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Bundled Outsourcing: RGM Group Case Study

Posted in English Room, Opinion | February 2nd, 2011

Overview

The case study is taken from Accenture Bloggers and Journalist Writing Competition. This is the sixth question. The case study will be discussed about outsourcing topic, especially bundled outsourcing. Bundled outsourcing allows organizations to outsource combinations of business processes, back-office functions and IT in a single bundled outsourcing deal to just one provider to maximize strategic flexibility while reducing costs.

Here is the case study:

RGM Group (RGM), a diversified global resources business, with major assets in Asia Pacific, South America and Europe, is rapidly growing in geographical spread and revenue. The organization currently employs 55,000 people and achieved an average growth rate of approximately 25 percent in the last few years and has forecasted to continue its growth through both greenfield and brownfield expansions, and mergers and acquisitions. To support its growth agenda to be a high-performance global business, RGM assessed the viability of setting up a shared services center that could function as a scalable base in terms of providing IT, finance and accounting, and human resources support services to the client’s group of companies and other businesses. Accenture’s feasibility study identified areas for synergy in support functions: human resource, information technology/ information systems, and finance & administration.

There are two questions that must be answered clearly:

Would a Shared Service Center be the best option for RGM?
Would it make sense to have business process standardization, streamlining and improvement opportunities within the business units and across the organization as a whole?

This is the analysis for 2 questions above

In my opinion, a shared service centre will be the best option for RGM group. Outsourcing provides opportunities to deliver high performance as long as it is well managed. In RGM group case, the company need to use bundled outsourcing that allows the company to outsource some combinations of business processes such as IT, finance and accounting, and human resources support services. Bundled outsourcing can help redefine back-office operations, reducing cost and increasing strategic flexibility while simplifying multiple back-office functions.

Service center is important as a center of information. Therefore, the company should provide a high quality of service center to the customers and clients. RGM must adopt a term called bundled outsourcing because the company will combine several units such as IT, finance and accounting, and human resources. It can provide support services to the client’s group of companies and other businesses.

Bundled outsourcing is an innovative approach to outsourcing that consolidates multiple business functions with a single service provider. It can provide more significant and immediate cost savings and greater speed to value. Over the long term, it allows an organization to continuously drive down costs, improve performance and gain global competitive advantages.

As a result, bundled outsourcing addresses the challenge of managing multiple providers and contacts. It is easier to manage and measure because it creates standardized, repeatable processes under one integrated governance structure that ensures maximum performance at lower sustained costs.

The benefits of bundlead outsourcing are:

Reduce operating risk: The use of multiple service providers creates significant potential for operational failures related to shared processes, systems and controls. Bundling with a single provider greatly reduces these potential points of failure.
Simplify the governance process: Investing in a relationship with one provider, clients have only one relationship to manage, reducing administrative and contract activity.
Reduce redundancies and costs: Operating multiple processes from a single platform reduces hardware redundancy, development, maintenance and licensing costs.
Improve performance: Automating manual processes and activities such as error handling can result in increased productivity and reduced time to complete.

Nevertheless, bundled outsoursing requires a business process standardization into a single system within IT, finance and accounting, and human resources unit. Therefore, it make sense to have business process standardization, streamlining and improvement opportunities within the business units and across the organization as a whole.

Consequently, RGM should manage the outsourcing arrangement, for example finance and accounting processes with human resources and IT processes, to make the single system run smoothly. In addition, as an innovative approach to outsourcing that consolidates multiple business functions with a single service provider, the company must consider their own organizational culture vigilantly before deciding on the type of outsourcing, bundled outsourcing as well as the right partners.