Companies often look to lower their labor costs by moving pieces of their noncore or contextual processes to cheaper labor markets. Many think this type of outsourcing, or “offshoring,” has a negative connotation, and many people have had experiences where language, culture or geography have made explaining a complex issue difficult and kept a problem from being resolved.

There are also ethical and political concerns around lost jobs and wage erosion in the originating country as well as working conditions in the destination country. Outsourcing can be a touchy subject.

The industry has seen a trend toward increasing the value and level of service of outsourcing by moving processes back to the originating country. Some call this “nearshoring” or “reshoring.” In this case, the larger business processing outsourcing providers would dedicate a group of workers to each customer, so if a large enterprise wanted to take advantage of finance and accounting outsourcing, then a portion of the outsourcing provider’s offices dedicated to that customer would take place. A handful of clerks might handle all of the accounts payable, accounts receivable and general ledger activities.

SaaS changes the game

The advent of cloud-based and software-as-a-service (SaaS) technologies has changed the outsourcing landscape, providing sophisticated technology to companies of all sizes. SaaS allows economies of scale and efficiencies for the software provider and customer. Elasticity, multitenancy and resource pooling allow providers to manage one code base and make the most efficient use of computing power. The same attributes allow customers to offload server maintenance and IT resources to the provider while also allowing a customer’s business to scale without needing to worry about how the software will handle that growth.

This has set the stage for smaller organizations to adopt an outsourcing model. The industry sees this most commonly with human resources and human capital management, but outsourcing finance and accounting for mid-size businesses is becoming a much more acceptable and attractive option, particularly in the energy space.

Bill Weathersby, chairman and CEO of Energy Water Solutions (EWS), a provider of cleanup and recycling services for fracturing water, produced water and coalbed methane water, explained why. “Basically, we’re buying outcomes. It doesn’t matter if it takes four people or 40 people; I buy the outcomes. So when oil went from $70 per barrel to $140 [per barrel], I added zero staff. We just scaled up on the software. And then as the downturn started, instead of having to lay a bunch of people off, our headcount stayed constant. It’s really nice if you can scale up or down in a changing market. And instead of having all that capital tied up, it’s a service and becomes an operating expense rather than a capital expense.”

Going beyond bookkeeping

AcctTwo is EWS’ accounting department and doesn’t deliver transactional receipts in a shoe box or via a data dump from QuickBooks. Business-process- as-a-service (BPaaS) is provided on a shared services model. This means EWS’ bills come to AcctTwo’s financial operations center. AcctTwo pays its vendors, closes its books, reconciles its cash accounts and handles all the transactional processing for the company. “All of our accounts payable [and] all of our accounts receivable go straight to AcctTwo,” Weathersby said. “We don’t even have an inbound AP address.”

“All of our accounts payable [and] all of our accounts receivable go straight to AcctTwo,” Weathersby said. “We don’t even have an inbound AP address.”

One technology platform

AcctTwo’s BPaaS customers all use one technology platform—Intacct’s on-demand enterprise resource planning system. As a former president of EquaTerra, an advisory firm that specialized in outsourced business processes, Weathersby learned certain requirements for success when it comes to outsourcing.

“One of our key requirements was that everyone had to be on the same software,” he said. “If I need to access it from the office or my house to look at an account or see whether a vendor’s been paid, I want one system across the entire enterprise.”

Requiring the adoption of one technology across all of a BPaaS providers’ customer base allows the accounting team to leverage one skillset rather than working in various customer-hosted on-premises systems. This also allows BPaaS customers to log in to the system and see the real-time data that matter to them via reports and dashboards with drill-down capability all the way to the transaction level.

In addition to providing insight into business metrics via a powerful technology platform, BPaaS for finance and accounting lets CFOs focus more on strategy and less on the day-to-day transactions and accounting operations.

“Our CFO works with AcctTwo to close the books maybe two days a month,” Weathersby said. “This frees him up to be a strategic CFO instead of an operating CFO.”

Specialization

Another key benefit of BPaaS is specialization. Many small- to mid-sized companies can’t afford a full-time controller and CFO. They usually get someone whose skillset is one or the other. Their accounting clerks are expected to handle various tasks—from accounts payable to accounts receivable to general ledger and cash management. With a BPaaS arrangement, companies can take advantage of accounts payable and accounts receivable specialists, controllers and CFO services on a fractional basis, getting expertise and experience they could never afford on their own.

In a business environment as volatile as today’s energy markets, the industry is likely to see more and more companies adopt BPaaS to safeguard against staffing fluctuations and the knowledge gap that can accompany hiring and laying off staff with the rise and fall of the price of oil. BPaaS also offers mid-sized energy companies access to the latest SaaS technologies, affordable specialization, best practices from experienced service providers and access to real-time and relevant insights into their businesses.

Have a story idea for Industry Pulse? This feature looks at big-picture trends that are likely to affect the upstream oil and gas industry. Submit your story ideas to Group Managing Editor Jo Ann Davy at jdavy@hartenergy.com.

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