Avoiding Pitfalls that Hinder Return on Investment in F&A Outsourcing

How to achieve real value versus pro forma cost savings

By Clarence Schmitz, Outsource Partners International

There are three kinds of failures in outsourcing:

1. The relationships where there is dissatisfaction with the other party’s performance against the agreed-upon and anticipated behaviors and actions.
2. The relationships that are unable to endure over the long term because of inevitable changes with the business environment.
3. The relationships where one or both parties initially hoped the relationship would achieve value beyond the initial objectives, but failed to do so. These relationships sometimes achieve pro forma, or perfunctory, satisfaction of minimum requirements such as cost savings but never achieve real value.

All three types of failures are the result of common pitfalls that occur largely because of the way in which the outsourcing arrangements are structured at the outset. The pitfalls over time become obstacles that hinder achieving the parties’ anticipated return on investment (ROI) in outsourcing. Fortunately, these pitfalls are avoidable.

Achieving value through an outsourcing strategy depends on eliminating or mitigating these pitfalls, by adhering to best practices and by taking preventive measures throughout the relationship. For a successful relationship, both parties must commit to taking these steps.

This paper discusses those commitments and the steps that need to be undertaken up front and throughout the ongoing relationship to avoid the hindrances to achieving value.

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