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Statutory Reporting

Trends in Business Process Outsourcing

Thomson Reuters Tax & Accounting  

· 6 minute read

Thomson Reuters Tax & Accounting  

· 6 minute read

Today, many multinational organizations are going through some kind of finance, tax, or IT transformation project to drive efficiency and reduce costs. Often, these transformations include the use of technology to automate processes or centralizing common functions through the use of shared centers. No matter what delivery model that your organization finds best to support statutory reporting or other compliance tasks, there are four elements that must work together in harmony to enable success: people, process, data, and technology.

For this multi-part blog series, we’ve interviewed industry experts and customers just like you to get their take on these crucial four elements and what they mean for centralizing and standardizing compliance operations.  In our first installment, we heard from Ed Heffernan, co-founder of Barden Financial Recruitment Agency, as he talked through trends he’s seen in recruitment for shared service centers and tips for companies looking to set up a shared service center (SSC) or expand their current operation. In our second installment, Shane Nolan, Senior Vice President at IDA Ireland, discussed trends he’s seen in the market for shared service centers (SSCs) and why Ireland can be a strategic location for companies looking to centralize their operations. In this third installment, Kamalesh Karnad, Marketing & Alliances Leader at IBM Finance Services, talks through trends he’s seen in Business Process Outsourcing industry.

What are BPO’s and how do they help their customers?

Business Process Outsourcing (BPO) refers to a company contracting its business operations such as accounting, payment processing, procurement, customer services, human resources, etc. to outside professionals enabled to perform them with higher degrees of efficiency. By outsourcing non-core and administrative functions, companies can reallocate time and resources to core competencies which results in advantages over competing businesses in their industry. Business Process Outsourcing can overcome internal barriers to provide world-class functions including capital spend, future investment in technology, availability of suitably skilled resource and flexibility to scale. BPO service providers constantly strive to improve their processes by adopting the most recent technologies and practices enabling companies to achieve outcomes that hitherto may have been difficult to achieve.

How is Digital Transformation impacting Shared Services Centres (SSC)?

The digital economy has permanently changed business economics in fundamental ways and will continue to evolve along this new axis for the foreseeable future. This presents new challenges for business processes requiring CXOs to accelerate the shift from analog to digital and unlocking new value from enterprise data faster. It involves completing the digitization of shared services and reimagining how an organization works. According to an IBM study on Digital Reinvention in finance, 89% of surveyed finance leaders have a vision for using digital technologies to reinvent the finance function. Operational excellence focus, high standardization of processes, systems landscapes, and governance models make SSC a suitable environment for the adoption of new technologies such as automation, blockchain, analytics, and artificial intelligence (AI). Attracting, retaining and training staff with strong digital skills has emerged one of the top business priorities. The benefit realization of digital transformation is predicated on improved strategic alignment and closing of the execution gap.

How has the BPO Market evolved over the last two decades?

In the early 2000s, BPO services market exploded by an offshore-centric model capitalizing on labor-arbitrage opportunity where you could access the similar quality of talent at a significantly lower cost base. Over the period, some service delivery improvements were introduced, such as Lean and Six Sigma, end-to-end process definitions, technology augmentation through bolt-on tools and right-sourcing.

In recent years, while the demand for BPO services continues to be strong, the nature of the demand is very different from the traditional ask of running the processes at low cost. There is immense pressure on legacy “lift-and-shift” approach and more clients are demanding that BPO service providers demonstrate innovation to transform processes and drive business outcomes (e.g. increased cash flow, stakeholder experience, compliance, etc.). As the industry shifts from arbitrage-first to digital-first model, service providers are building partnerships to offer the latest technology to meet buyer needs and shorten time-to-market / value. Most BPO service providers are developing business platforms that address end to end value realization and orchestrate various digital capabilities (e.g. automation, analytics, AI, blockchain etc.). As part of platform strategy, they are also integrating ecosystem partner solutions (like Thomson Reuters) to put forward best of breed solution and deliver services in a Business Process as a Service (BPaaS) model. Technology embedded outsourcing has also helped the market move to outcome-oriented pricing.

Which finance functions are more suited in a BPO type environment?

Initially finance outsourcing was limited to transaction-intensive and function focused definition (e.g. Accounts Payable, Payroll, Accounts Receivables, General Accounting, etc.). In the early 2010s, an end-to-end process-driven approach had emerged that focused on consistent delivery and enterprise-wide integration. (e.g. Order to Cash, Procure to Pay, Record to Report). This evolution enabled companies to outsource judgment intensive processes like credit risk management, statutory reporting, internal audit among others. The emergence of digital technologies has shifted the focus from labor arbitrage to technology enabled process transformation; automation and business insights. With more companies facing a critical shortage of digital skills, they are looking at BPO Services providers to enable them to thrive in a constantly changing environment.

Tips for customers on centralizing a global process

Finance Operations continues to get centralized & benefit from economies of scale including predictable delivery, reduced cost, improved knowledge, and talent management. Various factors, such as the maturity of global processes, operating model and organization’s infrastructure will determine the degree to which functional areas could be centralized. In this context, the role of Global Process Owners (GPOs) who own an end-to-end process across functional silos, geographic and business unit boundaries have become more critical than ever to create enterprise-wide value. As a part of the transformation roadmap development, it comes critical to:

  • Develop a deep understanding of the current state including constraints; changes which cannot be implemented
  • Define the target state, establish a plan to standardize and centralize processes
  • Determine sophistication of regional shared services and off-shoring options
  • Enforce high data integrity standards

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