Making the case for business process outsourcing
What trends are driving the increased focus on outsourced services today?
Middle market companies are struggling with the ability to find the right resources at the right price. With the current skilled labor shortage, this challenge becomes more apparent. Business owners, particularly in the middle market, need to stay focused on their core business. Outsourcing key functions that might otherwise require a very expensive resource, provides them the assurance of meeting their regulatory, security and compliance needs so they can stay focused on growing their business.
During this podcast, Jim Cashin will discuss how middle-market companies struggle to keep pace with the demands around the technology evolution that continues to pick up speed. That includes keeping pace with new process improvements, but also being able to keep pace with the right skillsets needed to continually improve best practices relative to producing and sharing information so that the owners and operators of a business are able to focus on their core mission in driving that business to success.
When you talk about outsourcing, you’re referring to evaluating and performing many different functions across the organization? In other words, it’s not just about technology, correct?
Cashin: Right. First and foremost, it entails evaluating the overall roadmap for a company and the corresponding technology needs. Then, understanding what it takes to support that strategy and that technology.
Beyond that, there are regulatory and compliance issues that are relevant only to particular firms. Privacy and security are clearly two of the issues that are facing all institutions.
Ultimately, when we talk about technology outsourcing, it’s really centered on a strategic plan—how are you supporting your infrastructure and your business applications? Then, tying in those components to ensure that your environment is secure and that you can have a sound infrastructure.
Then, it’s figuring out the business applications that allow for business processes to be more efficient and better automated. That technology should alleviate the need for manual processing and provide real-time information for better business decision-making.
When it comes to specific issues like compliance and reporting aspects, we see a lot of outsourcing of internal audit services because of the expertise required given increased regulatory complexity. The experience of a firm like RSM allows companies to do more without the internal burden of salary, benefits, training and other components they would need.
What sort of cost savings should a firm expect from outsourcing these functions?
Cashin: It’s hard to give a specific answer, because every company is unique. But, on average, a company can save money and that’s not including “soft costs,” which are often overlooked. Generally, we find that through technology improvement—not just with outsourcing but leveraging newer and better technologies to support the business—there’s a substantial cost savings that companies expect, roughly in the neighborhood of 10 to 20 percent.
At the firm level, what sort of analysis goes into determining whether a particular organization would benefit from outsourcing?
Cashin: In a lot of cases where there are small practices performing these functions, it’s hard to keep pace with the technology trends and/or best business processes to employ within a business. A lot of times, there’s a gap that can be filled very easily through leveraging an outsourcing component, whether by “co-sourcing” to perform certain functions or by outsourcing the functions entirely.
If a firm decides to use an outsourced provider, how do they best ensure a successful partnership?
Cashin: The biggest thing is putting the effort into the planning phase of the outsourced engagement—to define what the roles are and who’s going to be responsible for each task so that everybody is clear on the deliverables, the timeframes and the key reporting metrics that need to be reported. It’s understanding how the client wants to be communicated with. Without that understanding, a lot of expectations will likely not be met.
LISTEN TO THE OTHER EPISODES IN OUR OUTSOURCING PODCAST SERIES
Listen to this podcast to learn how organizations are using internal audit outsourcing to help address and meet compliance requirements.
Learn how finance and accounting outsourcing can help you manage your back-office allowing you to focus on the core of your business.
This podcast makes the case for managed IT services as a cost-effective way to enhance business processes and develop future strategies.