Paving the Way for E-commerce
When Claude Hartridge makes a BPO presentation to the CEOs of some of Europe’s biggest multinationals, the cost benefits are the factor that typically turns their heads. When Hartridge, BPO Business Development Leader for PricewaterhouseCoopers in London, projects an outsourcing contract can shave anywhere from 25 percent and more of their back office costs, they pay attention.
Today, however, another concern is increasing in importance. The CEOs know they have to enter the e-commerce fray on two fronts — client facing and back office support. But they have little idea how. So, they are turning to PricewaterhouseCoopers (PwC) to help them ramp up to Web speed. BPO can accomplish both goals.
With e-business so new, it might take as long as two years to see which of the currently competing technical approaches drives the e-commerce arena. But while that situation sorts itself out, companies can start laying the groundwork for their own Internet transactions. Hartridge predicts companies that have already standardized their processes will be ready to move six to 18 months ahead of their competition. At Web speed, that can be quite a competitive advantage. “While we’re saving you money, you’re can’t do anything better to prepare for e-commerce,” he concludes
Moving to E-enablement
That preparation involves the standardization of systems, processes and controls. Web commerce is so efficient because everyone uses standard protocols. Corporations need to do the same. “What they want and what they need is a staging ground for the standardization and the streamlining that will move them into e-enablement,” says Hartridge
On the Continent, standardization is relatively new. Hartridge recalls a European CFO who proudly declares, “We’re all on SAP.” Then PwC staffers go out in the field and find the company’s German subsidiary is using SAP release 1. In France they’re using SAP release 2. And in Italy they put a front end in front of release 3.† “Although they claim they are all on SAP, they actually are on different releases that aren’t standardized in any way, shape or form. It’s like having three totally different systems,” Hartridge reports. The short term goal would be to get everyone as standardized as possible or using the similar processes for the software.
This mixing and matching of software and process is common in Europe because many multinational corporations have grown by acquiring companies, penetrating one nation at a time. Because of the differences in languages, currencies and tax laws, it made sense to let each subsidiary grow up independently, selecting its own processes and procedures.
In the past, subsidiary 1 would balk at doing what subsidiary 2 was doing because the regulations were different in each country. “What you discover when you start peeling back the layers of the onion is that 90 percent or more of European regulations are similar,” notes Hartridge. He’s found many companies have built policies and procedures around rules that really aren’t necessary.
Today, however, there is a new environment. The advent of the European Union as well as the introduction of the Euro as common currency have accelerated the standardization trend. “Now you don’t have to do quirky things to operate on a cross-national basis,” says Hartridge. “A lot of European trends suggest a pan-European shared services center is the logical next evolutionary step.”
Shared services centers
Shared services centers of excellence are a cornerstone of PwC’s BPO strategy. The first step in its BPO assignment is to document all the processes, then move everything into one location. Often, different subsidiaries sit side by side at the service center, using different systems. “There’s no efficiency gain yet because everybody is still doing their own thing. But at least they’re doing their own thing under one roof,” explains Hartridge.
Once that’s accomplished, PwC can start the standardization process at the pace selected by the client. Typically it takes between three to six months to stabilize the environment to ensure all the work gets done. Then, PwC begins to streamline the processes to get rid of unnecessary steps. “You’d be amazed at how much wasted effort is involved when you have a handful of people doing the same thing at multiple sites. When you have them all together, you can immediately make head count savings,” says the executive. Often, one person can do two or three countries instead of just one.
During this time PwC team members go out into the field to make sure the users understand why these changes are taking place. The outsourcers let the employees know they are just eliminating steps that don’t add value.
Hartridge says this reengineering typically takes about twelve months. PwC has global centers of excellence throughout the world to handle its BPO work. In the center at Rotterdam, for example, we have 22 nationalities who can speak twelve languages.
The success and speed of the standardization often depends on how much of business process the customer is willing to cede to PwC. Hartridge says the wider the scope of the engagement, the more potential there is to unearth the savings that make BPO so cost- effective. “Please don’t assume that I’m being pushy when I suggest that we want to operate in as many process areas as we can for you,” Hartridge. “The more responsibility we’re given, the more impact we can make on the bottom line.”
Lessons from the Outsourcing Primer:
- Companies need to standardize their business processes to get ready for e-commerce.
- BPO helps companies achieve this requisite standardization.
- The broader the scope of the BPO engagement, the greater impact the outsourcer can have on the company’s bottom line.
- Europe is becoming more homogeneous. That change is making shared service centers a more common feature for multi-nationals.