GS100: 2011 Global Services Compendium
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Technology Matters

 Strategic technology investment enables both process optimization and long-term value in FAO outsourcing arrangements. The role of technology has evolved from the basic “tie-and-run” model to an “augmentation” model. In 2010, technology augmentation emerged as the new “normal” – nearly 50 percent of the new contracts included add-on tools such as workflows, interfaces, document management, business process management, business intelligence and user portals/dashboards.

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Ramakrishna added, “Historically, F&A outsourcing has not been a technology intensive service. The focus has been more on adhering to processes, backed by a strong manual work component.

This is starting to change and for the first time, a growing number of F&A suppliers are offering standardized IT platforms with their F&A services. While there are challenges to overcome regarding data security, ERP architecture & integration, these options will continue to evolve, particularly in the near term for mid-market buyers who typically are more inclined to buy in standard solutions.”

Although cloud is making its presence felt across various industry verticals, this industry still needs to mature before its processes can be delivered in cloud- enabled models. The reason being, buyers have already injected huge investments in this space such as ERP and they expect to achieve major process and cost-efficiency gains through them. So, they are reluctant to let go of these investments.

In addition to the obvious security concerns of placing financial data in a cloud, the other concern is cloud-based FAO solutions need transaction-based pricing as opposed to FTE-based pricing in traditional FAO. However, transaction-based pricing is not yet a well established pricing model in FAO.

Having said the above, still there is no escaping the cloud.  They could either consider approaching a third-party in a 'cloud F&A BPO model' or move completely into entirely cloud-enabled platforms.

Kevin Lightfoot, vice president,external communications,ACS articulates, "The majority (over 70 percent) of the FAO contracts signed with the major FAO providers are with Global 2000 companies (company revenue in excess of $2B). Thus most of these companies have complex ERP requirements and have made significant investments in their ERP platforms. The ERP application is the core source system for F&A processes.  Thus adopting a SaaS ERP application for this type of company is very difficult.  Therefore I think adoption of cloud computing associated with the core ERP will remain low for this type of buyer.  However, the industry has focused on BPaaS (Business Process as a Service) more discretely on a functional basis (e.g., Procure to Pay, Order to Cash) and or on an industry vertical basis (e.g., claims processing)."

Lightfoot added, "In this case, providers offer technology enablement and
BPO services bundled and the work environment for the clients as well as the pricing is either subscription based, or usage based.Adopting a SaaS ERP solution or a BPaaS model with the underlaying ERP and functional tools along is more likely with the mid-market where CFO’s are more willing to balance ERP requirements for a tradeoff in ownership and costs. ACS can offer F&A BPaaS services on a cloud based SAP platform.  Currently our focus for this service is the European mid-market."

Gupta stated technology strategies that are being deployed across all FAO: 
• Tie-and-run: Limited role of technology where service provider plugs into the buyer’s existing systems to deliver pure-play BPO services
• Technology augmentation: Service provider implements tools that serve as “add-ons” around the periphery of the existing buyer systems to address specific gaps
• Core F&A technology replacement/ implementation: IT infrastructure and/or core F&A application implementation bundled with FAO services. Technology ownership resides with buyer
• Platform-based FAO: Pre-integrated applications and pre-built processes, owned by service provider, with pricing built into the FAO contract
In 2010, technology augmentation emerged as the most prevalent model. While most FAO buyers prefer a technology augmentation approach, there exist situations where buyers are amenable to platform-based FAO as well. However, such instances are few given the hurdles described in the answer to the question on cloud computing adoption.

 GS100: 2011 Global Services Compendium
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