Parseq: Boutique thinking – Rod Edwards

For a long time, multitower outsourcing was the default option for most corporations. Multimillion-dollar agreements would see very large suppliers build and run applications for every aspect of a business, from data centre operations to the customer call centre. This way companies could minimise the number of vendors they had to deal with. And if anything went wrong, there would only be 'one throat to choke'.

Over the past decade, this has started to change. Companies have become reluctant to do everything in-house. Instead, they are seeking smaller, niche organisations and dividing responsibility between them. Rod Edwards, CEO of business process outsourcing (BPO) provider Parseq, has successfully positioned his company to take advantage of this trend.

"In the past, if something wasn't working, it was automatically the fault of the vendor," he explains. "Now companies are choosing to go to a specialist for their software, another for their payments processing, one for data centre operations and so on. That's a megatrend and we've grown massively because we've acted on that trend."

"In total, Parseq processes around £25bn of payments a year."

There are a number of reasons for this change. As the need to save money grows, many processes that were thought too important to outsource now appear less so. IT and systems infrastructure is increasingly sophisticated and expensive, discouraging companies from creating new in-house systems. Many organisations have also come to realise the superior service that can be offered by a more focused outfit.

"By outsourcing to smaller providers, you are working with a company that views your back office as its core business," explains Edwards. "They've probably got better processes, better technology and there are benefits of scale because you can run operations alongside those of other companies. Specialist niche providers really can be best of breed, which is the reason outsourcing is maturing. We are now onto our third generation."

Parseq is a UK-based back-office specialist, with a strong track record in document management, payment processing and contact centre operations. The company processes more than 50 million transactions a year, executing payment for approximately 7.5% of the UK workforce. In total, it processes around £25bn of payments a year. Along with the move to more specialist providers, a few other factors have conspired to drive the company's growth.

Processing homeward-bound

Processes that were once being moved offshore are being brought back, as companies realise that the benefits of overseas operations are not as great as they once were. In terms of the front office, it has become clear that many customers prefer to deal with onshore call centre operatives than offshore. It has even become a selling point, with groups such as RBS and Natwest highlighting their UK call centres in advertising campaigns.

Most significantly, the cost benefits associated with moving overseas have diminished rapidly over the past decade.

"There is an expression that is becoming increasingly common - 'repatriation'," Edwards explains. "Many of the economies that were cheap ten years ago have seen strong inflation, so the cost advantages have eroded.

"There's a lot of hidden cost, as well - communications, connectivity and the fact that clients of a company will have to travel out to the call centre at least a couple of times a year. The move back does not just involve voice, but also back office work."

Savings and security

The outsourcing conversation almost always starts with the question of cost savings. In a poor economic climate, handing processes over to a third party allows a company to free itself from a fixed-cost model and move to a pay-per-use arrangement. This unit-based system of pricing gives the workforce a degree of flexibility, as operations can be scaled up or down, depending on demand.

"An outsourcing contract can be based on unit volumes, how many documents are processed or how payments are made - it's a variable cost base," explains Edwards. "If you had staff in-house, they'd still be there even if there were no calls coming in. That's on top of technology and real estate costs.

"The cost benefits associated with moving overseas have diminished rapidly over the past decade."

"We can buy resources and technology that aren't justified in-house. We've set up inbound and outbound contact centres in less than three months, and complete back-office operations in less than six months. If companies did this from scratch, it could take a couple of years."

When choosing to outsource, particularly to a smaller provider, security is an important consideration. Data breaches can be catastrophic for a company's reputation, so BPO providers must go out of their way to ensure that confidential information remains that way. Parseq is in the unusual position of having been spun off from a financial services institution.

As a result, its Yorkshire-based facilities are exceptionally secure.

"The standard of security on our site is higher than I've seen at many of our clients' operations," Edwards says. "There is CCTV everywhere, our staff have to swipe in and out of rooms, and all go through a strict vetting process. Our systems are also payment card industry-compliant. Some in-house operations can be a bit laissez-faire about these things. To us, maintaining security is absolutely critical."

BPO: a 360° view

To some degree, the BPO business is counter-cyclical. When the economy is floundering, CEOs will do whatever they can to reduce their cost base. At the same time, the fates of the provider and customer are very much intertwined - less business for one means less business for the other. This is why, in Edwards' view, gaining a thorough understanding
of the customer's business is the key to successful outsourcing provision.

"Handing processes over to a third party allows a company to free itself from a fixed-cost model and move to a pay-per-use arrangement."

"It is important that we can support clients as their businesses change," he explains. "You can't pretend that everything can be captured in a contract - you have to be flexible. If their volumes go down, both of us take a hit. I spend a lot of time finding out what keeps my clients awake at night and making sure we can adapt accordingly to new circumstances and opportunities. Where is the business going and what can we do to help?"

Ultimately, the main benefit of outsourcing is that it enables the management of a company to focus on their core business. This is especially relevant for a new enterprise, where as much energy as possible should be expended on making a splash in the market.

"If you're an entrepreneur setting up a pay-day loan company, you want to focus on things such as marketing, branding and risk management," says Edwards. "Routine back-office functions are just a distraction. The secret of successful outsourcing is to identify what differentiates you from the competition - keep that in-house and outsource the rest to a specialist."

Companies like Parseq offer a comprehensive set of components that companies can put together a way that benefits them most. Especially in times of economic volatility, this flexibility is a huge competitive advantage.

The secret of successful outsourcing is to identify what differentiates you from the competition – keep that in-house and outsource the rest to a specialist.
Rod Edwards is CEO of business process outsourcing provider Parseq.