Getting the Most Out of an Outsourcing Vendor Site Visit

by Kalpana Ramakrishnan, Theodore Frangulescu

With the finance and accounting marketplace so mature, a potential outsourcing partners operational
and organizational cultures become key differentiators when selecting a vendor. But a proposal
document cannot communicate culture, so vendor site visits become critical in the selection process.

In addition, a properly planned and executed site visit can help demonstrate a vendor organizations
commitment to making the relationship work. And since the value of such a relationship is based on
what each party contributes, site visits help increase an organizations return on its outsourcing
investment.

But what makes for an effective site visit? In many instances, organizations return from these visits with
an overwhelming amount of information, little of which helps to distinguish the bidders. To make a site
visit an effective and valuable exercise, particularly when traveling to offshore destinations, it is
imperative that an organization set a clear agenda about what it wants to accomplish. Otherwise, it risks
being treated to the standard promotional presentation and tour. Effective site visits are characterized
by the following:

A clear agenda based on objectives, defined in advance by the customer and communicated to the
vendor;
Direct observation versus presentation of the practices and procedures that are critical to the
outsourcing organization; and
Interaction with service-delivery staff at various levels, instead of simply with the vendors senior
management or sales personnel.

While the objectives of a site visit will vary according to an organizations specific outsourcing strategy
and operating model, we believe that there are several critical areas that should be addressed. These
include training; security; business continuity; resources, recruiting, and performance measurement;
and service maturity, growth, and development. In this article, we describe aspects of each of these
areas and provide guidance on getting the most from a site visit investment.

Training. Few processes affect an organizations culture more than training. Understanding a vendors
approach to training requires direct observation in several areas including:
General on-boarding and assimilation;
Language neutralization (if relevant);
Culture and regional knowledge; and
Industry and client/process-specific instruction.

Observe actual training classes in session. Note the interaction between instructors and participants.
Observe the degree of formality and the attitude with which participants are engaged. Does it appear
that participants are genuinely interested or just checking off a requirement?

Speak with the instructors. Ask them about their experience. Is training their primary responsibility, or
does the vendor rotate trainers on a regular basis? Discuss the requirements for passing a course.
Discuss the vendors approach to refresher training and continuing education. Do formal requirements
exist for each employee? Are employees encouraged or required to seek additional training throughout
their careers? If so, discuss and observe the resources available to them such as libraries and continuing
education facilities.

All of these factors will provide an indication of the vendors real commitment to the quality and
professionalism of its employees and its approach to managing attrition.

Security. Information security is a critical issue, particularly when collaborating with an offshore
vendor. As with training, all vendors will tout their information security credentials and procedures.
Dealing with financial information makes security all the more critical. Use the site visit to explore how
these policies are put into practice. Observe the physical security and access to facilities and information
by visiting several operational sites. What types of access controls are in place? Observe the level of foot
traffic.

Note the presence (or absence) of printers and paper documents. Restricting the use of paper in the
course of operations is a key contributor to information security. If your process requires the use of
physical documents, speak with the operations managers about their document-handling procedures
and how confidentiality and security are maintained.

Observe the office configuration and separation between teams serving different clients. For the right
price, vendors are happy to offer clients dedicated, controlled-access facilities, versus the use of hot-
seating where individual workstations are shared across multiple clients. If dedicated facilities and
seats are a requirement, ask to see where your team will be located. If dedicated space is not a
requirement, inquire how security is maintained during shift changes.

Likewise, discuss the vendors use of dedicated versus shared staff. Will operational personnel serve you
exclusively, or will they work on multiple client accounts? How flexible will the vendor be on this
decision, and what would the impact be on cost? These decisions affect the complexities and risks
associated with managing security.

Business Continuity. Outsourcing to offshore, or even nearshore, destinations involves dealing with
new infrastructural, political, cultural, and environmental issues, and each of these poses new business
continuity risks. When conducting a site visit, speak with the vendors operations managers about the
business continuity/disaster recovery plans and how these plans are executed. Discuss likely disaster
scenarios and conduct a verbal walkthrough of recovery procedures.

Be sure to consider all aspects of a recovery plan such as staff, equipment, facilities, data, and
documentation. Certainly, all vendors will have backup sites that can be maintained in a full (hot backup)
or intermediate (warm backup) state of readiness. But often, disaster recovery efforts are hindered by
simple, non-technical issues. Will the vendor maintain a fully trained team at the backup site, or will
recovery depend upon transporting the staff to the site? In case of the latter, what happens if the
disaster in question prevents the staff from getting there?

If possible, speak with staff that have experienced an actual disaster, and learn about their recovery
efforts, what worked, what did not, and what were the lessons learned. Rarely, if ever, do recovery
efforts go exactly according to plan. In many cases, successful recovery depends on the willingness of
team members to go the extra mile, and these are tasks that cannot be easily documented in a standard
business continuity plan.

Resources, Recruiting, and Attrition Management. Meet with managers involved in recruiting and
hiring. Discuss the sources of talent, size of the resource pool, and educational/professional background.
How are these factors changing over time? How does the specific location relate to the resource pool? Is
there a substantial pool of local resources expected to remain stable or grow, or does the vendor have
to recruit from other regions? Discuss the recruiting and selection process, from initial application to
final hire. What are the dropout rates at each stage? How long does the entire process take? How
rigorous is the selection process, and what are the criteria? Are background checks performed? Attempt
to gain insight, at least comparatively among vendors, on the attitude a vendor has toward staff.

Once hired, how are staff members assigned to clients? Does the vendor hire for specific client needs or
hire to maintain a constant resource pool? What career paths and performance management programs
are offered to staff? Inquire about attrition management programs and historic turnover rates.
Understand the underlying calculation methods.

As the outsourcing market has experienced explosive growth, particularly for F&A services, competition
for resources and managing attrition has taken on greater importance. Discuss resource stability and
length of service statistics. How long do resources typically remain in the same position before moving
up or out? These factors provide a glimpse of whether the staff regards employment with the vendor as
a desirable career or merely a stepping stone. Resource stability has a direct impact on service quality
and consistency and the potential for innovation and process improvement.

Performance Measurement. Perfor-mance measurement is the foundation of effective governance
and relationship management because these two areas rely on having an objective, meaningful set of
performance data. While conducting a site visit, meet with managers and team leads who bear
operational responsibility for performance measurement. Observe the processes and systems they use.
Ask to view sample reports or report templates but also explore how performance data are captured,
collected, and analyzed. Try to gauge the depth and flexibility of their performance measurement
capability. Is it limited to a standard set of high-level metrics, or does it offer the ability to establish
custom metrics and indicators?

Colorful reports are impressive sales tools, but the value of a performance-measurement capability
depends upon the processes and tools that make use of the performance data that are meaningful to
your business. Bring samples of your reports to the site visit and be prepared to discuss how
performance management is used in your operations. Describe what your performance-management
requirements would consist of and what it would take the vendor to comply.

A vendors reaction to customization requests is not only a good indicator of the future relationship, but
also a test of how robust the vendors procedures and tools are. Expect that during a site visit, a vendor
will rarely, if ever, say no to anything, so avoid asking simple yes/no questions. Assume that anything is
possible (for the right price), so focus discussions on how and who, rather than if.

Service Maturity, Growth, and Development. This area may be the least tangible to assess during a site
visit, but in many ways, it is one of the most important. With the rapid growth of the outsourcing
marketplace, there is an abundance of vendors with extensive experience in finance and accounting
processes. But a vendors maturity and depth of experience may not be consistent across all the sub-
processes you are considering outsourcing. Accounts payable processing, for instance, has almost
become a commodity, but knowledge of certain accounting practices that are closely linked to particular
businesses and industries may not. This is where it is important to perform a self-assessment before the
visit.

Meet with your existing accounting managers to understand the state of your F&A processes. How
standardized and routine are they? What is the degree of variability over time, regions, business units,
etc.? To what degree do processes rely on judgment-based decisions vs. rules-based decisions? In the
case of the former, can any of this judgment be documented? The purpose of this self-assessment is to
explore further than the highest level of the process (where they all appear to be the same) and dive
into the details where variations, issues, and critical success factors reside. Use the knowledge gained
from this self-assessment in discussions with the vendors operational staff, and explore their level of
experience dealing with similar situations.

Finally, discuss the vendors strategic plans with respect to business growth, infrastructure
development, resource management, and diversification. What challenges and issues will shape their
business in the future and, ultimately, your service delivery?

A common misconception about outsourcing is that because it shifts the burden of managing all these
issues to another party, the way in which a vendor handles them is inconsequential. In reality, however,
successful outsourcing arrangements are based on the recognition of a collaboration or team effort,
rather than simply a client-provider relationship.

To that end, understanding as much as you can about a potential vendor and how their culture and
attitude fit with yours is a critical factor in your selection. Ultimately, it is about finding the best fit as
much as assessing technical capability. Site visits that are carefully planned and proactively managed can
help by providing key information that is otherwise difficult to obtain. Moreover, these visits
demonstrate to internal organizations and vendors alike the commitment that a company has to making
the outsourcing arrangement successful.

Kalpana Ramakrishnan is the national services leader for KPMGs Sourcing Advisory practice. Theodore
Frangulescu is a manager in KPMGs Sourcing Advisory practice. Sourcing advisory services include
assessments of sourcing options and risks, sourcing strategy, feasibility analysis, sourcing process design,
sourcing selection, transition management, and ongoing performance assessment.

Maximize Your Site Visit
Getting the most from your site visit investment involves investigation in several areas, among them:
training, security, business continuity, resources and recruiting, performance measurement, and service
maturity, growth, and development.

Training: Look at how the vendor handles on-boarding and assimilation. If you need to, make sure it
can provide training in a neutral language. Examine culture and regional knowledge, and check out its
instruction in areas pertaining directly to the industry and client in question.

Security: Observe physical security and access to facilities and information by visiting several
operational sites. Note the use or avoidance of paper, which can leave unwanted paper trails. See how
teams serving different clients are placed in the office, and ask about dedicated space or even teams.

Business Continuity: What is the vendors recovery plan in case of a disaster? Examine several likely
scenarios and ask how they would deal with such an occurrence to minimize loss of data or interruption
of operations.

Resources, Recruiting, and Attrition Management: Talk to managers about
talent sources, as well as the number
and educational backgrounds of staff.
Ask about hiring and retention programs.

Performance Measurement: Find out who is responsible for this, observe their systems, and ask to see
samples of report templates. Try to learn the depth and flexibility of their measurement
capabilities.

Service Maturity, Growth, and Development: Meet with your existing accounting managers to
understand the state of your F&A processes. Use the knowledge you gain from this self-
assessment to talk to the vendors operational staff and explore their level of experience dealing with
similar situations.

Finallly, find out the vendors strategic plans with respect to business growth, infrastructure
development, resource management, and diversification. Learn as much as you can about a potential
vendor and how their culture and attitude might fit with yours. Finding a good fit is as important as
assessing their technical capability.