Shared Services Week Spotlights Co-Sourcing, FAO Wins, Agility Risks

By Dan BerthiaumeAttending the 16th annual North American Shared Services & Outsourcing Week hosted by SSON in Orlando last week was an opportunity to catch up on trends and innovations in shared services and BPO. It was also a reminder that outsourcing is a truly global phenomenon and a key driver of international commerce. The exhibit floor included representatives of groups promoting outsourcing in emerging BPO delivery destinations such as Lithuania and Costa Rica, as well as several established Indian providers, and a poolside cocktail reception was hosted by Scottish Development International.

In a morning conference session, Jake Farkas, project director of Trinity Industries, a multi-industry conglomerate involved in everything from leasing railcars to oil fracking, described how outsourcing finance and accounting processes has helped his company unify numerous financial systems and methods that resulted from hundreds of mergers and acquisitions over the years. Assisted by transformation/outsourcing provider EXL, since 2002 Trinity has achieved benefits such as reducing the cycle of closing books from seven days to two, eliminating non-supported legacy financial systems, deploying best practices for financial benchmarking and baselining, and streamlining regulatory compliance efforts.

The Pros and Cons of Agility

The G6 Under Practitioner Review brought together executives from Capgemini, Deloitte, Alsbridge, KPMG, CSC, and Genpact to discuss a wide range of issues affecting captive delivery services and outsourcing providers, one of which was agility. Participants debated whether an outsourcing provider can be as agile as a captive service provider, and what the ramifications of BPO agility are.

Ben Trowbridge, CEO of Alsbridge and occasional contributor to Nearshore Americas, described agility as a double-edged sword. “The good news about agility is also the bad news,” he said. “You are driving a car with lots of controls [in an agile captive services model], but you must make lots of decisions at all value points. You spend a lot of time dealing with routine things.”

Hubert Giraud, CEO of Capgemini, said that outsourcing providers can make up for having generally lower levels of agility than captive service providers with other advantages. “An outsourcing provider with a large base can exchange people and move locations,” he said.

Meanwhile, Susan Hogan, principal of Deloitte, said outsourcing and captive services providers deliver value to their clients on different timetables. “Outsourcing providers deliver an initial bubble of value, while captives deliver an ongoing innovation value stream,” she said.

Co-Sourcing Aids Indirect Procurement

Laszlo Koos, corporate indirect purchasing director of L’Oreal, described how the company uses a collaborative outsourcing model that has been dubbed “co-sourcing” to reduce costs and increase efficiencies of L’Oreal’s indirect procurement activities in France, Germany, Italy, Spain, and the UK. Combining elements of consulting and outsourcing, co-sourcing focuses on high-end strategic sourcing and category management activities with a gainsharing model that pays the provider based on measured savings from supplier invoices.

“There has been a factual economic contribution to the business units involved,” said Koos, “and an increase in the profile and visibility of the purchasing team.” Koos said the program, which went live seven months ago after a 23-month building process, began producing “significant savings” after one month. L’Oreal’s co-sourcing initiative is designed to help support broader company goals including doubling the number of global consumers it touches from one billion to two billion in the next 10 years.

This article originally appeared in our sister publication BPO Outcomes.