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Phil Fersht, CEO and head of research, HfS Research and Bruce McCracken, Senior Research Analyst, HfS Research.
In this Business Outcomes Case Study by Horses for Sources (HfS) Research, Phil Fersht and Bruce McCracken take an in-depth look at the challenges facing Microsoft as it tried to manage finance and procurement activities across its 96 global subsidiaries.
This article looks at why outsourcing made business sense to Microsoft, and why the company chose to work with Accenture. It examines the tricky business of the transition, and explores the results, paying particular attention to how good governance and smart metrics have helped to drive innovation and business benefits.
In 2004, Microsoft reached the point where its global finance and procurement operations needed to undergo a major transformation to support its business effectively.
The global business software giant became so geographically dispersed, stretched across such a large number of business entities, that its existing operations needed a new and unique mix of technology, talent and processes. Microsoft operated 94 independent subsidiaries (later growing to 96) around the world, all in different countries.
The enterprise was suffering from a lack of continuity, control, fragmentation and inconsistent performance across its finance and accounting function, with each country operation operating independently with individual policies and unique processing procedures.
To achieve the performance objectives, the service level agreements (SLAs) would be built with gain-share provisions to encourage innovation.
Microsoft selected Accenture in 2007 to transition the four processes across all subsidiaries within 18 months. Accenture’s experience in change management was one of the key factors in Microsoft’s decision.
Microsoft and Accenture decided in any given country to transition simultaneously all three process areas –accounts payable, document management and general ledger –and the procurement function.
Innovation can be embedded by a dynamic SLA design, with provisions for change over the life of the contract, which was seven years in the case of the Accenture/Microsoft engagement. By setting up the governance structure for annual review and possible revision, the relationship grows and adapts to changing business needs with greater agility.
Mature, savvy organizations that are experienced in outsourcing are able to be innovative in structuring their agreement to maximize the potential of the relationship to their mutual benefit. In comparison to many SLAs, the Accenture/Microsoft SLA feature two distinct elements —annually reset KPIs and gain-sharing rewards.
Achieving innovation in F&A BPO requires defining a flexible, continuous road map that incentivizes provider and buyer on common business outcomes.
It’s experience that makes it dynamic: Organizations that have experience in successful outsourcing endeavors have the foresight to establish a dynamic relationship with their service provider.
Review, revise, repeat: Good governance at the onset of a long-term contract accounts for an evolving business environment that results in changed business objectives, so well structured and frequent reviews and revisions of KPIs is critical.
Look to the future: By providing elasticity and KPI resets, the organizations avoid being trapped by an SLA anchored in the past.
Recognize that success is a two-way street: Creating a relationship that harnesses the experience of both partners in change management to secure stakeholder buy in can pay dividends in transitions.
Share the wealth: Building gain-share mechanisms to compensate the provider for business improvements and the resulting costs, or loss of revenue incurred for initiatives such as relocating to less expensive delivery centers, enhances a healthy relationship for mutual benefit.
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