Did you hear that one about the British geophysicist who became an accountant, ran an African engineering business, has been a COO, CIO and CFO, before winding his way into the sourcing business with Accenture, and subsequently Capgemini, where he helped jump-start their BPO business?
Today, Chris Stancombe has worked in BPO for nearly a decade, and now heads Capgemini's Global Finance and Accounting Outsourcing practice. And one of the first things you'll notice when you meet Chris is he doesn't mince words... he cuts right to the chase. And that's exactly what we wanted him to do with the HfS crowd when we recently caught up to ask Chris how he sees sourcing in this economy shaping up, and get his views of what customers are looking for (or should be looking for) today...
Phil Fersht: Chris, thanks for joining us today. When you look at the market landscape today, how do you sum it up in terms of what clients are looking for, and how things have changed since the recession, in terms of the kinds of conversations you are having?
Chris Stancombe: I think it is quite interesting because it depends upon the maturity of the client and of the advisor. We are in an interesting time where there are renegotiations happening. There are some mature clients who have achieved the benefits from labor arbitrage. Now, they are looking for a partner who is going to help them with process expertise and driving realization of technology investments. I think that there has been a fair degree of wasted money invested in technology without really building and improving process. Consequently they believe that they lost the return on their investment. I think with some of the more mature clients and some of the more mature advisors the conversation is much more amicable. “You have got the capability. Yes, you have the global delivery centers. What we really want to talk to about now is your process expertise. How are you going to help us solve our challenges and how can we work together as a partner?”
At the same time, you do also have some clients who are still dipping their toe in the water and still thinking outsourcing is just about “lift and shift”. I think that the trick is finding those clients who you believe have the potential to mature into much more of a partnership relationship because they think that more than just lift and shift is interesting to an organization like Capgemini. We want to showcase what we do. We want to provide low cost process delivery and be an extension of our clients’ finance function. We should be challenging back to them as we work for that organization and we are employees of that organization. At Capgemini, we want our people to have that attitude back to their clients: challenging, supportive and making a difference.
Phil: Okay, so you talked about those who are still undecided that are dipping their toe in the water. What do you think would drive them over the edge and actually encourage them to take the plunge?
Chris: There are many internal things where they are in desperate need for a business case. Maybe they are not getting the quality or the transparency of information that they want, or the strategic intent to reshape their organization. We work with companies like Unilever who are creating global business services and service companies to support their initiatives and create strategic value. They are used to outsourcing. They understand it, and recognize how they bring benefits through partners. Internally, they recognize that they need a strategy, and that they need to be positioned and have the authority to make change in process and technology so they can drive towards that realization. They can eliminate waste if they have the authority to eliminate steps, automate, and use that investment in technology for the better.
Phil: Do you think that the attitude towards finance and BPO now is any different than it was maybe two or three years ago?
Chris: I think that it depends upon the client. It is more accepted and the suppliers are more mature. We aren’t the only people who have matured. There is more separation and fewer horror stories in the marketplace. Some days I feel very positive about it as you meet people who understand. Other days you meet people who it is all new to. So I think there is still some way to go.
Phil: In terms of shared services, a few years ago I think many people in the industry were forecasting the demise of shared services and this truly hasn’t happened. What is playing now for the company that is very invested in shared services operations and do see those companies morphing more into BPO or do you think that the larger opportunity is with those firms that don’t know very matured shared services?
Chris: I don’t see why anybody would invest in a shared-services center - it doesn’t make any sense to me as it is not their core business. However, people do. They think that they have the scale to make it worth their while. We clearly advise them that we can do it for them. You need to look at your long-term vision for a shared services center. A big part of the benefit is through consolidation but you only get that once. The next part is labor arbitrage and you choose the right price. The ability to continue to provide the right price is something that we will not lose. It is not just the location e.g. Eastern Europe, India, or the Philippines. As the inflation of prices increases in India, the potential for low cost delivery is worldwide. There will be a constant need to reinvent and to move and this is something that an outsourcing partner is much better positioned for. Once you start looking at these challenges, what is the long-term future for shared service organizations? We have used shared service centers and captives to grow our business model and I think that will continue.
Phil: So, in a nutshell, how is Capgemini different? Why would you see your company, in the marketplace, as being different from your competitors?
Chris: Although we are of European origin, we are a truly global company, embracing different cultures. We are a very collaborative organization. We have an absolute passion, seeing ourselves as a professional services organization. The qualified accountants that work for me are proud to be accountants and finance professionals. They are not just managers. They want to make a difference and are motivated by driving the industry forward. I think that is a big change.
Phil: Chris, we've talked about types of clients that are right for these companies, and it's getting clear now that certain value propositions work differently with certain clients with F&A services. We've also talked a little bit about providers being extensions of companies’ finance departments, so does that mean that you’re selectively choosing which clients to go after now? I think that, until recently, it's been a bit of a rat-race in the market, everyone bidding on every opportunity. Do you feel that the market now is maturing a bit where you are picking and choosing, that this might not be the right client us versus this is?
Chris: We have a stringent qualification process in which we evaluate whether or not we can win. To those that we qualify in, we match the value proposition that we just discussed giving us a greater chance of winning. If a company is just focusing on the lowest costs, then clearly you can’t change control of that. That’s fine but this is not the way we work so we would disqualify it. We know the type of cultural fit so we also take that into account.
Phil: You talked a bit earlier about most clients need to have a longer-term vision for their finance function whether they have shared services or not. Coming out of this recession and looking at the new landscape do you see BPO as heavily embedded in that vision still or do you think it’s becoming a bit of a mixed bag?
Chris: Absolutely. There are some enlightened clients that recognize now that they can use BPO not just for the short-term processes, but to help deliver cultural and transformational change into organizations. In most global companies there is a strong desire to operate and be seen by their clients as one standard global enterprise regardless of which entity you visit. They recognize that the discipline of shared services and the discipline of BPO can bring help and resources to drive that change. They can rely on providers like Capgemini to be a partner to help them achieve their global vision.
Phil: There is so much talk about transformation when companies go through F&A in particular, that we have seen so many examples of companies who seem to jump at the low cost option moving transformation further down the road. What is going to happen to companies that don’t transform? They do a cheap BPO and in two years time the CFO can turn and say, “That was great but what comes next?” What is going to happen to those businesses? Do you feel that every provider out there is going to be able to help them get to that next level?
Chris: We have a number of those types of transactions. Within two years the client comes back to you, “That’s great, but what have you done for me lately? You made budget cuts or whatever it was, but what is the step change now and how are you helping me?” I think there is a constant demand from clients to be excited which is not unreasonable. If the client isn’t chasing you asking for more, then that is a pretty stagnant relationship. As you know, we have innovation reports twice a year with our clients and we are constantly investing in assets. We are always trying new things to keep our clients excited and to deliver value to them whether that is around driving efficiency or effectiveness, delivering more value for the organization or increased control. We try to organize around those four things. We also bring innovation in pricing and commercial terms, whether it is FTE based, fixed, or transaction based pricing. We assess what is the right commercial mechanism and the right measures and the key performance indicators that you should be using and how can we better align our delivery to them. We are constantly challenging ourselves and being challenged by the client to get better. Our obsession is to be the best at what we do. We invest in our product offerings, capabilities and in our people to make sure that we deliver value to our clients. If someone has a rather boring and mundane relationship with their provider then that is probably the fault of both parties and they both need to see whether they can do something exciting about it. If the provider hasn’t got good assets, good people and a strong desire to be the best at what they are doing then they aren’t the best provider for that organization.
Phil: When we look at the build out in the IT business, we have very much reached a stage now where clients will tend to use one predominant provider their offshore work, but then bring in a different provider to integrate it, to do more of the complex work and be more aligned with the business. Do you think that is going to have to happen in F&A eventually where if you are using a low cost offshore provider to do a bunch of back office but they are clearly not up on the skills and the expertise to transform and drive innovation, that the buyer is going to have no choice but to look into bringing in additional talent from other providers?
Chris: I think they should be. It is interesting that you talk about that. To some extent when we structure solutions, we have an industrialized piece so we are tempted to look at finances. You record transactions and that should be very industrialized and then through the reporting period function you report those transactions so that you’ve got some data and current information. Then you analyze that information to produce some insight. We take some action that then delivers a different outcome. It should be done as efficiently and effectively as possible. You produce a receivables report; someone should look at it and say, “Okay, where do I now prioritize? How do I improve my collections? How do I get my cash in quicker or more cash in the door?” You produce lots of insight and pass back to the collections group, who then drive that improvement outcome. We segment our view of the world in that way.
Phil: Do you feel that you are having more technology conversations with the clients now when you talk about F&A? How can you bring in new financial systems or upgrades? How can you build analytics and dashboards? Do you feel that is very much part of the conversation now or do you still feel it is a process conversation first and the IT stuff comes in later?
Chris: It is interesting. They want to do the process issue first. People still think about what is your cost in India versus your cost somewhere else and then deal with it. Then you get, “How are you going to help me with my processes, how are you going to drive that change?” On the more mature conversations we have the command center concept where we standardize all of our dashboards. It’s all about enabling different multi-shore delivery centers through lots of communication and lots of reporting. We use standard KPIs, and standard definitions in every different center that we work. As you know, we have created a global process model to enable standardization of delivery and consistent measurement from one center to another because you need to know the stop points of the transaction and all activity within a process. So we have invested quite heavily in standardization of definitions and underpinning enablement workflow modules for each process to provide visibility, which makes sure we always understand how we do those things and where we should focus our efforts to improve.
On the Cott Beverages engagement that has just gone live, we took the client’s new SAP build, and in parallel, used the global process model and worked with our technology services [TS] colleagues to build a new SAP platform for the client. We went live on that in less than nine months from start to finish. The benefits that we move into the BPO situation in that scenario pay for the TS bill. The whole story on Cott is pretty strong and it’s what clients are looking for. In such tough business conditions you have to contemplate a little more risk. Obviously they have pushed that risk to us, we contracted for that risk and we will deal with it. We used some SAP template work that TS had already invested in. We used a metal process model to deliver process designs that were built into it so the whole process was accelerated. We don’t need to train our people on the old processes because we switched straight from the old process to the new process. We used our finance academy approach, to train people on the new process model and it was done. I remember when I started ten years ago that transformational outsourcing was a big buzz word. No one believed in it. I think it’s here. We built a process model and took over 300 roles on the client side within nine months delivering service across Europe. The client released some of their 300 people. We brought 200 people in India. So it worked out a business case itself all through this transformed process model. Not lift and shift and then fix it. There is another example of a company that had a strong desire to make change happen quickly.
Phil: So finally, Chris, if you could have your time again... you are graduating from the university... would you choose to do this or do something different?
Chris: (laughs) All right. I have no regrets in my career really. I like working cross sector and I like working with very bright people. I like being at the forefront of my profession. So when I think about everything I could have done, I probably should have left industry sooner. But, you know, I learned a lot, I did a lot, and traveled a lot, lots around culture and how change happens. I think I probably should have spent a little less time with one industry sector. Multi-sector working with very bright people is very exciting, very interesting.
Phil: Excellent - that was a very good answer! Thank you very much, Chris, for the interview and we look forward to sharing this with our readers.
Christopher Stancombe (pictured above) is Global Head of Finance and Accounting BPO for Capgemini.