Supplier Consolidation
Overall, the financial area of BPO made significant strides in 2001. “We began to see much greater momentum as companies became much more interested in outsourcing financial processes,” reports Vince Burkett, CEO of SourceNet, a BPO supplier based in Houston, Texas.
The supplier, which provides long-term accounts payable and payroll process management services to its U.S. clients, received “a significant increase” in potential customers contacting its sales force and asking, “What will it take to outsource my finance and accounting?” Burkett reports. SourceNet typically receives five to seven qualified inquiries a year. Last year it received 25.
The CEO says his team had to spend considerable time educating prospects about the benefits of financial outsourcing in previous years. Last year they already understood “outsourcing is a viable model for critical financial processes.”
Burkett finds these types of queries encouraging because he predicts their questions will turn into contracts for SourceNet this year.
The CEO says economic pressures in a down economy ignited a renewed interest in looking at the cost and benefit of keeping all non-core processes in-house. If a process was not producing immediate returns and long term benefits, it became a candidate for outsourcing. In addition, companies concerned about their cash reserves have been unwilling to spend those scarce dollars on non-core process improvements. He says companies today are happy to hand over the reins of “a necessary but unexciting process” to a qualified supplier.
The Importance Of Continuity Planning
The tragedies of September 11 shoved the importance of crisis planning into sharp focus. Burkett says prospects want to do business with a supplier that has a strong business continuance plan. “If a disaster happens, we can keep their payments going,” the SourceNet CEO points out.
Burkett predicts there will be “a fair amount” of consolidation among BPO suppliers this year. “The lines are blurring between the big IT suppliers, the Big Five accounting suppliers and traditional BPO providers who are process specialists like SourceNet,” he says. These three groups of players will realign according to their strengths to produce astute and technologically capable new players. Business alliances will be the BPO blueprint for 2002.
These combinations will happen because many BPO buyers today want one full service supplier. “You have to be able to respond to the specific process need or be able to offer everything; this will take alignment of providers,” says Burkett.
Lessons from the Outsourcing Journal:
- The economic downturn is causing companies to look at all their processes critically to decide which to keep in-house. Necessary but non-core processes like finance and accounting often lead the list of processes to outsource.
- American companies need less education about the values of outsourcing; last year many just wanted to know how to begin the process.
- The tragedies of September 11 made companies aware of the importance of continuity planning. That’s one of the benefits of BPO outsourcing.
- BPO suppliers will consolidate and form business alliances this year as the line between IT suppliers, Big 5 accounting consultancies and process specialists blur.
- This year BPO buyers will seek out suppliers who can offer everything.