IBM: Efficiency Matched with Insight - Graeme Butterworth

Playing a strategic role is recognised as essential for CFOs but many are still battling with inefficient core finance operations and spending half their organisation's time on transactional activities. IBM's head of business process outsourcing in Europe Graeme Butterworth tells FDE that there have already been significant changes in recent months.

As CFOs brush their teeth in the morning they might find themselves peering into the mirror and wondering, "Am I a value integrator? Or a scorekeeper?"

The small group of value integrators greatly outperform their peers and head up slick finance operations while providing keen insights and supporting effective decision making as part of the executive team. Scorekeepers, on the other hand, struggle in both areas.

The terms were coined by IBM on the basis of results from its fourth Global CFO Study, a survey of 1,900 finance executives from 35 industries across 81 countries.

The majority of those surveyed recognised that they ought to be providing strategic insight and risk management to drive performance across their businesses. But over 45% of respondents believed their organisations were not able to fulfil these roles, leaving a gap between expectations and actual performance. IBM also identified constrained advisors, who offer insight but low efficiency, and disciplined operators whose operations run smoothly but add little else.

The problem is not a new one. Since IBM began conducting the studies in 2003, finance directors have identified a desire to move beyond core financial activities and contribute more towards achieving their companies' strategic goals. The recession served to delay progress and the recent results show that most have yet to make the leap.

Scorekeepers rate poorly on both efficiency and insight, which is not surprising as the two are linked: a well run finance function is required before a CFO can tackle enterprise level issues.

Although challenges remain as the global economy recovers, there is more room for flexible approaches. According to Graeme Butterworth, IBM's head of outsourcing, there have already been significant changes in recent months. "We are seeing a huge increase in companies looking at our services," he says. "They're focused primarily on transactional outsourcing, but also interested in moving up the scale to release management bandwidth for other activities."

The benefit of outsourcing is that it provides finance directors with greater control over their operation while reducing costs. Butterworth outlines three ways a typical deal can be set up. The first is to simply 'lift and shift' a process, which might only involve a company transferring the work of 50 of its employees to a lower cost location such as Poland and India. The second involves taking on an entire function – like finance and accounting – over which the provider is given scope for innovation and refinement. The third is the transformation of a number of different processes at the same time.

Once that step has been taken, companies can start analysing data drawn from their processes to drive programmes of continuous improvement. Whatever the entry route, many businesses find themselves keen to broaden the scope of their deal and make use of analytic tools to improve performance.

Global flexibility

In addition to offering a competitive package in the first instance, the real advantage IBM offers over some other BPO providers is its ability to respond to new circumstances or requirements as they emerge down the road.

"A lot of customers come to IBM on the basis that we can provide a fuller set of options and take them on a journey," Butterworth says. "We can start in one place then take them to another, by providing a broad range of transformational services as they're required."

IBM achieves its flexibility by maintaining service centres across the globe. Facilities in Europe are supported by employees in India and other sites in countries like the Philippines and China. Networking these locations means the company can make the best use of expertise wherever it is needed.

Butterworth contrasts this with captive service centres, many of which are starting to reach the end of their useful life. "They were about getting control, some early savings and standardisation, which was great at the start of their lifecycle," Butterworth explains. "But if you've just got one centre in Mumbai, and the labour market starts to change, then it's very hard to get the flexibility you need, or start setting one up elsewhere."

Suffering from a lack of investment, captives often cannot perform the analysis and insight functions now required by CFOs. To enable clients gain more value from their data, IBM has enhanced its global analytics capabilities by investing $10 billion in acquisitions, such as RedPill, over the last five years, and creating seven analytics solutions centers around the world.

There will still be challenges ahead for finance organisations but as the outsourcing market becomes more mature, new opportunities are being opened up. A well-structured deal can be a roadmap for better future performance. By bringing base processes under control and then leveraging the abilities of a provider like IBM, change can be achieved in a manageable way and resources freed up to focus on strategic decision making.