||This transcript is drawn from an Xtalks presentation on January 25, 2007. To access the archive click here.
Ned Worthington joined AOL in early 2000 where he is now Director, Shared Services Partner Management. Under pressure to re-tool its financial processes and systems AOL migrated to a Shared Services platform in late 2004. In early 2005 Worthington began leading a project to assess options for using a BPO service provider in Bangalore, India.
How do I find the right service providers for my outsourcing journey? What qualities do I check?
I would start with just doing some general research on the web. Information is widely available on who are the big players. You'll hear that the big five or big six are referred to quite often. My focus has been on providers in India. But I would not limit my search to one particular region. You want to find the provider that meets your needs regardless of where they are located. There are any number of factors that you would consider to select your vendor. A lot of it is the geography or what kinds of languages do they speak. And really you want to find a good match culturally with your organization so that the governance is something you are confident will work well. There are some good places to look for information, IDC Gardner has good data, Xtalks is a great source to help steer you to some partners. Depending on the size of your company it might be worthwhile engaging a company like TPI to help you think through some of the steps you want to take in your early planning. I'm partial to TPI because I had a good experience with them but there are a lot of players in the industry. You'll find your way around once you start researching and find a good fit for yourself.
When do you decide to outsource? What company size makes sense?
A lot of it depends on what your drivers are and what you are trying to accomplish. For us all of the drivers led us to this now. It's not just the label arbitrage, although that is an early win that you get as long as you plan it well and you plan out all the costs and if your cost savings are really proved out in reality. So that's really a function of how well you do your planning. But what are you trying to accomplish with your outsourcing is probably the most important question that you should answer early. I'm not so sure that's a function of size or whether or not your goals are going to be met through outsourcing. For us the answer to that was yes. Our deal is probably larger than some but definitely not as large as others. I know some other partners that HP services are much bigger deals. In that case they are usually a smaller focus, in terms of which areas they are supporting, but they have 200 or more head counts. The objectives for something like that are different to what we were trying to accomplish. So I don't think it's so much a function of size rather it's understanding your goals and then making sure that the business plan of the outsourcing effort helps you achieve those goals.
At what stage does outsourcing bring cost savings?
I think there is a healthy scope of scepticism and people have different experiences. I can only speak to my experience here and I wouldn't want to leave you with a picture that everything is rosy. It's a very difficult thing to do but if it's planned well and you have good leadership and support in some of the key things that are going to help it become successful then I think you can have a very good experience. For us, we really broke even and that's after transition costs, travel, consulting expenses and contract negotiations. We had surprises, we had more travel than we had planned, and in some cases we were fortunate to have a captive centre that we could utilise. A good example is when it became time to launch our first set of processes, scheduled for October 2005, and unfortunately out IT was not set up and ready to go. We did not have the connectivity that was necessary in order for the provider to perform the work at their sight. So we had to lean on our captive centre where we already had established connectivity in order to help bridge that gap. Those are the kinds of things that add cost to your engagement and all of those things are a factor of when do you brake even. For us, brake even came out of the first year and then savings from that point forward. In some cases I think it's hard to see the cost savings, if one of your goals is to become a transformation centre as opposed to a transaction processing centre, how do you put a number on that. But from a dollars and cents point of view for us it was out of year one. But really it would be a function of what expenses is it going to take you and what are the other economics and your business case.
How do you manage Sarbanes Oxley controls with an outsource provider. Does it simplify the procedure at all?
That's definitely one of the things we were concerned about moving into this space. I would say we managed it very carefully. In many ways, I think the process of going through this planning helped us understand our processes so much better and gave us such a better view into what we did and where the gaps were or where we needed improvements. I think it was a huge benefit in terms of understanding risk areas and really that's what SOX is about, making sure that you are disclosing everything and making sure you understand the risks in you business and the stop gaps for risk in your business. So having better documentation and understanding your processes better is a big win. One piece of advice I can give is that you have somebody on your project team from your SOX area who knows what you are trying to accomplish, and the SOX requirements, and from there you need to have it clearly articulated in your contract what your expectations are of your partner in terms of helping you certify your results. All of our SOX requirements are built into our contract and our deliverables from our partner and we work very closely on an ongoing basis with our internal control desk, here within shared services, to make sure that the folks who oversee our SOX efforts are part of the process to ensure compliance.