SourceNet Solutions is an outsourcing supplier focused on accounts payable (AP) and payroll administration. Mellon Financial Corp. acquired the College Station, Texas-based company in December 2004 in order to meet a demand for these services that was emerging from its large corporate client base. SourceNet’s 225 employees currently process six million transactions a year. Editor Beth Ellyn Rosenthal talks to President and CEO Leon Busch, 36, about why it focuses on these two processes and the strategy behind Mellon’s acquisition of the organization.
Q: Why did you join SourceNet, at that time a young start-up?
A: SourceNet went operational in January 1997 and I joined that September in the technical department. The company was on the cusp of signing a large engagement with a Houston waste management firm.
It was exciting to be a pioneer. I implemented the company’s first major imaging system. I also worked on its first Web-based work flow application.
Q: How did a technical person end up running the company?
A: In our second year we signed a large engagement with a Houston-based computer company. Management asked me to lead the client implementation for one of the organization’s recent acquisitions. I thoroughly enjoy operations. I became VP of operations in May 2000. My direct experience with the client enabled me to go beyond the technical aspects of the business–to interact more with customers and learn more about what they need and expect from a provider. I became President of SourceNet in May 2005.
Q: Why do you only focus on two finance and accounting (F&A) processes?
A: We purposely picked these two business processes because they are the first F&A processes a company typically outsources. In our experience–and the studies back up our empirical evidence–these two are always in the outsourcing mix at the outset.
Q: Doesn’t that limit your potential buyers?
A: Not at all. If a supplier offers every business process in the F&A spectrum, buyers expect them to be best-in-class in every single process. I think that’s pretty challenging for a supplier. Instead, I think outsourcing buyers want experts handling their specific work. I think they have trouble having one supplier do all their back office tasks. We decided we wanted to be exceptional at those two business processes.
There’s also the risk mitigation issue. Buyers don’t want all their eggs in one basket.
Q: But isn’t it harder for buyers to manage multiple suppliers?
A: Today’s outsourcing deals are very complicated. A multiple silo engagement is very complex. It can be as complicated as managing several providers.
Q: What do you see as the biggest challenges for F&A buyers?
A: Sorting through the options. Should I give my work to one supplier or many? Which processes should I outsource?
Q: Are buyers acting differently in today’s marketplace?
A: Buyers have become much savvier. They are examining individual processes. For example, many customers now want to keep the customer-facing aspects of an F&A process while they outsource the technology. They want to service their own customers but have us process the documents and deal with the exceptions.
Q: What are today’s challenges for F&A suppliers?
A: At 30,000 feet, everything is AP. But when you get to the ground level, every buyer’s process is different. We have to decide what will work for our buyers that will also work for us.
We are still doing a lot of education around the F&A decision-making process. I think that’s because the process itself has become more complicated. We help our prospects sort through their options.
Q: There seem to be a lot of new F&A suppliers. How does the increased competition for business affect you?
A: We have to do what we do the best we can. At the end of the day, we have to remember our business is people working with people to accomplish great things. We can’t forget we are a customer service organization regardless of what tools we are using.
Q: Will you ever expand your repertoire?
A: We are currently looking at growing into other F&A processes. We now can create some synergies with Mellon. For example, Mellon is already receiving receipts from its customers. So we are looking at moving into cash application processes that manage inbound receipts and checks.
Q: How has the Mellon acquisition changed life at SourceNet?
A: We’ve enjoyed three major benefits. First, we now have global reach. SourceNet Solutions was a Texas-based firm serving North American customers. Now, as part of Mellon Financial, our vision and our marketplace have completely changed to a global perspective.
Second, we have greater distribution. We had a limited sales staff and deep relationships with just a few companies. Mellon, on the other hand, has a well-known name that makes it easy to have conversations with C-level executives across the globe. This increased our reach exponentially.
Third, we now have access to capital. We didn’t go offshore because it would have been very expensive. Mellon already has an offshore solution. A week doesn’t go by without us talking about how we can integrate our operations; for example, our interest in cash management is a logical touch point.
Q: How will electronic invoice presentation and payment (EIPP) change F&A outsourcing?
A: It’s clearly getting all the buzz today. But we have to be careful and contemplate its impact on downstream processes. For example, regarding electronic payments, it’s great to get the money in the bank account, but you have to consider the cash application process as well. Electronic payments without the requisite invoice detail provided electronically as well can negatively impact cash application.
Q: What’s your offshore strategy? Until you became a Mellon subsidiary, your corporate stance was to do all your work in the US.
A: We view offshore like we view technology: it is a tool you use when appropriate. It may not make sense in every situation. We assess every buyer’s situation to determine if offshoring will garner increased efficiencies. We believe one size doesn’t fit every situation.
Q: What are your secrets to good management?
A: You have to have fun at work and I encourage the employees to do the same. Weekly, I attempt to walk through the entire organization and personally say hello to everyone.
Q: What are your favorite movies?
A: I love the Lord of the Rings trilogy. I’m a big science fiction buff. I often use quotes from movies to make a point. I also love the Shawshank Redemption and the Green Mile. Both films are about overcoming challenges and never losing hope. I find them inspirational because the protagonists press on regardless of the obstacles.
Q: Where did you grow up?
A: I grew up in Detroit, Michigan. I graduated from Michigan State with a degree in financial administration.
Q: How did you end up in Houston?
A: A computer systems company that services the automotive industry recruited me and sent me to Houston in 1993. I packed up my belongings and moved to Texas. I didn’t know a soul in that state. I have made a lot of good friends living in Texas; many are people who grew up in Michigan!
Q: Tell me about your family.
A: I am married and have a 19-month-old daughter, Olivia.