Keep your eye on the ball.
This piece of advice is given to every Little Leaguer who swings a bat, but it’s just as relevant for financial services companies competing against both tech-savvy startups and established giants. For many companies, maintaining a focus on their organization’s core mission—serving customers and delivering value—is a challenge in an environment that demands them to assume a host of secondary responsibilities as well.
What’s a business to do as it seeks to balance devotion to its customers with the need to complete a variety of back-office tasks, such as processing sensitive customer data and handling regulatory compliance? Business process outsourcing—hiring a service provider that specializes in back-office operations—is one increasingly popular solution.
Partnering with a business process outsourcing (or BPO) provider allows businesses to focus on their core competencies, says Daniel Melchior, North American advisory practice leader for global business services and shared services with The Hackett Group. Outsourcing human resources, accounting and other tasks to a specialist in those areas frees up valuable time and resources.
Many financial services firms have already embraced outsourcing, and industry analysts expect adoption to grow steadily over the next few years. Experts say firms that adopt this strategy see a host of direct and indirect benefits.
“Often, the number-one driver that starts financial services organizations down this path is cost,” Melchior says. “The BPO providers have such scale, and they’re normally doing it for a large number of clients. They can spread that cost across multiple clients and they can do it cheaper.”
In addition to cost savings, service providers can deliver greater efficiency and quality. Their expertise lies in the service being outsourced, and many of these third parties rely on advanced information management and workflow automation solutions, allowing them to do the job better and faster than the client companies themselves.
According to Indivar Khosla, senior vice president/global head of financial services business services for consulting firm Capgemini, before firms can reap the benefits of outsourcing, they must answer two key questions: What processes will they outsource? And how?
To tackle the first question, businesses need to identify which functions are part of their core mission and brand strategy. These functions should remain in-house, and companies should devote intellectual capital to these roles to better compete in the markets they serve.
However, routine operations such as customer setup, account setup, master data setup, end-user product support and data collection may not be part of a firm’s customer-focused approach. “If those processes are not core to your differentiation strategy, then that’s what you need to focus on in terms of outsourcing,” Khosla says.
If you look at the big financial services firms here in the U.S., virtually all of them have outsourced something. —Daniel Melchior, The Hackett Group
To see all of outsourcing’s potential benefits, firms have to steer clear of common obstacles. For example, processes must be consistent and standardized to achieve good results with a service provider, Melchior warns. Further, financial services organizations must spell out in detail both their roles and responsibilities and those of the service provider. Businesses should establish service-level agreements with targets for performance and quality, and they should monitor the provider’s work and hold them accountable to those targets.
Security is another major concern. “Whenever a company puts its data in the hands of a third-party entity, they obviously run a risk,” Khosla says. “But that risk is well-mitigated by the maturity of the business process outsourcing providers.”
Because of the data and funds they handle, companies in the financial services industry tend to be risk-averse. In some cases, they cling to less efficient and even antiquated legacy systems because they’re unwilling to move to other platforms.
But Melchior observes that service providers have proven to be a reliable option for organizations looking to improve the quality and efficiency of their back-office operations without compromising security. He recommends following the lead of other firms that have already taken the plunge into outsourcing.
“If you look at the big financial services firms here in the U.S., virtually all of them have outsourced something,” he says. “You can learn from them.”
For more information about how Kodak Alaris can help drive growth through digital transformation see our accounts payable article and visit www.alarisworld.com