Clerk
Today the concept of outsourcing is enthusiastically discussed by businessmen and in public media. On the one hand, advantages from transition to outsourcing seem apparent as the company focuses on addressing its core business objectives and reduces operating costs: the economy of scales approach and standard solutions developed by the providers make their services less costly than the internal back office function. On the other hand, the principal question for the client is credibility of a service provider: how reliable is an outsider to whom we entrust the accounting function, the “heart” of any business, or HR record-keeping?
Sergei Tiunov, Managing Director of BDO Unicon Business Services, a company specializing in business process outsourcing covering accounting, payroll processing, HR record-keeping and legal advice has shared with Lev Mishkin, Clerk Ru IA correspondent, his views on the trends in the outsourcing business in Russia.
The rapid proliferation of IT technologies in the West spurred development of a new service – IT outsourcing, which encouraged other types of outsourcing (HR management, accounting, logistics, etc). There are examples when transition to outsourcing helped cut down the by 40% . In Russia outsourcing is a relatively new business. How would you describe the current situation in this market?
Outsourcing as an effective corporate governance strategy has always been an attractive cost reduction tool for Russia-based foreign businesses and Russian enterprises aiming to achieve business transparency and operating under “white” schemes. Outsourcing enables to cut costs, but primarily, it allows the top managers to concentrate their efforts on key business priorities and outsource other functions to contractors offering effective solutions for a specific business.
The generality of solutions, on the one hand, and their flexibility, on the other, allow to address the client’s tasks in a time efficient manner. Unlike in the US market, IT outsourcing in Russia has never been at the forefront of the outsourcing business. The common trend in Russia was towards outsourcing cleaning and logistics services. However, with more Russian companies emerging from the “shadow”, accounting outsourcing has become a more popular choice nowadays.
The crisis has sharpened the need for outsourcing, as many companies seek to make a more efficient use of their human resources and cut personnel costs. Practical experience shows, however, that optimization within the company does not always lead to the desired effect, as the functional duties should be performed by professionally eligible staff, so outsourcing today can be viewed as an anti-crisis strategy.
How can you describe solutions in the area of business process outsourcing? What services are required by companies of different forms of business organization and type? What do consulting firms offer to start-up businesses and large integrated holdings?
Outsourcing, undoubtedly, is a very flexible instrument of performing daily routine work. Business of any client is unique and requires, on the one hand, a customer-tailored approach in transition to outsourcing, and on the other, – strict compliance with client liaison procedures, reporting standards, forms and deadlines. The outsourced services should be delivered with optimal productivity to assure the expected high quality and efficiency.
For example, integration of payroll calculation, HR record-keeping and HR management in a single information system. We can put in place the HR and payroll administration function from “scratch” for start-up businesses and sophisticated holdings with regional networks taking a standard sequence of steps adapted to the client’s industry-specific needs.
In terms of statistics, the client’s preferences can be summed up as follows. Demand for package services (accounting + payroll calculation+ HR record-keeping) mostly comes from small representations of foreign companies. Medium-sized businesses also frequently need an integrated service, and in this case we focus our efforts on integration of outsourced accounting procedures and the client’s business processes. The accounting system can be set up so as to enable joint work for authorized users of the provider and the client in the system. Large companies where the accounting function is a component of the ERP system usually outsource payroll processing services.
Today the capacity of the Russian outsourcing market is estimated at 3-4 billion roubles, which is a negligible amount for this country with a huge potential for the outsourcing market development. A possible market size is a hundredfold greater. So, this niche can be still considered unfilled, as outsourcing, being a recently evolved phenomenon, is only beginning to gain a foothold in the Russian market.
Could you give examples of successful projects or some interesting cases?
For several years we have been successfully cooperating with the “36.6” pharmacy retail network. We automated the complex HR incentives system, which enabled to minimize errors and change the HR incemtives system, where necessary. The data on the “36.6” pharmacy group personnel are processed and stored in a centralized database. The payroll software was customized and developed by our specialists to meet the network’s requirements. Apart from the payroll calculation capability the client can use the system to generate reports relevant for management analysis and decision-making.
A comprehensive service package combining payroll and HR administration, financial and tax accounting was offered to Eldorado-NSK specializing in consumer electronics repair. Quality control procedures for the payments function designed by our specialists demonstrated to the company the obvious advantages of outsourcing. We have optimize HR records management, developed and introduced the regulations for all HR administration processes, payroll processing and accounting. Now Eldorado-NSK spends far less time on this work.
What are the phases of transition to outsourcing? What things should be kept in mind before hiring an outsourcing company?
Normally, a decision on outsourcing is taken by top management of the company. But the driving force behind this decision may be managers of the departments striving to improve performance of their departments through outsourcing certain functions. As soon as the decision is made, the client’s business is subjected to a diagnostic review. Based on this examination, the outsourcing company can set up the accounting function and develop related documentation. As a rule, 90% of success depends on client liason procedures which should provide, where possible, for all irregular situations which may arise. Long-term client retention depends on effective and efficient handling of such emergencies.
Today outsourcing is gradually becoming a component of the corporate recovery program and a reasonable cost cutting tool.
© Clerk Ru IA, analytical department
