Recently, a large consulting firm came to us for help getting companies and operations set up in 30 countries. We were happy to help them achieve operational readiness across all of these international geographies.
Like root structures of trees, we build flexible foundations for our client’s operating models. This is true whether they are first entering or growing to scale in multiple countries.
The client has evolved in several ways, creating the need for change in their back office operating model. Fortunately, we are enthusiastic about achieving impactful results. This holds true regardless of the stage our clients find themselves in. It could be expanding abroad for the first time to one country. Sometimes, it involves expanding organically to several countries. Other times, they are acquiring a company with existing operations in multiple countries. Alternatively, the goal might be consolidating processes and operations across various geographies. In this particular case, the objective is to achieve scale in certain countries, where it now makes sense to transition from outsourcing to in-sourcing.
In this case, there were some considerations for the future state operating model design for our client:
The basic needs in each country now are much different than what was needed at the time of the M&A transaction. This includes areas such as legal, accounting, payroll, and HR admin operations.
Our client has now operated in these geographies for a significant amount of time. Several years ago, they lacked the expertise to establish and run a globally compliant back-office infrastructure. They now have a few years of experience running these departments across the globe.
Having a locally staffed back office in every country for nominal transaction volumes may no longer be the best operating model.
Conversely, there are probably some higher-end activities (e.g. global tax compliance) that do, in fact, require local expertise, and our client doesn’t have the scale (nor should they build it).
Therefore, consider a different option. V2 back-office infrastructure entails low-cost transaction processing, outsourced expertise where scale is lacking, and internal financial analytics and oversight. This strategy, if designed right (that’s what HSP does!), will achieve cost savings from the low-cost part of the equation, local outsourced expertise where absolutely required.
Some consultants in this space might recommend building additional infrastructure where unnecessary. They may suggest providing robust end-to-end local teams even when shared service centers can handle a large proportion of transaction volume at a much lower cost. Additionally, they might advise replicating and preserving this infrastructure across geographies, despite disproportionate growth rates in each country.
A blended approach involves leveraging local expertise where necessary and establishing a low-cost transaction processing hub, such as a shared service center. This approach ensures the retention of expertise where required. It also keeps costs at a minimum and enhances the flexibility of legal, accounting, tax, payroll, HR, and compliance functions. This increased flexibility enables thoughtful and accurate responses to new questions while improving the speed and accuracy of throughput.
