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In recent years, leading companies in the Aerospace & Defense (A&D) industry have been making growing use of Business Process Outsourcing (BPO) as a way to establish and run shared services, reduce costs, and free up management from routine business support activities. The scope for BPO has traditionally included functions such as Finance & Administration (F&A), but it is now increasingly extending to new activities, including supply chain.
At the same time, many major A&D players are successfully pursuing active acquisition strategies, enabling them to access and integrate value-adding skills, offerings and capabilities. Each of these acquisitions brings its own established support functions and processes that ultimately need to be integrated into the acquirer’s operations.
Our experience with A&D clients shows that these two strands of activity—outsourcing and post-merger integration—are actually mutually supporting and closely linked. A well-developed and industry leading BPO approach and organization can deliver faster and more effective integration of new acquisitions, thus dramatically speeding up the time taken to realize the targeted synergies, and helping the CFO meet external stakeholders’ demand for financial information. In this paper, we’ll examine how companies can maximize these benefits.
Learn more about Accenture’s research for the Aerospace and Defense Industry
To get their outsourcing strategies off the ground, companies in A&D often begin by looking across their various functional areas to pinpoint opportunities for shared services and/or outsourcing of different roles and activities. After the first year or so, as the program gains momentum, a number of functions begin to gain critical mass in terms of outsourced activities and capabilities.
The core initial focus for BPO has generally been F&A. This is regarded as the most mature area for BPO, where—regulatory restrictions permitting—varying degrees of offshoring can be used to drive significant cost benefits through wage arbitrage. The advantages of F&A BPO are now well-established in A&D. But increasingly, F&A is regarded as just the first step on the outsourcing journey.
A&D companies are increasingly addressing this shortcoming by contracting for outsourced “delivery assurance” services. This approach confirms that this key supplier management activity gets the dedicated focus it needs and deserves, from resources with deep role specific experience and understanding.
At the same time, the scope of BPO in A&D is also expanding in other directions along the supply chain—towards customers. BPO services in customer service/aftermarket handle the full range of activities, including spare parts order entry, warranty support services, spare parts inventory management and reporting.
In parallel with this growing adoption of BPO, A&D companies are seeking targeted acquisitions, as they adjust their portfolios of businesses to meet new customer demands in a more dynamic world. A key focus in these acquisitions is identifying and realizing synergies as fast and fully as possible.
These additional advantages beyond labor arbitrage savings mean that Finance BPO can jump-start the Finance function’s ability to help the CFO address three critical imperatives to driving the success of the merger integration. These three imperatives are Maintain Finance operations and service Delivery, Integrate the Finance function, and Plan and manage synergy savings for the enterprise as a whole. If a company has a robust BPO platform and operating model in place, and is undertaking a significant number of acquisitions, then our approach can help to open up major opportunities for faster and more effective value realization—especially in the key timeframe of the first one to six months after close, and particularly the first 100 days. Our approach and tools apply in each of the three key stages of the PMI process—Pre-Merger; Day 1 to 100; and Day 100 to 18 Months.
A recent Accenture study1 identifies a select group of businesses whose use of BPO differentiates them as “Shared Services Masters”. These companies constitute less than 10 percent of the respondents, and demonstrably use their shared service center (SSC) operations to drive high performance. Our research shows that these organizations:
1. Accenture, Lessons from the Shared Services Masters research study, 2011
Our analysis confirms that these attributes enable Shared Services Masters to demonstrate a superior ability to target and secure business objectives, compared to their counterparts and competitors. Crucially, the Masters recognize the importance of retaining key leaders to drive success: 65% of Masters have had their leadership team in place for over six years, compared to 35% for other companies.
Also, the Masters’ proficiency in the fundamentals of shared services has given them an edge over others in securing their original objectives. This proficiency incudes placing significant focus on operating models, workforce models, recommended practices, and technology.
In an A&D environment where consolidation is advancing rapidly and speed-to-value is key, the realization of targeted merger synergies at pace is more important than ever. Against this background, a robust, efficient and industrialized BPO engine at the heart of the Finance function—and increasingly expanding into other activities along the value chain—has the ability not only to deliver significant cost savings, but also to accelerate post-merger integration, bring forward benefits realization, and lay down a solid platform for continuous improvement over time.
May 7, 2012
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