Affiliated Computer Services: BPO is Re-Born - Mike Donnellan and Jordi Marsa

BPO is a very different beast from that which emerged in the 1990s. Mike Donnellan, director of European business at Affiliated Computer Systems (ACS), and Jordi Marsa, director of European operations at ACS tell FDE why the company is at the forefront of innovation in this fast-moving discipline.

Business process outsourcing (BPO) has experienced tremendous growth in recent years. Since its emergence in the early 1990s, it has undergone several iterations, seen its meaning change and its popularity fluctuate.

In recent years, many blue chip businesses have offshored an internal outsourcing project to Asia or Eastern Europe to service a number of global locations. The theory is that shared service centres (SSCs) deliver the efficiencies of an outsourced function without any loss of control.

ACS has enjoyed success in BPO, in part by developing an offering specifically for businesses that have adopted an SSC model. Recognising that some businesses may be nervous about outsourcing processes and operations en bloc, the company has spent several years tailoring a deeper, more integrated outsourced offering that it believes will gradually remove the need for captive shared service centres. That in turn will bring greater efficiencies in BPO, in part by developing a deeper understanding of processes and pressure points, and offering clients a truly integrated end-to-end service.

‘We’re talking about achieving much higher levels of what we call "end-to-end process integration" which spans both the client’s business and our operational centres,’ says Mike Donnellan, director of European F&A business. ‘What that’s doing is extending the reach of the BPO service provider/client partnership, by improving contact with the client.’

This approach is clearly catching on; ACS has enjoyed substantial growth in the finance and accounting part of its business, largely driven by the company move to a more value-added model. Blue chip clients are now recognising the value of a best-in-class BPO player providing a more proactive service that reaches further into their operations and offers a more business intelligence led approach that goes beyond simple transaction processing.

‘ACS is investing heavily in research and development and in true innovation of a core BPO service delivery model,’ says Donnellan. ‘Consequently, the type of offer that we can make head-to-head for a new sales opportunity with a client is very different to what the previous incumbents can offer.’

So how does this new approach work? What ACS is pioneering can be described as a hybrid shared service model in which the BPO provider and the captive shared service centre work more closely together. Clients can now break free of the limitation imposed by being tied to a single ERP system and in addition ACS is capable of introducing other business integration technologies that allow companies to extend the reach and effectiveness of the finance and accounting function.

In Donnellan’s view, ACS is now defining the next logical stage of BPO’s evolution.

‘There are 2,700 shared service centres across the world, of which roughly 20% are BPO,’ Donnellan says. ‘I think that within ten years that 20% will become something like 80 or 90%. That means there will be very few captive in-house shared service operations by the end of the next decade.’

This trend has been partly driven by innovation from the likes of ACS, and partly by market forces. The economic downturn has led to serious pressure on cashflow for most businesses, while the regulatory burden (Sarbanes Oxley being the most painful), particularly for companies with cross-border operations, has also taken its toll.

These factors combined mean that BPO providers now have little choice but to adapt their offering.

‘There are a number of paradigms that are being broken,’ says Donnellan. ‘For example, we’re now seeing technology being far more tightly integrated into BPO than it has ever been, and so there’s a lot of investment in that.’

Donnellan is now working with clients to engineer the right solutions for their needs. The result? Much tighter integration and collaboration. Clients now receive a much higher level of integral shared resources, shared training and shared investments. And ACS is able to tailor its offering to ensure clients are being served in the most cost efficient way.

By way of illustration, one client had over sixty different ways of raising a PO, opening up obvious risks of duplication and system error. So if ACS was processing an invoice it would need to get manual approval if there wasn’t a matching PO. That would lead to a transactional price different to a straight-through automated sign off, which matches up PO, invoice and goods received.

ACS’s solution was to introduce a differential transactional pricing model. That led to internal competition between divisional FDs looking to avoid being the department with the highest transaction price. Ultimately this innovative approach drove behavioural change across business units and achieved better value for ACS clients.

Closer client relations

This innovation is driving ACS’s success. The previous paradigm saw clients simply agreeing to a set service level and outlining the processes they required. Providers would then simply feed back into the client's system and that was that. But, as Donnellan points out, the depth of the relationship that ACS has with its clients is now such that clients receive a great deal more than just process automation.

‘Effectively, we’re doing deep data mining at a transactional level,’ says Donnellan. ‘That means we’ve got operational control tools that allow us, every day, to highlight the reasons why there might be a problem related to cashflow, for example.’

That enables ACS to come up with a diagnostic overview that gives the client a root cause analysis. For example, a client may have 200 DSO with its customers in Italy because they have shipping problems, and they are either part-shipping or are getting too many returns, resulting in it not showing up until there is a debt overdue.

‘What we’re able to do is actually apply those analytics and then sit down with the client and go through the process, right the way back to where the originating problem was and give them statistical data,’ says Donnellan. ‘Once we’ve done that we apply Lean Six Sigma all the way back to the root, giving the client transparency on the effectiveness of their true end-to-end business process.’

Value and flexibility

As with all technologies and business practices, with each development, the client expects more. And, as Jordi Marsa, director of ACS European operations explains, simply lowering the per head cost of a process and leaving it at that will no longer do.

‘You have to be able to offer more if you want to be successful,’ he says. ‘Here’s an example. We signed a contract two years ago with a client that was transferring out some activities to us. We signed the contract with the finance function. Initially they said "our accounts payable process was broken." After the transaction we did a 16-month project on their AP, and we said "your finance processes are okay, but they are negatively impacted by weaknesses and disruptions within your purchasing cycle. You need to think from a Purchase-To-Pay end-to-end process perspective in order to address the root causes of the issues."’

Marsa tells this story to illustrate how far ACS has pushed its people to understand clients’ processes and ask tough questions.

‘Frankly, you have to be able to go inside the company and present your solutions to fix the problem, wherever the problem exists,’ he says. ‘If not, if you are not close to them, you will never find the right solution to the problem.’

Deeper integration

Problem solving is at the heart of ACS’s proposition. Recognising that businesses have traditionally feared a loss of control when entering an outsourcing contract, the company has strengthened its offering to be as flexible as possible. That ensures clients are fully aware of how its processes are being fulfilled, where pressure points exist, and where engineering may be required. All in all, ACS is demonstrating its commitment to understanding its clients’ needs and designing the right solution for them.

As we go to press with this edition of FDE, Xerox announced a definitive agreement to acquire ACS for $6.4bn. This deal is game-changing for both companies as it will create a $22bn global corporation with $17bn in recurring revenue. Xerox's services business will triple in size to more than $10bn. It enables ACS to quickly expand its global reach and benefit from Xerox's technology and innovation. Combining the companies creates a single provider for enterprises and governments to do the three things that matter most: reduce costs, improve processes, and manage information more efficiently.