Going Away

For clients like Bristol-Myers Squibb, these broadening capabilities suggest the possibility of outsourcing increasingly complex finance activities in the years ahead. "As the marketplace continues to evolve, and the outsourcers develop capabilities, we will continue to evaluate those capabilities," says O'Day. "To the extent the market is capable, and we consider them to be in the appropriate risk level, we will continue to consider outsourcing more functions."

Not Just India
In addition to expanding their capabilities, outsourcing vendors are extending their geographic reach, too. While India remains the predominant offshore-outsourcing location worldwide, says Lisa Ross, CEO and founder of FAO Research, outsourcers also are setting up shop in Eastern Europe, China, Canada, Brazil, Chile, Uruguay, Argentina, the Philippines, and even parts of Africa and the Middle East. When Bristol-Myers Squibb transferred a passel of finance activities (payroll, HR operations, bank payments and account reconciliations, accounts payable/expenditures, T&E processing, fixed assets, balance-sheet reconciliation, intercompany accounting, master data maintenance, and vendor payable inquiries) to Accenture in 2005, it saw that work farmed out to Accenture locations in Slovakia, the Philippines, Brazil, and China. Even though Bristol-Myers Squibb had organized its finance activities into shared-services centers years ago, observes CIO O'Day, it couldn't duplicate either the scale or the access to worldwide labor markets that Accenture could offer.

Accenture also is doing some of Bristol-Myers Squibb's work in the distinctly nonexotic cities of Houston and Wilmington, Delaware. O'Day notes that today, for services that include more-complex and time-zone-dependent transactions, it is common to have a small onshore component to an outsourcing contract. In her own company's case, she says, Accenture has U.S. payroll-tax experts located in Houston, and accountants with a deep knowledge of pharmaceutical accounting in Wilmington — people whose expertise can't easily be duplicated in, say, India's Bangalore or the Czech Republic's Brno, two popular offshoring locales.

Shankar Narayanan, a principal with business consulting firm McKinsey & Co., notes that such cities as Juarez, Mexico, are becoming popular locations for originating workflows that involve processing large volumes of paper documents generated in North America. For example, in Juarez, which is just across the border from El Paso, Genpact employees collect the mileage, tax, toll, and fuel data logged manually by drivers of rented Penske trucks and enter it into a Penske computer system that is accessed in India.

Making It Work
For all that outsourcing vendors have to offer, companies still can't expect to wash their hands completely of the processes they hand off. "They have to continue to manage that area," says Tom Schramm, managing director and head of the finance and accounting practice at EquaTerra Inc., a Houston-based outsourcing consultant, "and understand that there are going to be issues that they will have to work out with the outsourcer to fix them."

One of the biggest challenges many companies face is transferring institutional knowledge — information about the company and its culture — to the outsourcing vendor. "It's important that an outsourcer understand that," says O'Day, "because often they're the face of the company." They are the face of the company when suppliers call about invoices, for example, or when employees receive paychecks.

To help with that effort, O'Day says, Bristol-Myers Squibb continues to spend time visiting with its outsourcing vendor's managers and operators. "We visit the sites at least once a year, and sometimes more often," she says. The company also asks the outsourcer's management representative to sit in on operational meetings in the United States. During the first six months of the contract, Bristol-Myers Squibb employees continued to perform the outsourced tasks in parallel. "Entering these relationships is not trivial," summarizes O'Day. "It should be part of your strategic perspective and part of a broader program, not just an isolated activity. It should be leveraged across multiple outsourcing opportunities."

Penske is serious about the issue of maintaining oversight of and responsibility for outsourcing activities. In June and November, the company sends account managers to India to conduct training and review processes. Where Cocuzza deems it appropriate (usually at the supervisory level), his domestic managers will participate in HR reviews and hiring activities in India.

He also expects his domestic process owners to visit the overseas teams handling their work if there's a problem. "Early on, we made the decision that if you were to set up a shared-services center in, say, Michigan, you'd go out there and it would be your shared-services center," he explains. "Well, this group happens to be in India. I tell my people, 'If you've got a problem, don't tell me about Genpact; you go fix it. If the problem were in Chicago I wouldn't let you off the hook, and if it is in India I won't let you off the hook.'" Cocuzza also goes to extraordinary lengths — hosting semiannual awards banquets in India, for example — to make Genpact workers assigned to his account feel a part of the Penske team.

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