Affiliated Computer Services last month appointed Ron Gillette to senior managing director of its finance and accounting business. Computer Business Review asked him about the latest developments in the FAO market.
Q: There’s been plenty of talk about FAO moving to higher-value and more analytical services. What is ACS doing in this regard?
A: As clients add more services to their contracts, analytics is of increasing interest. Today we have several clients for whom we are providing tax, purchasing, and inventory analysis, as well as financial planning. This trend will continue not only with existing clients, but also with new clients who begin their outsourcing relationship with a broader scope of services.
Q: Recently BT outsourced its FAO in two parts, one part to Accenture and the other to Xansa. Do you think this will be a trend among FAO buyers as the market becomes more mature?
A: Over the years there have been a few clients who have chosen to pursue a multisourcing approach to FAO. However, I don’t see this as a trend. The companies which have chosen to do this have either had an existing corporate sourcing strategy requiring more than one vendor or, through mergers or regional growth, have found themselves with multiple suppliers. Most clients who look at FAO have sought, and will continue to seek, a single supplier with the capabilities, experience, and cultural alignment that best meet their needs. They, like everyone, are focused on reducing costs, and a very effective way of doing that is to bundle complementary functions through one service provider, which frequently gets you the biggest savings.
Q: How successful have you been selling F&A services to the mid-market? Is this something the enterprise players are equipped to do, or is it more the domain of the mid-market specialists?
A: Practically every company, regardless of its relative size, is under competitive pressure to reduce costs, and outsourcing is a great means to that end. Larger companies, including the FORTUNE 500, have set the pace. FAO in that market has been going on for about five years, and now these companies are starting to outsource more than transaction-type work. Mid-market decision makers have taken notice.
For the most part, our competitors require their clients to have or buy an SAP or Oracle solution. We don’t, and that gives smaller companies the ability to outsource not only their F&A and their transaction-type work, but their rules-based decision making too. Outsourcing is far more economical for smaller companies now, and as the scope of available services continues to expand in FAO, a mid-market company can take advantage of scale to make the business case to outsource. The mid-market continues to be important to ACS, and we are actively discussing solutions with potential clients.
Q: How important is client technology in the FAO process?
A: A client’s existing technology is, of course, critical to the process because it is their accounting system of record. While there has been and continues to be a large effort on behalf of clients to move to a common ERP, the environments we encounter are far from homogeneous. Many clients have grown rapidly by acquisition and find themselves in a diverse systems environment.
Q: It seems that the bulk of FAO work is now done offshore – most vendors say about 75%. What’s the story at ACS?
A: On-shore versus off-shore is strictly a matter of how comfortable our client is. Based on what our clients need and how comfortable they are with our off-shore capabilities and locations, about 75% of our FAO work is done off shore. Our global talent and technology mean 24/7 service, but we also provide on-shore and near-shore service. We can perform high-order tasks from almost any of our global centers, providing tremendous flexibility in designing the right solution at the right price, and we are already providing the full range of our services from our offshore delivery centers.
Q: Has the competitive landscape changed much in the past year? How successful have the Indian vendors been with their BPO offerings?
A: The competitive landscape is changing. While there are always new entrants to the market, particularly from India, the competitive field for the larger opportunities seems to have remained the same or even consolidated somewhat.
Q: What do you see as the big issue for F&A in the coming year?
A: As mentioned earlier, F&A outsourcing has emerged from the early adopter stage and is clearly a proven mainstream alternative for most businesses. With the transition to mainstream acceptance has come increased demand. Responding to multiple client requests and transitioning multiple clients simultaneously will be the greatest challenge to all FAO providers in the next year.