Insider Business Club: mid-market outsourcing

Insider Business Club: mid-market outsourcing

Whether it is to aid growth or cut costs, more businesses are turning to outsourcing, according to our experts

Are mid-market companies embracing outsourcing and which finance services
are being put out?

Mark Holland, partner, Baker Tilly and ICAEW IT faculty

I think it’s a trend that is growing. Mid-sized companies are seeing the
opportunity now to benefit from the services, the efficiency gains, the
reliability and the additional functionality that outsourcing can bring to them
that, perhaps, up until relatively recently, was only possible for their larger
corporate colleagues.

There have been changes in the last few years in technology and in ways of
working that mean those benefits are now far more accessible. Some businesses
are taking up the opportunity, or at least looking at it.

Outsourcing has tended to be done more for positive reasons, i.e. growth and
development, rather than purely as a cost-cutting exercise. I would be
interested to see whether, given the current environment, it continues to be
growth that is the key driver or whether cost cutting perhaps raises it.

With the commercial usage of the internet as it is now, it is possible for
businesses and outsourcers to share the same information simultaneously whereas,
in the past, outsourcing the finance function might have been a question of
basically losing control over everything. You wouldn’t know anything until the
set of reports hits your desk in a paper copy a week or two later.

Those days are over. Now what we are seeing is a collaborative approach, a
partnership approach between the outsourced delivery company that is actually
doing the final part of the finance function and the company that has outsourced
part of that function.

The components that we are seeing outsourced are increasingly around some of
the less value-added areas. For example, purchase ledger, reconciliation,
preparation of management reports, KPI reports, that sort of thing. We tend not
to see credit control being outsourced to such an extent because that is
touching customers.

Are companies willing to outsource ‘core’ services?

Peter Simons, technical specialist, CIMA

I work with a forum of leading companies ­ we call them enterprise-sized
companies ­ and this has already happened in their area for some time now. When
I talk to members about developments in the finance function and tell them this
may come down the line, they have been in denial.

But increasingly now there are anecdotes coming back from the audience in
smaller mid-sized and even SME companies where they are saying: ‘Yes, this is
what we are doing too.’ So it’s an exciting time for accountants.

People have no problem outsourcing their car fleet or outsourcing catering
the canteen because they never saw that as being core. But what is interesting
is that in the last few years, people have thought, well, maybe HR isn’t that
core, IT isn’t that core and now they are saying that accounts are not that
core.

That’s a shift because politically HR were probably weak at the board level,
while IT are geeks ­ nobody understands what they do anyway. But finance used to
always be at the fore as something that people had to have at the board table
and previously they would not contemplate outsourcing that.

How can you best manage an outsourced service?

Keith Wilson, commercial director, BaxterStorey

We are a provider of outsourcing services ­ catering, reception services,
etc. In our IT department we also outsource a lot of our services to support
companies. There is a variety of them, although we do have a central small hub
that manages those outsourced services.

I think that is key to make sure that you keep the control when you outsource
the technical parts of a service.

It would probably be fair to say that it happened by accident, or happened by
evolution. We have grown very rapidly. We have been going for seven years and we
have grown rapidly in that period of time.

It was therefore very difficult for our IT department to keep up with that
growth. So we were forced into making sure that we had best practice by going
out into the market.

I think there will be a drive to outsource in the current environment. The
big issue that is facing us all is the whole issue of risk management and I
think people will want to bring in experts in a particular field ­ whatever it
maybe ­ to manage the risk. Without doubt that will become a driver.

I think it will force organisations to start looking at what services do they
do themselves and what do they do externally.

Chaired by Damian Wild

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