For Internal Use Only
January 21, 2005
What an outsourced back office service could look like
Financial analysis, strategy and reporting
Criteria for considering which services should be outsourced vs. maintained internally
Non profits could expect efficiency and effectiveness benefits from outsourced back office services
Several requirements would need to be in place to be successful
The administrative burdens cause some organizations to run inefficiently and sometimes ineffectively
But these organizations struggle to improve the situation
Outsourced and shared services could be either those that are transactional or those that require expertise
Create outsourced Centers of Scale (highly transactional services) and/or Centers of Excellence (expertise-based services)
What is happening with outsourcing and shared services in the for profit sector
When evaluating a shared services initiative, we are asking organizations to first outsource certain back office functions and then we are looking to provide those functions under a shared service structure. We can and should consider helping organizations outsource exclusively (without shared service center). Three models for outsourcing and shared service are generally found in for profit organizations:
Shared services within a company/organization -large companies centralize non-core back office functions such as technology, human resources and finance in a shared services center (SSC). The center resides within the company and there are several different organizational models that work.
Shared services spin-off (sell services externally) -some companies have built best-in-class SSC and have spun them off to also serve external clients.
Outsource service to Business Process Outsourcer (BPO) -a company could also choose centralize a function and outsource the service to a BPO or just outsource the service without centralization (although the former generally makes the most sense). CIO.com estimates the BPO market to be $301 billion in 2004.
Business process outsourcing (BPO) is the contracting of one company by another to execute a business process end-to-end. By definition, it goes a significant step beyond traditional outsourcing contracts, in which a company delegates only components of a business process to an outside vendor. Take, for example, the granddaddy of payroll outsourcing, Roseland, N.J.-based Automatic Data Processing (ADP). Fifty years ago, long before the concept of outsourcing became mainstream, ADP was contracted to process client payrolls faster and cheaper. And, says Bill Zint, senior vice president of marketing for ADP national accounts, they were again ahead of the curve when more than a decade ago, they had the first insight to offer BPO services. ADP now offers BPO for human resources, including benefits, payroll and task administration. 1
Many successful BPOs are not in the US but in areas with lower labor costs, such as India, and serve the technology and call center BPO market.
We’ d also apply a number of filters to identify organizations well suited for outsourcing and sharing back office services
Any shared service option has several risks which requires a measured and deliberate approach
E&Y1 identified the Dos and Don’ ts of shared services
E&Y also identified several key enablers and risks in a shared service initiative
The Blue Ridge Foundation
Al Sigl Center
La Piana Associates – Strategic Restructuring Consultants
Potential Providers/Vendors -Human Resources