on delivering cost and service-level improvements. Risk and Controls. Shared-services centers may lack expertise on how to migrate processes without disrupting the business. Companies may perceive that they lose control when using an outsourcing provider, but much of that risk can be mitigated through proper governance and business control structures. As part of its research project, FERF would like to interview members who have thought through the "make" versus "buy" sourcing decision. Please contact William Sinnett at bsinnett@fei.org. William M. Sinnett (bsinnett@fei.org) is Director of Research at Financial Executives Research Foundation (FERF). contributed by FERF |
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