Mid-Market Outsourcing

15 October 2008:

Are mid-market companies embracing outsourcing and which finance services are being put out?

Mark Holland, partner, Baker Tilly and ICAEW IT faculty

I think it’s a trend that is growing. Mid-sized companies are seeing the opportunity now to benefit from the services, the efficiency gains, the reliability and the additional functionality that outsourcing can bring to them that, perhaps, up until relatively recently, was only possible for their larger corporate colleagues.

There have been changes in the last few years in technology and in ways of working that mean those benefits are now far more accessible. Some businesses are taking up the opportunity, or at least looking at it.

Outsourcing has tended to be done more for positive reasons, i.e. growth and development, rather than purely as a cost-cutting exercise. I would be interested to see whether, given the current environment, it continues to be growth that is the key driver or whether cost cutting perhaps raises it.

With the commercial usage of the internet as it is now, it is possible for businesses and outsourcers to share the same information simultaneously whereas, in the past, outsourcing the finance function might have been a question of basically losing control over everything. You wouldn’t know anything until the set of reports hits your desk in a paper copy a week or two later.

Those days are over. Now what we are seeing is a collaborative approach, a partnership approach between the outsourced delivery company that is actually doing the final part of the finance function and the company that has outsourced part of that function.

The components that we are seeing outsourced are increasingly around some of the less value-added areas. For example, purchase ledger, reconciliation, preparation of management reports, KPI reports, that sort of thing. We tend not to see credit control being outsourced to such an extent because that is touching customers.