The Fear Factor

When it comes to outsourcing at a UK institution like the BBC you might forgive Zarin Patel, group finance director, for acting cautiously. But caution is not her style. Witness the finance and accounting (F&A) outsourcing deal with Xansa announced in November, which, for the first time, includes the offshoring of transactional processing. It is a deal that Patel expects to reduce costs from £33m to £8.5m per annum.

It is also a deal that has led to protests, not least from unions raising concerns about the potential security risks involved. Patel, however, has no doubt the deal is the best way for the BBC to deliver quality content and remain relevant in the fast-changing media world.

IN THE HOT SEAT

Patel joined the BBC in 1998 and became group CFO on 1 December 2004. She arrived in her new post fresh from three years in the licence collection operation at a time of upheaval.

"It was a big year for the BBC," she says. "We had just lost both chairman and chief executive. There was a new management team at the top, thinking hard about the scope and scale of the BBC. What should it do and not do? How should it be regulated?"

It didn't take long for Patel to become involved in the change agenda. "The place needed a real shake up and I have a natural desire to change things. I set out the challenge in my first day on the job: we are not all going to be here in two or three years' time, and even if we are, we are going to be doing very different jobs."

The BBC was facing some tough challenges: changing audience dynamics, competition from new media and the switch to digital. Meeting these challenges while delivering quality programming requires money, and lots of it.

Patel says: "However much money we get in the licence fee settlement we are trying to negotiate at the moment, creative ambitions for the audience far exceed our available resources. My team needs to make sure we are really driving out value, either through doing things differently or cutting costs – all while making sure that we are investing in getting new audiences."

Patel doesn't define her role in terms of finance: "I would call myself chief performance officer. The way to get more money into the BBC is to improve its performance. So you find yourself not just thinking about the money, but thinking about how the organisation works; how it should be shaped and what its capability is."

OUTSOURCING PIONEERS

The BBC is no stranger to outsourcing. A pioneer in this area, 45% of its spend is outsourced. From licence fee collection to programming, very little is sacrosanct. It is ahead of the curve in F&A outsourcing, something that Patel thinks lends itself to outsourcing and offshoring, provided you know where to draw the outsourcing line.

"Over time you go from processing the invoice all the way to what I call trial balance, producing the accounts," she explains. "But there is a line: to produce the accounts, you have to know the business; to know the business, you have to be quite close to it. There is a natural point at which you can't do it from a distance."

Patel spent a lot of time deciding where to draw that line, eventually settling for a model where transaction processing is anything that is rule-based and doesn't require a lot of individual attention.

So, while transaction processing gets outsourced, there is also a shared service centre in Cardiff that houses the accountants who take the transaction data given to them by the outsourcing provider, produce the accounts and budgets, and do the forecasts. They do it consistently, delivering cost savings. Plus there are 90 business partners providing decision support, creating value and driving the business forward.

However, even for an organisation as experienced as the BBC, there are risks in outsourcing elements of the F&A function, ranging from service delivery to security issues. It seems, though, that Patel has them all covered.

CHANGE IS GOOD

She took a lot of care choosing a new provider to take over from Medas when its contract ends this year. In keeping with her general approach to business, Patel was keen to freshen things up for the second-generation F&A outsourcing and was prepared to take some bold steps.

"We were the first to outsource ten years ago. We have done great things with the first deal, but we have become comfortable with it. We needed to do something really different, to throw everything up into the air and see how it comes down. We needed a fresh, young company that was really hungry for us. I was also determined to go offshore with the back office."

She acknowledges it was a brave step: "It was bold for the BBC to go offshore, largely because we feel that the public pay us the money to invest in Britain."

She explains: "While programmes and venture capital in the creative economy should always stay in this country, if you can make the back office cheaper you end up spending more in the UK creative economy.

"So offshoring was going to be a big part of this outsourcing. It was the first one, so I wanted to proceed carefully. I wanted people to get comfortable with it first."

THE RIGHT PARTNER

There were several criteria Patel had in mind when choosing the new outsourcing provider. Choosing the right partner was an essential part of eliminating risk from the arrangement. For Patel, cultural fit was a top criterion.

"The cultural fit was about finding a company that thinks hard about developing its talent. Is it a company that is naturally innovative, for example? It is very easy to say that you are innovative, but we wanted to see the processes, see if it was in a company's DNA. Is it constantly thinking about getting better, doing things better and pushing the envelope? That was a big part of our partner evaluation criteria."

Obviously, value for money was also important – and not just at the outset, but through the life of the contract. But once again, Patel opted for an arrangement that builds mutual trust and cooperation, minimising the risks.

Given a choice between five, seven or ten years, she went for ten, "because it allows your service partner to really invest in you, and to be secure and certain. It's about building a relationship with neither side feeling like they are on the wrong end of a deal that they are locked into."

Flexibility was also a key consideration. "Flexibility in the contract was incredibly important to us," she adds. "I also have a general philosophy that your service partner should make a very decent return from you because that way they will invest in you and you will get the best service."

MANAGING THE RISK

The announcement of the latest outsourcing deal was accompanied by press reports of union leaders expressing grave concerns about the security of BBC staff financial details. Patel takes these risks very seriously, and, while taking sensible measures to deal with them, is not convinced that they should necessarily be greater when offshoring.

"Credit card fraud is on the rise, in this country as much as in India or anywhere else," she explains. "Call centres, for example, whether here or in India, are often high-stress environments. There may be low pay and there may be some vulnerability to bribery. However, in India, as elsewhere, business process outsourcing people are paid well and it attracts good employees, so I am much more comfortable."

As Patel points out, Xansa and other service providers have incredibly high security standards. It has to be that way; if they get it wrong, they lose business. Xansa also has a lot of banking business, and as a result has been thoroughly tested by various banking associations.

Xansa continues the high security standards already in place with the previous provider. "One of the things that Medas brought was a very good standard of security," says Patel. "We have continued that. By using the same data rules as the UK, the data protection environment and the training, and because it is offshore, we have heightened the security."

Even so, she has taken additional care in some areas. "There were two things I wanted to be careful about: we wanted voice interaction to stay here, so it is based in Manchester, and payroll stays here as well because of security and efficiency."

While Patel is satisfied that her approach to choosing a provider reduces any potential risk to reputation, there is a more immediate benefit of having a UK based provider: "If something goes wrong, I can call up the chief executive and say 'fix it'. That is very powerful. So I chose a firm that gives me a UK focus with capability in the UK, but also in India."

MOVING FORWARD

Patel has not reached the end of her quest to drive down cost and increase value. If she had her way, she would push outsourcing further up the value chain and consolidate providers.

"The important thing is that we carry on pushing the boundaries. I think offshore will carry on for a while because there is good capacity. I have about five service partners in the back office, but I think two, one for technology and things like property and one for everything else, would be perfect."

As for the future, somewhere near the top of Patel's to-do list is thinking about her succession. Walking the walk, she doesn't intend to outstay her welcome.

"I'm going to practise what I preach. I think constant change is good for an organisation and one day I shall move on. I will build a succession plan behind me. I think that is a healthy thing to do; it is also a scary thing to do."

But that, according to her philosophy, is exactly the right way to act.