Should collections be considered part of FAO? Well, the typical consultant's answer would be "it depends" - but my definitive answer, as an analyst, is that collections absolutely should be considered part of FAO. (And I thank Andy Kitcher and Helen Ricardo , highly-regarded sourcing consultants from Alsbridge Europe in London, for their lively discussions with me on the yays and nays of this topic!)
I ask this question for a few reasons. One is that I've been getting queries from companies that provide collections services (like Ocwen, NCO and CGS) who claim emphatically that they provide FAO services and want to be included in our research. My response has been "no, we typically do not include companies of your type/size/leaning as offering comparable services to the others in our purview, like IBM, Genpact, Infosys, EXL and the like. But they keep insisting. Another is that I get informed all the time about "FAO" contracts that include collections, but again, I generally pay little attention, as collections hasn't been part of our wider FAO universe.
The argument AGAINST including collections as part of FAO, is that collections is usually considered part of their business operations, generally voice/call center for retail companies (banks, insurance, utilities). Companies who are B2B don't like Finance staff contacting their valued customers, as the account manager sees it as potentially damaging to the relationship. So this "back office" operation generally isn't included as FAO.
The argument FOR including it is that it's a finance function! "Collections," by definition, is pursuing payment on debt - collecting revenues as payment for products/services rendered. Some departments are even called "Finance & Collections". Collections jobs even are listed in MySpace job listings under the category Finance/Collections. We technically could make the same argument for the "credit" business process which involves the provision of financial resources. That, too, hasn't been part of traditional FAO.
At the end of the day, collections services are offered by nearly all of the major FAO suppliers, but the customers who want to engage fully in this space - especially to achieve an FAO 2.0 mindset - generally look for a supplier with deep process knowledge and a broad range of experience in FAO. They typically higher a big boy for FAO total. But that's not to say that every prospective customer operates that same way - some may choose a process specialist for collections and engage in multi-vendor relationships. There's a lot to be said about that model but the vendor management aspect can become a nightmare.
So...the point is that we as analysts - and you as suppliers and/or advisors and/or buyers of FAO services - must see the wider universe of services being offered. As with the convergence of FAO and procurement outsourcing (the entire order-to-cash process) - and with FAO and HRO (payroll, as example), there's now a clear convergence between FAO and Call Center Outsourcing. Go figure!
The real question becomes then, as suggested by my colleagues, how do you define FAO...is it Finance & Accounting Outsourcing or is it Finance & ADMINISTRATION Outsourcing? I would say regardless of what we call it, most business functions should be under scrutiny as potential candidates for outsourcing. Call it FAO or create your own acronym. But as most business processes touch the finance function, I think it's safe to say that the universe of FAO is much wider than we think.
