1. Special Report Do
OUTSOURCING
Shared Services or Outsourcing:
Two Winning Options for
Finance functions
Chief Financial Officers and Controllers are directly involved in the way they
operate their own finance and administration responsibilities. In light of the
experiences of managing multinational companies, the author presents
some solutions with an overview of the potential functional scope of Shared
Services Centers (SSCs) and of Outsourcing, featuring an interview with
Valérie Raoul-Desprez, Financial Controller of Rhodia group.
M
anagers are facing an environment that is
more and more competitive in terms of
productsandservicesofferedtocustomers
andintermsofthefinancialandhumanresourcesthey
would like to attract and retain to generate sustainable
growth and profitability for their firms. To
succeedtheymustcomparetheperformanceand
attractivenessofthecompanywithotherecono-
mic actors beyond their own business sector.
Theymustimplementthebesttechnologicaland
organizational practices in order to create value
forthecompany'sstakeholders:customers,share-
holders and employees.
Theprocessesmanagedbythesupportfunctions
create value when the benefits they bestow on
thecompanyaregreaterthanthetotalcostofthe
resourcesused(operatingcostandassetholding
costs).Intheabsenceofbenefitevaluation,value
creation will be considered as positive so long
as there is no better option on the market (no
destruction of value based on the best commer-
cialized practices).
As indicated in the DFCG-HEC study conducted in
2002 , the major stakes are:
• Reduction of 20% to over 30% of fully loaded costs
obtained at a comparable level of service.
• “Refocusing" of energy and resources on the core
business (allocation of manager's time and resources
to more strategic upstream functions that contribute
to growth)
•Flexibilityandadaptabilityofresourcesbasedonbusi-
nessvolumesandqualityofservice(e.g.serviceconti-
nuity,cycletimereduction,dataconsistencyandrelia-
bility, etc.)
• Access to external skills (e.g. technology or exper-
tise, etc.)
• Optimization of the capital employed by operations
and functional offices
It would be appropriate to add to this list the general
managementexpectationtoupgradesupportfunctions
contribution, transforming each functional manager
into a more proactive “business partner”.
SHARED SERVICES CENTERS (SSC) AND
OUTSOURCING
Theseinitiativesconsistofconsolidatingthefunctions
orprocessesofseveralunitswithinagroup(mainoffices
and/or operational units) internally for SSCs or exter-
nallywithothercompaniesthroughaspecializedservice
provider . They are most commonly organized after
comparing level of service and costs of a process to
bestpracticesandreflectgeneralmanagement'sdesire
todevelopthecontributionofsupportfunctionsbyopti-
mizing resources to favor business activities that are
furtherupinthechainofvaluevis-à-viscustomersand
shareholders.
Jean-Claude DE VÉRA
President,BIPORIS,
CoordinatoroftheDFCG
(French Association for
Financial Officiers and
Controlers) “SSC and
Outsourcing” group
BY
1
Quélin B. and Duhamel F. :
“Outsourcing : Finance and
Skills drivers are linked”, in
Échanges, n° 194, décember
2002.
SPECIAL REPORT
OUTSOURCING
THE MONTHLY MAGAZINE
FOR MANAGEMENT
AND FINANCE
EXECUTIVES
Novemberr 2004 - N° 215
Excerpt from Echanges N° 215
November 2004
Business Information & Process Optimisation
for Results & Innovative Services

2. ÉchangesNOVEMBER 2004 • N°215 2
They result in a function being contracted to an inter-
nalorexternalserviceprovideroveraperiodofseveral
years,whichrequiresthatareferencedatabasebeesta-
blished to set forth the full cost, quality of service and
thevolumeshandledbythisfunction.Indeed,itisimpor-
tant to carefully assess from the start the business
workload and complexity which will be used to esta-
blishthecontractualobjectivesbecausetheservicewill
be provided in compliance with the specified levels
of service, performance and responsibility.
This transformation of support functions into profes-
sionalservicesprovidedtoclientoperationalBusiness
Units is far from natural, particularly when determi-
ning the range of services provided and the terms and
conditions of billing them or in the implementation of
an ongoing progress initiative.
ROLEOFTHEFINANCIALOFFICERINSSCAND
OUTSOURCINGPROJECTS
Thefinancialofficerandhisteamsmustbeheavilyinvol-
ved, from preparing decisions to implementing SSC
projects or outsourcing contracts and monitoring the
operational functioning of the client-service provider
partnership.Theymakeamajorcontributiontodefining
theperformanceindicatorstheninmeasuringadherence
totheserviceandpricecommitments,whichwillmake
it possible to assess the progress made and to activate
any bonus or malus contractual incentives.
Decision-Making Process
The financial officer has a fundamental role to play in
determiningthescopeofactivitiesconcernedandover-
seeing the company's projects. Moreover, he sets an
example when it comes to analyzing his own opera-
tions and deciding whether to integrate them into a
sharedservicecenteroroutsourcethem;hemaychoose
activitieswithlowvalueadded,suchasrecordingmone-
tary transactions, as well as those that are closer to his
core business, such as managing client receivables or
reporting.
Hisassessmentsofprojectsandsitesforlocatingthese
operations will affect the structural architecture selec-
ted in the business case.
Project Implementation
At this stage, the financial officer and the controller
must, at a minimum, be involved in the following
processes:
•Approval of the reference data base establishing the
levels of service, costs and volumes of activity
•Assessmentofassetsandanypotentialtermsoftrans-
fer (including information systems)
• Legal and economic structure of the service contract
and relations between internal entities (SSC-BU rela-
tions) or between the company and the service provi-
der (capitalistic and/or contractual)
• Formalization of the methods of performing fully
loaded costs (i.e. the allocation of support activities)
and determining the price of services (flat fees or unit
prices invoiced depending on consumption)
Operational Functioning
The financial officer must help develop the manage-
mentofperformanceandremunerationsystemsadapted
to professional service business.
InthecaseofanSSC,hewill,inparticular,defineobjec-
tives adapted to the financial and human needs, which
willbeintensifiedbytheregroupingoffunctions(e.g.:
integration of indicators specific to staff management,
employee satisfaction studies, etc.).
As part of an outsourcing contract, he will also have to
overseetheimplementationofongoingprogressproces-
ses on the client side and on the service provider side.
Inbothcases,goodpracticespointtothecreationofan
oversightcommitteeresponsibleforcontractualmoni-
toring, including modifications to the scope of the
contract,andassesstheperformanceandlevelofservice.
The choice of a project owner and a project manager is
essential to developing a sustainable partner relations-
hip between the client and the service provider: they
mustestablishbenchmarks,analyzetheoperatingmetho-
dology and jointly define the communication and trai-
ning plans of their reciprocal structures.
POTENTIALSCOPEOFTHESSCAND
OUTSOURCINGFINANCEFUNCTIONS
As an example, here is a non-exhaustive breakdown
of the functional processes between the core business
ofafinancialofficer(e.g.contributiontothecompany's
strategyandplanning,managementofthefinancedepart-
ment, internal control and decisions support, etc.) and
recurring activities that may be shared or outsourced
(e.g.transactionmanagementlikeaccountspayableand
receivable, general accounting, etc.).
The target objectives (optimization of cost-services or
the development of added value) and a diagnosis of
theexisting(controlofprocesses,managementculture,
etc.) will determine the architecture of the solution
adapted to the company: a national SSC or regional
SSCswithorwithoutrecoursetolocalorremoteexter-
nal service providers.
ossier
2
Cf. De Véra J.C. : “Value
creation through Shared
Services and Outsourcing”, in
Échanges n°196, february
and n° 198, april 2003.

3. Potential Scope of SSC or Outsourcing for Finance and Administration Functions
Échanges NOVEMBER 2004 • N°2153
Processes/Activities (status quo)
Finance and Administration
Department
Financial strategy, financing
and management of the function ✔
Decisions regarding
management and internal control ✔
Management Control
Plans and budgets
Forecasts versus objectives ✔
Status report and other reports to
management ✔ ✔
Performance related action plans on
P&L / BS ✔ ✔
Accounting
Legal consolidation and reporting
✔ ✔
General accounting
✔ ✔
Accounts payable and
receivable/banking ✔ ✔
Cost accounting
(inventory and production costs, ✔ ✔
assets, etc.)
Tax returns (VAT, Income tax,
other taxes) ✔ ✔
Credit and cash flow
Credit and Cash collection
✔ ✔
Banking reconciliation and cash ✔ ✔
management
Placement of liquid assets
✔ ✔
Functions/ F&A SSC Outsourcing Comments
Special Report Dossier
OUTSOURCING
Contribution to the company's strategy and organization .
Monitoring of financial resources for the company current
operations and developments (incl. the financing plan,
engineering, acquisitions-divestments, risks, etc.).
Responsibilities of the director that cannot, by their nature,
be delegated (arbitration, allocation of resources, monitoring
to ensure compliance with procedures and regulations, etc.).
Overall responsibility of performance monitoring vis-à-vis
shareholders and of business developments.
The existence of integrated information systems and
software suites may limit possible options: the choice of
performance indicators and company oversight are the
responsibility of the senior management committee;
measurement can be delegated to local SSCs.
Definition of objectives and leadership of internal actions
whose execution can be delegated (e.g. logistical management
of inventory or optimization of non-critical purchases, etc.).
In theory, the preparation of consolidated financial
statements can be delegated, but, in practice, the financial
officer is ultimately responsible for approving the financial
statements vis-à-vis outside parties.
Enforcing applicable rules within the firm is the responsibility
of the financial officer. Accounting transactions can be
delegated to an SSC or a service provider.
Maintaining the accounts of outside parties can be
delegated, but the resolution of contractual litigations is the
responsibility of the operational structures.
The management of costs accounting can be integrated into
an SSC, but it is difficult to outsource them because they
assume proximity with physical flows and assets.
Tax filing and documentations are the results of accounting
transactions: they can be prepared by an SSC or a service
provider, but are signed by the financial officer.
The decision to enter into a contract with a client and the
level of risk taken are management's responsibility. However,
transactional activities related to the management of
receivables can be assigned to SSCs or outsourced according
to the principle of the best service at the best cost.
Transactional activities that can be assigned to SSCs or
outsourced.
Transactional activities that can be assigned to SSCs or
outsourced.

4. ÉchangesNOVEMBER 2004 • N°215 4
SSCs and outsourcing are means at the service of a
company's strategy. The general management decide,
with the support of the financial officer (forecast cash
flows) and the human resources department, on the
scope of these projects after reviewing the portfolio
offunctionalandoperationalactivities,distinguishing
strategicactivities(decisions)fromnon-"critical"acti-
vities (executions) and after comparing the respective
contributions of the projects and the related risks.
These two options amount to an excellent opportu-
nity to develop the expertise and the professionalism
of the support functions with respect to best practices.
By using contracts to define its relationships, these
optionsmakeitpossibletorefocusmanagement'senergy
on its essential growth and profitability missions.
Sharedservicecentersconstituteanoptimalmodelfor
value creation, whose limits reside, on the one hand,
in the ability to rapidly deploy the target to the entire
perimeterbecauseofinternalcompromisesand,onthe
otherhand,inthequestforeconomiesofscalebeyond
the volumes managed by the company.
For businesses aiming for additional cost reduction,
they represent an excellent platform for negotiating
future outsourcing contracts with the current global
playersinthemarketorwithnewentrantsthatarespecia-
lized by business sector or functional process. ■
Échanges: Under
what circumstances
was the decision
made to outsource
and create shared
service centers for
some financial
functions of the
Rhodia group?
Valérie Raoul-
Desprez : The
Rhodia group
launched an
ambitious plan to
improve profitability, which led us to assess
the various aspects of productivity and
rationalization for each function compared
to the best practices measured in the
benchmark reference.
The contributions of the finance, human
resources, information systems and
communications departments translated
into the pursuit of specific actions such as
sharing resources via an SSC or outsourcing.
Could you specify the scope of the finance
functions developed in-house and the range
of services contracted to a service provider?
Transactional activities were outsourced to a
provider based in Central Europe: accounts
payable and receivable and inflows-outflows.
General accounting services were integrated
into shared service centers by country.
Management control, which contributes to
performance oversight, is conducted close to
managers of "business units", who are closer
to the field.
How do you measure respect for contractual
commitments and the contribution of
support functions to the company's perfor-
mance and projects?
An oversight committee sets objectives and
monitors performance in terms of both the
level of service and the cost of outsourced
activities. This process is currently being
implemented for the SSCs. Moreover, all the
productivity plans are consolidated and
audited by the company.
You mentioned the relationships between
the business units and the service providers
(in-house or outside); did you define the
overall objectives of the project in terms of
the personnel on the customer and supplier
sides? Did this lead to changes in the
individual performance review systems?
The performance indicators and objectives
were in large part deployed at the service
providers' businesses and the non-
compliance analyses resulted in the
generation of specific objectives and actions
at the customer level (e.g. : purchasing
process, provisioning, acceptance of
deliveries and approval of supplier invoices
in factories). Furthermore, the overall
assessment of function performance was
integrated into the variable remuneration
system for the company's executives.
What key factors for success did you select
in order to implement the SSC and
outsourcing projects?
The main key factors to the success of these
projects are:
- The involvement of general management
and the alignment of the various structures
to be compatible with the target objectives in
order to strengthen the change management
process (e.g. hierarchical management of
the group's functions)
- Mastery and standardization of processes
before the transfer to SSCs or to outside
service providers
- The decisions made and solutions chosen
for the transition of organizations and infor-
mation systems toward the target (e.g. archi-
tecture by country or region, projects that are
sequential or conducted simultaneously, etc.)
Comments recorded by Jean-Claude de Véra
Rhodia: SSCs and Outsourcing Combine to Help Improve Profitability
Valérie RAOUL-
DESPREZ
FinancialController,
RhodiaGroup
CONVERSATIONWITH
BIPORIS
23, rue de Balzac - 75008 Paris - France
Tel. : +33 1 53 53 69 77
jean-claude.devera@biporis.com
www.biporis.com
➜ Benchmarking processes & Service provider Information
➜ Diagnosis & Optimization of processes: Finance and IS,
Customer-Suppliers Administration, Human Resources and
Facilities Management
➜ Assistance & Management of Shared Services Centers and
Outsourcing Contracts