What concerns have been raised by CFOs about outsourcing and how have you addressed these concerns?
CFO reservations, when they arise, usually originate from a lack of first hand experience with outsourcing rather than from an actual negative track record.
Heightened by Sarbanes-Oxley and new international accounting standards and regulations, some executives worry that outsourcing involves the surrender of control over vital business functions. But recent surveys of executives who have already experienced BPO outsourcing have found that they generally report rather increased control. In fact, veterans of successful outsourcing arrangements have indicated that outsourcing actually offers an enhanced type of control and even reinforces transparency.
In a 2003 survey of 1,200 senior financial executives, 86% of respondents credited outsourcing with increasing their sense of control over business results. In another recent survey, 73% of respondents felt that outsourcing could even improve disclosure quality by creating a beneficial space between managers attempting to attain certain performance levels and staff accountants responsible for measuring them. A professional BPO provider will use best financial and accounting practices, document processes in appropriate levels of detail and comply with applicable governance standards to achieve the performance metrics defined in a detailed service level agreement. This environment clearly should produce improved internal and external audit relationships for the company. Of course, as the overall responsibility for statutory compliance rests with them, the CEO and CFO must carefully consider scoping decisions relative to an evaluation of a BPO provider’s capabilities and accept responsibility for managing the BPO provider.
In this age of identity theft, another concern stems from a misperceived risk of loss of confidentiality. However, the record clearly demonstrates that BPO providers have truly excellent internal controls and security systems and procedures in place, particularly when they are SAS-70 certified, offering the same or even better professionalism and confidentiality as banks and other financial institutions who also handle sensitive customer financial data.
Identifying potential obstacles to outsourcing in one survey, 50% of respondents cited cultural resistance and 40% cited a vested interest in “defending” jobs, budgets and power. When resistance arises from employees and departments whose jobs are transformed or eliminated, undoubtedly firm management is required to ensure that BPO providers receive the necessary data input for the implementation and execution of outsourced functions and activities and company leaders must get involved and remain steadfastly committed to achieving the benefits of outsourcing to overcome these barriers.
