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Large and small firms explore IT outsourcing options

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1st Apr 2008
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IT outsourcingAfter a long period lurking in the background, IT outsourcing is beginning to catch on within accountancy as firms look for new ways to streamline their operations. John Stokdyk considers the re-emergence of an old trend.

At the end of March, Big Four firm KPMG signed a five-year, £62m contact with BT for networking and telephony services. BT will deliver a "fully converged" internet protocol-based (IP) networked telephony infrastructure for the firm across its UK and German practices, which merged in 2006 to form KPMG Europe LLP.

The arrangements are couched in typical outsourcing jargon, but involve the provision of both local area networks in KPMG offices, connected by a wide area network so that team members in both countries are supported by a consistent, linked infrastructure. The same network will also carry telephone calls via a Cisco IP Telephony system that will link into Microsoft Office Communications Server (OCS) software.

OCS is able to handle what Microsoft calls unified communications where voice, email, instant messages and SMS text are all handled within the same environment. The user has a "presence" within the network that they can assign to a particular PC, telephone extension, mobile phone or PDA and OCS will deliver mails and messages to them in the format they specify.

Part of KPMG's commitment to its people was to ensure they had the tools to manage their busy schedules, said KPMG partner Bryan Clark, who led the firm's IT infrastructure consolidation project. "The new technologies this service will deliver will enhance this proposition," he said, "and deliver significant benefits to both our cost base and our effectiveness in serving our clients."

But you don't have to be KPMG to consider IT outsourcing, according to West Midlands-based accountancy firm AGS. AGS founding partner Steve Aston set out to create a firm that combined Big Four values with the local knowledge, competitive pricing and personal relationships that are easier to provide in a regional setting.

The firm's portfolio embraces corporate finance, tax planning, financial services and business consulting, but one of the biggest challenges it faced was managing its own IT systems.

"We had to get the IT spot on," says Aston. "And that wasn't just about having the right infrastructure... it was far more about that extra 10-20% that dynamic, innovative IT delivery could give us."

To prosper, AGS needed an environment much like KPMG's that would let partners and staff work offsite with clients, but still be able to access their data and emails while on the move. Aston was also keen to provide "extranet" facilities to clients and online reporting.

"We faced a dilemma shared by many an SME. We needed our IT to be as good as it could be to support the excellence that we were striving for in our professional work. We simply weren’t confident that we could do that." Not being techies, the firm nonetheless wanted technology that could give it a competitive advantage - and still work reliably.

To achieve its ends, AGS turned to managed services provider e-know.net, which now effectively acts as the firm's IT department, delivering and supporting Microsoft Office, Sage and MYOB applications via a Citrix web interface system.

"By outsourcing my IT, I wasn’t losing control but gaining a whole new resource, a more expert, experienced and qualified one than I could ever have put together in-house," says Aston. "The addition of e-know.net to the AGS team was the springboard for growth fundamental to our ambition to become a full service accountancy and business consulting organisation. They’ve allowed us to stick to what we're good at."

Outsourcing in all its forms comes and goes in waves as fashions, technologies, demographics and economic conditions change. Perhaps because of this, there is some justification for accountants' traditional caution. A few years ago, the unfortunate experiences of Sainsbury's and WS Atkins cast a shadow over IT and business process outsourcing. Nor do HMRC's perennial difficulties and cost overruns help the cause.

But technology is becoming more democratic. With their complex requirements, top-level corporates may well have been unsuitable candidates for outsourcing. Smaller companies and accountancy firms have more straightforward business processes that do not require lots of bespoke development. The remarkable cost and performance improvements of broadband internet services are also changing the equation in favour of hosting and outsourcing.

With the profession still hampered by technology skills shortages, there is a clear logic for IT outsourcing - as KPMG, AGS and providers such as e-know, Online50 and TSG will attest.

Whole new industries have appeared, particularly in Asia, boasting skilled workers who can be incorporated into a firm's virtual team via electronic networks. Following in the wake of pioneering firms such as ieTaxguard, both MYOB and IRIS have introduced accountant-focused outsourcing services in the past year.

After struggling to recuit new staff, London firm Andrew Cross & Co tested the IRIS Resourcing service in December. Partner Charlotte Cross explains that the firm was initially nervous about dealing with outsourcing providers with which it had no links, but was more comfortable dealing with its practice software house. After getting used to packaging up the work for the resourcing service and monitoring the quality during a trial period, Andrew Cross & Co has since committed to 100 hours per month.

According to IRIS, once firms have experimented with outsourcing, they will start to understand how outsourcing technologies can open a new route to lower costs, greater efficiency and new growth. [Ed note: IRIS also asked us to mention that it is keen to work with other firms to beta test and refine its Resourcing service.]

Outsourcing of both the IT and business process varieties is on the up and the resurgence would not be possible without a good supply of reference sites and success stories of the type mentioned here. Don't forget too, that there are risks and drawbacks to the approach. You may relieve your managers of the nuts-and-bolts aspects of managing the technology or service, but someone will have to be responsbile for negotiating and enforcing service level agreements, which can be almost as perplexing and frustrating.

If you are tempted to explore these options, ensure you do your research and go into any arrangement with your eyes open. Some of the ramifications and counter-arguments are set out in articles from the IT Zone archive listed below.

Related articles
A practitioner's guide to technology outsourcing (2005 Expert Guide)
Outsourcing accountancy work (2005)
A new approach to service level agreements (SLAs)
More and more firms are turning to outsourcing, but do they really know what they're doing? (2004)

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