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Balancing BPO and Shared Services in a Complex, Global Environment

How one company leveraged BPO to reduce risk in Latin America


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Abstract

A leading global provider of cleaning and hygiene solutions engaged Deloitte Consulting LLP to evaluate outsourcing for part of its global Finance and Accounting (F&A) operations, as part of a broader enterprise cost reduction initiative. While the company already had begun to consolidate F&A operations into regional Shared Service centers, they were interested in seeking a cost-effective and sustainable solution. Largely due to the largest of these centers,, located in Buenos Aires, Argentina, the business case for outsourcing versus transitioning to an existing network was essentially a tie. However, qualitative factors such as their previous, while limited, experience with outsourcing and managing perceived risk related to operating a large shared service center in Argentina, weighted their final decision in favor of outsourcing.

The Challenge

As part of an enterprise-wide cost reduction effort, the company’s Finance organization was looking for a way to lower operating costs by expanding the geographic and functional scope of an existing outsourcing contract, previously only covering their European operations. Additionally, the company wanted to explore comparative savings from scaling up existing shared services as a potential solution on a stand-alone basis, or in combination with, further outsourcing.

The company had already made use of limited outsourcing, primarily in Eastern Europe, to support their Accounts Receivable, Accounts Payable and General Accounting needs of its European operations. As this work had become stabilized and standardized and with a now mature supply market, there was an additional opportunity identified to transition more of this work to a lower cost, far-shore location from Eastern Europe to enjoy greater cost savings.

With the largest overall scope in North America, the potential to leverage the Buenos Aires center for both North and South America became an early focus for evaluation. Similar operations in other geographies leveraged limited use of regional Shared Service hubs, with small centers in Malaysia and China also supporting respective regional businesses.

Having an existing center in a similar time zone, with tested capabilities, infrastructure and capacity, was a major financial advantage for this specific company’s current finance operations. The additional scope appeared manageable within the existing Buenos Aires capacity, service requirements were being met and local leadership had recent positive experience in transitioning work from throughout Latin American operations to the Buenos Aires center.

However, there were two primary decision drivers that caused this client to choose outsourcing, versus the perceived control of retaining these finance functions within a regional Shared Services network.

Risk:

  • As with any center, the operator owns the risk – from managing employee attrition to business continuity planning and, most importantly for this client, currency risks. Having experienced significant swings in currency values with respect to their Buenos Aires operation, client leadership determined that few could reasonably predict the medium and long term direction of Argentina’s macro economic development and stability.
  • Leveraging an outsourcing vendor’s experience in managing labor and currency risks in low-cost locations outside Latin America, mitigated this risk for the client and was a leading factor in electing outsourcing.

Process Ownership:

  • Finance leadership had made a conscious decision that they did not want to own transactional finance processes – specifically Accounts Receivable, Accounts Payable and General Accounting (e.g., Fixed Asset Acc’t, General Ledger, etc.). While they would continue to own and operate regional, hub-and-spoke shared service centers, their scale would be limited in size, functional scope and therefore risk. Additionally, the company sought to standardize a largely system-driven, complex finance landscape through increased centralization with either greater use of regional shared service centers or outsourcing.

How We Helped

The client ultimately chose to further leverage outsourcing as part of their overall strategy for managing risks and end-state vision of what they wanted their Finance organization to look like. Additionally, they ultimately selected the provider of their current onshore Europe outsourcing services, with a significantly renegotiated geographic and process scope over a 5-year contract term.

Solution

Deloitte assisted the client with understanding the financial impacts of an expanded shared services and outsourcing solution, including an evaluation of two possible outsourcing vendors and eventual contract negotiations.

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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