As finance professionals gear up for 2015, there are a few things to consider as the fiscal budget comes to a close: Over the next 12 months, the possibility of regulation regarding the increase of federal minimum wage is imminent. The current legislature is being called upon to boost wages for 15 million workers. While seen as a great stride in strengthening the economy, this could prove worrisome for organizations looking to successfully expand while containing costs.
According to the U.S. Department of Labor, employer costs for employee compensation averaged $33.20 per hour worked in September 2014, and $30.32 per hour for private industry employers. This number will only rise in the future.
For the last few decades, outsourcing has been (and will continue to be) one of the few tools that equip businesses with the power to fundamentally transform while reducing capital expenditure. A common misconception about outsourcing is that an enterprise will have to eliminate dedicated employees, when in actuality, those employers who outsource do so to minimize fluctuations in staffing, which occur due to changes in supply and demand. Additionally, outsourcing frees the valued employees to take on more strategic, profitable projects for the business, and provides more development opportunities.
According to research from The Outsourcing Revolution, an equal percentage of companies surveyed said they outsource to conserve capital for other investments or to improve product quality. 4% believe outsourcing will increase revenues, and 9% outsource to obtain skills they can’t find or can’t afford. 12% outsource to obtain the benefits of a variable cost structure, and 49% say cost reduction is the primary benefit.
Cost containment from operations lands somewhere in the 20% to 40% range due to reduced labor cost. For example: An architect earns $3,000 a month in the U.S. but $250 a month in the Philippines. A Java programmer earns $60,000 a year in the U.S. but makes $5,000 annually in India. U.S. Aerospace engineers earn $6,000 a month, while the same workers in Russia take home $650, etc. Despite these savings, the quality of work does not suffer and is, in fact, the primary reason companies move functions offshore. The Philippines is ranked as a Top 30 Location by Gartner for language skills and college educated personnel.
Additionally, companies who implement BPO strategies not only experience great gains in process efficiencies, especially in the accounts payable arena, but efficiency gains combined with reduced labor costs can generate anywhere from 20% to 40% in savings, according to the Ivey Business Journal. A global automaker, for example, outsourced its global AP process, which eliminated the cost of late payments, doubled its on-time-payments and generated more than $400,000 in annual savings.
The BPO sector is being increasingly viewed as more than a cost-saving vehicle; as outsourcing has become more strategic, companies are armed with the agility needed to focus on functions that will enhance their competitive edge. It is only expected to increase with the evolution of automation and use of cloud models by service providers. The DDC Group recently published results of a case study in AP automation for a global manufacturing client, which achieved over 40% improvement in straight-through rates with its Intelligent Capture for AP solution.
The DDC Group continuously delivers a series of customizable solutions to help companies enhance and transform infrastructure and operations in the ever-evolving financial market including, Claims & Care management , Finance and Accounting, and recently, Hybrid Shared Services.