EquaTerra: The Source of the Solution - Mark Toon and Bill Thomas
Mark Toon, founder of global sourcing advisory firm EquaTerra, and executive director Bill Thomas, speak to CEO about how companies are streamlining business processes.
When EquaTerra asked what effect economic conditions were having on outsourcing requirements in a survey in the first quarter of 2008, opinions were evenly split between accelerating, slowing and not changing at all. Posing the same question 18 months later provoked a very different result: 54% responded that financial events were driving an increase and 39% said they were re-considering or rolling back strategies. Only 7% now believe there has been negligible impact.
These figures offer an interesting insight into the evolution of the business psyche as economic events have unfolded, from a profound state of indecision to some form of resolution, but they are also indicative of a general shift in priorities. Those organisations now in a position to act are looking for ways of streamlining business process and, more markedly, saving cash.
It is a trend that EquaTerra has followed closely. Helping companies reduce costs and improve effectiveness and efficiency through internal process improvements, shared services, outsourcing and global sourcing solutions, the global sourcing advisory firm is well suited to the shifting priorities of corporations worldwide.
‘Our client base falls into three groups right now,’ explains founding CEO Mark Toon. ‘There are those that are still like deer in the headlights: survivalists. These companies really aren’t looking at doing anything more than figuring out how they can meet debt covenants and continue to exist as corporations. We’re not pitching these guys a whole lot of new opportunities.
‘The second group has survived. Their leaders feel as though they’ve made it out the other side, but appreciate that improvements need to be made, primarily with cost structure, if they want to stay there and position themselves for the upturn. The final type may have already gone through both those stages, or operate in a sector that was never hit that badly to begin with, and they’re looking at an array of options: innovation, transformation, expansion, M&A activity. There’s a lot we can do to help both parties.’
Toon acknowledges that the majority of new clients are coming to EquaTerra from a cost saving perspective and is not afraid to admit that the economic downturn has generally been good for business. With two decades of experience creating value for clients throughout the business optimisation lifecycle, the genial Texan founded EquaTerra in 2004. It has since become the market’s leading independent advisory firm, its client base consisting of Global 1,000s, multinational corporations, local companies and large public sector and not-for-profit organisations.
This has in part been the result of an aggressive M&A strategy, including the 2007 acquisition of advisory firm Morgan Chambers, then the largest organisation of its type in Europe. Toon compares EquaTerra’s value to that of the M&A lawyers with whom he’s become increasingly well acquainted over the past five years.
‘You might think you can do this sort of thing without any help,’ he begins, ‘but the reality is that you’ll be far better served working alongside people who are involved in the process 50 times a year rather than twice in a career. We’re talking about a lifecycle of improvement and you need expertise on hand if you are going to come out with the best solution. This is what we do and the advice we provide can be invaluable.’
Four steps to success
Within the BPI lifecycle, Toon highlights four stages where this is particularly true: performing analysis and formulating a strategy around the process one is looking to improve; implementing that plan and managing the transition; managing the solution once it is up and running; and assessing its success so as to know the areas needing to be addressed and the solutions that require reformulating.
‘If you look at the organisations that go though that process, they rarely have the technology or skills that enable them to fully realise that journey,’ the CEO explains. ‘We’ve looked at the niche-type competencies such companies would never build by themselves and developed a suite of products and services around the lifecycle of improvements in various G&A processes, from real estate management and IT to supply chain logistics, procurement, finance and accounting, HR, marketing, branding, the list goes on.’
Finding the right fit for each client, whether that might lie in outsourcing, offshoring, shared services, transformation or a blend of various solutions, demands a great deal of trust and dialogue between all key stakeholders.
‘This is a long-term gig,’ explains Bill Thomas, EquaTerra executive director for Europe and Asia-Pacific. ‘Take outsourcing, it has to work for both parties and it needs to be sustainable for the length of the relationship. Get that wrong and it’s awful for everyone. Our philosophy is to help clients find a long- term partner and sustainable business case quickly. That doesn’t mean a rigid tenure sourcing process that includes evaluating every corporation under the sun; we can rapidly help clients and providers qualify each other either in or out and that is an extremely positive asset for both sides.’
Such emphasis upon the speed of a deal reflects an environment in which a large proportion of clients are now focused upon virtually immediate returns. ‘Previously, clients would be far more willing to implement global transformational solutions that might take years for the real benefits to come through,’ Thomas says. ‘At the back-end of last year it became a question of needing to reduce cost and conserve cash. That is beginning to ease a little as access to cash increases and people are starting to talk about doing the "right" deals again and using words like "sustainability", but cost and therefore speed remains a key driver.’
With speed, however, comes risk. Those operating without external help can find themselves paying well over the odds as they look to move to a solution as quickly as possible. ‘Service providers need an adequate amount of data and due diligence for a deal to get done,’ Toon explains.
‘Without those things, they layer on levels of cost to cover any risk they believe they’re taking on. About a third of our employee base has worked on that side of the fence and fully understands what those risks are and how to strip them away. We try to present a scenario that has zero hidden risk and avoids any premium being built into service levels or pricing.’
Form and function
Another shift the EquaTerra executives have witnessed is clients becoming far more willing to look at their own needs and find a functional solution that addresses them accordingly. ‘Previously there were some sectors that would only ever buy a unique, platinum-standard service level for 100% of their requirements,’ Thomas explains.
‘That’s come down in two ways. There is now an absolute price point, but, more interestingly, we are also seeing a right sizing of service levels. Most organisations neither need nor can afford such a solution and a big part of our role is helping the client fully understand what their requirements are.’
Getting a handle on one’s business requirements and performance is also seeing existing solutions and relationships being structured in new ways. Toon cites a global entertainment firm with whom EquaTerra has been working that is in the process of changing its mix of functions being operated by a service provider.
‘They’ve found that the provider is really good at certain elements and not so good at others, something the client freely admits is partly their own fault,’ he explains. ‘They’ve therefore pulled back some pieces, but the success the provider has enjoyed in other areas has convinced them to expand their scope. In such situations, we believe both parties have to work collaboratively at looking to eliminate some tasks and standardise others. Everybody thinks they’re different, but the reality is there’s a list of processes that are pretty much the same across the business world. If you can use something standardised as opposed to a customised solution, costs go down dramatically.’
The importance of strong relationships and ongoing dialogue is a point that the two executives return to time and again. From an EquaTerra perspective, this involves knowing providers well enough for both parties to be utterly up front with one another from day one on issues such as expectations, performance and capacity.
When it comes to clients, they must be willing to take on advice and, if necessary, hear some hard truths.
‘The absolute foundation for a well executed, efficient process is stakeholder access,’ Thomas believes. ‘It can be a painful value to live by, but integrity lies at the very heart of our business. We have to be completely upfront with our clients and act with absolute honesty. If the best thing a client can do is shut a project down, even if that means we won’t see our fees being paid, we have to call it. That sort of honesty defines who you are and trust is everything.’
This approach has seen EquaTerra build a portfolio of clients who value their honesty and regularly seek their counsel. ‘There are 15 companies or so that we’ve worked with every year for the past five,’ says Toon. ‘Their industries and corporate cultures might be dramatically different, but when organisations find a partner they trust, it makes them look for opportunities to use that partner in new ways. We’ll be the first to tell them what we can or cannot do and that’s an approach they value. For companies with less experience in this area, it can all sound a little like a sales pitch. Our older clients know their requirements; they know what they don’t know.’
In what is still an extremely risk averse business environment, it seems likely that an increasing number of organisations will be taking stock of their known unknowns. As an advisory firm with a global reach, this can only be good news for EquaTerra.