FMAccounting.com » Outsourcing

OUTSOURCING MARKET TREND IN MALAYSIA

slang — Wed, 26 Aug 2009 07:44:43 +0000

For those professionals like accountants, It experts and others who would like to pursue or establish outsourcing business, take note of the advice from Outsourcing Malaysia chairman David Wong

According to David Wong:

Our local outsourcing sector could be worth more than US$5 billion (RM17.55 billion) in 10 years if local firms can win bigger deals internationally . The sector is expected to grow by 18 per cent this year to US$1.1 billion (RM3.86 billion) and reach an estimated US$2 billion (RM7.02 billion) by 2012. This figure is still small compared with the global outsourcing market that’s worth US$220 billion (RM772.2 billion).
The local outsourcing market growth is retarded by lack of venture capitalists[ less than 10 VCs as compared to 50 during the Internet boom.]
Outsourcing in ICT involves shared services outsourcing (SSO), IT outsourcing (ITO) and business process outsourcing (BPO) among others.
The US, Europe and Asia Pacific, including Malaysia, Japan and Australia will be the key focus areas for Malaysian service providers for BPO and ITO services.

TOPICS COVERED UNDER THE HEADING OF OUTSOURCING

slang — Wed, 12 Mar 2008 05:01:51 +0000

The following articles are covered under this heading:

Outsourcing-Introduction & The Advantages of Disadvantages and Key Factors to Consider

Outsourcing The Accounting Function (Part1)

Outsourcing The Internal Audit Function/Department (Part 2)

Outsourcing- The Establishment of Controls Points When Outsourcing Part Or All Of The Finance Function ( Part 3)

Outsourcing-Performance Metric To Be Established When Outsourcing the Accounting Function

Article on Outsourcing: CNI Holdings Bhd Outsourced Its Logistics Section

Article on Outsourcing: News-Australia To Outsource Bank Jobs To India.

Article on Outsourcing:Best New IT Outsourcing Hubs

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Best New IT Outsourcing Hubs

slang — Wed, 14 Mar 2007 04:09:16 +0000

CLICK TO THE MAIN PAGE FOR ALL ARTICLES ON OUTSOURCING

We normally associate IT outsourcing mainly to India in places like Bangalore. However, with the passage of time, higher labor costs and turnover rates made companies also look at elsewhere to get their outsourcing needs.
A list compiled by management consulting firm neoIT on the new outsourcing hubs which are based on the following criteria:

availability and skill of workers,
cost competitiveness,
quality of the local infrastructure such as transportation, and the risks of doing business in each city

Take note that the cities are listed alphabetically, as there is no ranking.

1	Buenos Aires, Argentina	Open-source technologies	Accenture EDS Stefanini IT Solution	Big IT investment in the 1990s was followed by the devaluation of the peso in 2002, driving the need for IT workers to use open-source, or freely available, software
2	Bucharest, Romania	Security systems development and software testing	Genpact Wipro Infosys Accenture	A high availability of qualified personnel and the city’s proximity to Western Europe make it attractive. Even better, prices are 40%-50% lower than in Western Europe.
3	Dalian China	Application development	Genpact Accenture IBM Global Services	Dalian has a high availability of workers who are proficient in medium-level IT activities. Proximity to Japan and workers who are fluent in Japanese make it appealing to Japanese companies
4	Ho Chi Minh City, Vietnam	Low to medium level application maintenance and technology support	Glass Egg Digital Media TMA Solutions First Consulting Group FPT Software	Labor is cheap here, costing even less than in India, and workers are adept at performing labor-intensive IT support services.
5	Moscow	High end software R& D; development of embedded software, or programs that reside within a specific device	IBM Global Services Luxoft EPAM	There’s an availability of highly qualified engineering talent, specializing in R&D and high-end product development
6	Mexico City	Custom application development	EDS Stefanini IT Solutions	Having the same time zone as parts of the U.S. and fairly good availability of skilled labor make the Mexican capital a good place for software projects that require extensive collaboration with U.S.-based teams.
7	Prague, Czech Republic	IT systems management services	Accenture EDS	Prague’s good infrastructure and proximity to Western Europe make it a good place for companies that want easy access to outsourcing providers
8	St.Petersburg Russia	High end software R&D, embedded software development	IBM Global Services Luxoft EPAM	St. Petersburg is an important educational hub, with a large number of institutions offering relevant courses for developing high-end programming skills
9	Santiago Chile	IT infrastructure and systems management; high end software development	EDS Stefanini IT Solutions	Good supply of educated, IT-proficient workers in Santiago, and it’s an alternative hub for companies that want to consolidate IT services
10	Sao Paulo, Brazil	Support and maintainance for enterprise resource planning systems, or software for running a business	Accenture EDS IBM Global Services Politec Stefanini IT Solutions	Companies in Brazil have been providing IT outsourcing services to other Brazilian companies for years, so there’s a proficient labor pool in Sao Paulo.

(Source: BusinessWeek.com)

Outsourcing News: Australia To Outsource Bank Jobs To India

slang — Wed, 26 Jul 2006 10:37:12 +0000

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Reported in the IBNlive.com ((Friday July 14, 02:03 PM)

The National Australian Bank (NAB) has said it plans to outsource 100 credit card processing jobs, with India being a possible destination. The decision to outsource is to bring in greater efficiency. A pilot programme of the NAB, in which 24 accounting jobs were outsourced to India, has “met and exceeded” the bank’s hopes, NAB general manager Peter Cochrane told The Australian Financial Review.

Australia’s Finance Sector Union (FSU) said 100 Melbourne credit card processing jobs of the NAB were up for international tender and India was a likely destination for these jobs once the tender process closed.

However there were a few concerns raised by FSU:

earlier incidents like the recent terrorist attacks in Mumbai could disrupt banking business,
Identity theft and lax data security posed greater threats to customers

Incidentally, Australia’s ‘Big Four’ banks – ANZ, Commonwealth Bank, NAB and Westpac – already have operations in India or are considering moving work there.

ANZ has led the charge, with about 1,100 call centre employees in Bangalore. It also has four staff in a Mumbai branch office.

Malaysia: Outsourcing: CNI Holdings Bhd Outsourced Its Logistics Section

slang — Wed, 31 May 2006 08:48:11 +0000

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In my earlier articles, I have mentioned many advantages of outsourcing. Reported in The Star pertaining to the outsourcing of CNI Holdings Bhd’s logistic section
Points extracted are as follows:

With the BPO in place, the company would be able to maximise efficiency and cost savings. By outsourcing its non-core functions, it could also focus on its multi-level marketing activities

SnT Global took over CNI’s logistics and warehousing operations in March 06. It has set up a warehouse in Subang Jaya with its layout and operations structure optimised for CNI’s operations.

As at March 31, the group has 67 distribution centres, 135 sales points and 24 CNI Beauty World centres in Malaysia, Brunei and Singapore.

Establishing KPA/KPI or Performance Metric For Outsourcing The Accounting Function (Part 3)

slang — Mon, 01 May 2006 14:09:46 +0000

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It’s crucial to maintain certain performance metric so that the company can measure the efficiency of the accounting and bookkeeping services provided by the outsourced providers.

The key performance metric can be demarcated into the different areas if the functions are being outsourced:

Transactions Processing:

· Average cost per transaction

Strictly the average cost per transaction does not varies with the volume. This change unless there is a contractual agreement to alter the cost per transaction if there is significant change in the volume of transactions. This cost is easily obtained from the provider billing statement and should be tracked on a trend line to spot any changes to the per-unit cost.

· Error rate on processing
It’s important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore, the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses, accounts payable matching and others

· Average turnaround time like payment of employee expense reports ( staff) or to the creditors
Periodic checks should be done to ensure that the agreed average turnaround time to pay the above is on target otherwise there will serious repercussions to the company’s business

· Average time to resolve errors

· Timeliness of processing like invoicing customers on time

· Percentage of invoices paid on due date

· Percentages of payment discounts taken

Bookkeeping and Accounting Services:
· Time to release financial statement
This can be measured by the number of days lag between the end of the reporting period and the receipt date.

· Number of percentage of material irregularities
This can be determined by the amount which the financial statements are incorrect, and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

· Accuracy of accruals
This can be reviewed by looking at the calculation used for the accruals. · This can be determined by the amount which the financial statements are incorrect, and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

· It’s important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore, the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses, accounts payable matching and others

Establishing Control Points When Outsourcing The Accounting Function (Part 2)

slang — Mon, 01 May 2006 14:07:39 +0000

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When a company outsourced its bookkeeping and accounting function to an external outsourced provider, the management need to understand how to institute controls to check on them.

Therefore, the Finance Coordinator who is in charge of the outsourcing needs to institute certain minimum control points.

Some of the control points on accounting and bookkeeping external outsourced provider are as follows:

·  Timeframe on the audit of the bookkeeping and accounting service provider- twice or at least once a year,
·  Company needs to compare billings from the bookkeeping and accounting service provider against the budget,
·  Similarly the company also needs to compare billings from the service provider against the original contract,
·  The company official needs to keep proper documentation on meeting minutes. The minutes must be very clear of what has transpired, who are responsible, and others,

· The company needs to review the outsourcing accounting and bookkeeping outsourced provider’s expense trend periodically whether monthly, quarterly or yearly

· The general ledger in the books of accounts must have detailed accounts to keep track of all types of expenses of the service provider. Detailed monthly budget should earlier be keyed in.

· A complaint database whether from internal or external customers should be maintained to ensure that the provider is providing efficient and satisfactory services.

· The general ledger in the books of accounts must have to keep track of all types of expenses of the accounting and bookkeeping service provider. Detailed monthly budget should earlier be keyed in.

· The company official needs to keep proper documentation on . The minutes must be very clear of what has transpired, who are responsible, and others,

· Company needs to compare billings from the accounting and bookkeeping service provider ,

What are the advantages and disadvantages of Outsourcing The Internal Audit Department of a Company. Give some KPA/KPI to measure the performance of the outsourced provider.

slang — Mon, 01 May 2006 07:06:05 +0000

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There are advantages and disadvantages of outsourcing your company’s internal audit function.
Also, do you know how to measure the performance of the outsourced provider?
I have tabulated below the advantages and disadvantages and some measurements to assess the performance of the outsourced provider.

ADVANTAGES:

1	Skills If the auditing firm that you outsourced to is a large one, the company can enjoy the expertise of the auditors who are most skilled in their areas of audits.
2	Staff Quality Especially true if the provider is from the Big Four where the quality of the auditing staff supplier should be unusually high. This allows the company to have confidence that the audits will be in-depth and thorough
3	Knowledge of Best Practices Compared to the in-housed auditors, the outsourced auditors might have more knowledge acquired when they review the functions of many companies hence building up a hugh knowledge base of how processes can be performed most efficiently and effectively.
4	Variable costs The company only pays for audits performed hence the auditing cost can be switched from being a fixed one for an in-house staff to a variable one for an outside staff.
5	Quick accessibility to audit services The company has the advantages of very quick accessibility to an experienced audit team if it acquires a new business in a foreign location that is inconvenient for its internal staff to reach
6	Reduced travel costs With a big auditing firm, it can avail itself with audit staff from all over the region hence saving the company hugh traveling costs if it will to send its own internal staff
7	No downtime The company is able to avoid nonproductive downtime that sometimes occurs with an in-house staff, such as the interval between the end of one audit and the beginning of the next
8	No hiring and training costs The company can avoid the substantial hiring and training costs needed to staff and retain high key powered audit team

DISADVANTAGES:

1	Higher Cost? This can be more expensive as the auditing firm will charge its client using hourly rate which includes the firm’s overheads and profit margin. Also, there is the additional concern that as the audit progress, the audit firm will increase its fees.
2	Experience & skillsets The perceived quality of the auditors provided by the audit firm may be lower than anticipated since most of them have a very high staff turnover and also recruiting staff with lower level of experience in order to give them experience.
3	Training Some companies used the internal audit function to train their managers so as to given them a sound knowledge of how the company functions. By outsourcing, the company loses its training ground for the future manager of the company.
4	Responsibility The management might have the wrong notion that the responsibility now is passed to the outsourced provider.
5	Independence Sometimes, the outsourced providers are the external auditors hence the dependence of the external auditor is at stake as its directly conflict with their role as the internal auditors.

MEASUREMENTS:

1	% of Audits Completed This can be measured by dividing the total number of completed number of audits signed off by all parties by the total number of audits listed in the annual audit plan. If there is a big variance, it might mean that the appointed outsourced audit firm might be inefficient which should be replaced with another one.
2	Cost per audit This can be quantified or measured by extracting directly from the bills/invoices of the audit firm.

What are the Reasons,Risks and Opportunities when Outsourcing The Accounting Function of a company ( Part 1)

slang — Mon, 01 May 2006 06:15:54 +0000

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In my earlier article, I mentioned about some dinosaur functions in the Accounting & Bookkeeping function. I further elaborated on share service centre and outsourcing which can take away the livelihood of the accounting staff. This is because in a big group of companies, the Group CFO is constantly looking at ways to eliminate non-core transaction processing function and to move towards business partnering role and offering higher efficient services to the operating managers.

Typical and easily outsourced functions in the Accounting and Bookkeeping Section include the following:

Transaction processing – Accounts Receivable and Accounts Payable
Treasury namely cash management,
Collections of monies from Accounts Receivable,
Keeping books of accounts until preparation of financial statements,
Internal auditing,
Taxation,
Company secretarial,
Payroll
Investment
Pension

REASONS FOR OUTSOURCING YOUR ACCOUNTING AND BOOKKEEPING FUNCTION:

Generally, there are many reasons to outsource a company’s accounting/bookkeeping functions. This includes the following:

Focus on strategy and its core function

By outsourcing, it is able to avoid spending the bulk of the day handling, checking and reviewing the low value transaction processing operations. Time can be better spend on high key strategic and business partnering function,

Avoid major investments

Sometimes, management needs to make a decision to make a major investment in the function in order to modernize it. By outsourcing the function, the company can permanently avoid having to make this investment.

Handle overflow situations,

There are times of the day or year when a function is overloaded for reasons that are beyond its control. In these situations, it may be cost-effective to retain a supplier/outsourced provider to whom the excess work can be passed to when the in-house staff is unable to keep up.

Elimination of fixed costs

Instead of handling overflow situation, the function can be wholly pass for outsourcing simply to converts a fixed cost into a variable costs- the prices of the outsource provider will fluctuate directly with the transaction volume it handles

Improve ratios

It enhances especially profitability or productivity per person. This is especially true if you have too hugh manpower in the accounting function

Reduce costs
Enhance credibility by passing the job to the Big Accounting Four or larger reputable accounting firms
Jumping on the bandwagon.

As more and more coverage and publicity are on this, we see senior management of the companies asking their CFO’s to look into this option or strategy.

Improving performance

Sometimes, a company may find that the accounting functions has bloated costs or inadequate performance. This tempted management to “shake up “ the accounting function by advocating outsourcing to internal ( share service centre ) or to external party.

WHAT ARE THE RISKS AND OPPORTUNITIES WHEN OUTSOURCING YOUR BOOKKEEPING AND ACCOUNTS DEPARTMENT:

Despite the above mentioned reasons to outsource the accounting department, there are also the risks that we should be aware of :

The outsourced provider’s ability to supply the services may change over time.

The situation may change in the future, causing problems in the outsourcing relationship. This might be due to the provider having financial difficulties or it’s change in strategy that forces it to provide different services,

Another risk is that available information about the success of outsourcing is usually skewed in favor of success stories.
It’s might ruin or dent the reputation of the company, if the company lays off a large number of employees as a result of an outsourcing arrangement. This is especially true if the employer has been known to be a very caring employer whether towards it community and its staff.

Therefore, it is very important to reiterate that if we were to outsource the some of or all of the accounting function, the financial executives need to carefully plan ahead by examining some of the following factors :

The need to have a clear definition of the desired relationship. We should not jump into the vendor selection process,
The need to remember that outsourcing is not all about cost cutting. Otherwise, the results will be disastrous,
To allow outsourcing option a success will depends on the way requirements are defined, the way objectives are laid, the way vendor is chosen and the way service level agreement is written.