| mpanies get more involved with strategic outsourcing, | | | | started handling financial administration for all BP |
| they realize that when they work together as a team, | | | | companies in the United States. |
| they get far better results. But that takes a real leap of | | | | Late last year, BP took this trend to the next level |
| faith. Here are three companies that have made the | | | | when it partnered with Mobil in a refining, distribution, |
| leap - and will leap again. | | | | and marketing joint venture. By joining forces, the two |
| When British Petroleum Exploration (BPX) outsourced | | | | created a $5 billion organization with 12 percent of the |
| its financial management and reporting services in 1991, | | | | service-station business and 18 percent of the |
| it was the first such strategic sourcing arrangement in | | | | lubricants market in Europe. "The goal was to take |
| Europe. Skeptics shook their heads: Working with | | | | two organizations that are not in themselves market |
| drilling and engineering contractors was one thing; | | | | leaders in Europe and bring them together to get scale |
| handing off responsibility for such a critical financial | | | | benefits as well as scale economies," says Goodall. |
| business process was another. It was too different - a | | | | A third ingredient in the BP/Mobil venture is a |
| breach in the wall that separates a corporation from | | | | seven-year, $240 million agreement that has Andersen |
| the outside world, and it couldn't last. | | | | Consulting handling seven financial processes for BP |
| But BPX was looking for something different. In its | | | | Mobil in 11 countries (BP/Mobil has struck a similar deal |
| North Sea oil-field operations, the $18 billion ann of | | | | with another outsourcing firm in several other |
| British Petroleum (BP) had seen production costs triple | | | | countries). This has allowed the new venture to get up |
| and the price of oil decline by nearly half in 10 years. | | | | to speed quickly and to focus on its customer-oriented |
| As a result, executives wanted to cut costs in | | | | business processes without the political and |
| business-support processes and focus the company's | | | | organizational strain of merging the two oil companies' |
| energies on finding and extracting oil. | | | | in-house financial operations. |
| To do so, BPX went far beyond the traditional | | | | BPX's experience has shown there are several key |
| arm's-length outsourcing contract. Financial reporting | | | | factors that help such long-term relationships work - |
| and the handling of some 13,000 invoices a month | | | | starting with flexibility. "The agreement presumes that |
| were taken on by a shared-services unit created by | | | | market conditions will cause us to respond and change |
| Andersen Consulting; BPX continued to set policy and | | | | what we are doing," says Goodall. "So it's important for |
| make key decisions. The two organizations also | | | | us to share our plans and expectations, and to try to |
| developed a common mission statement and a set of | | | | give our partners early warnings and signals as things |
| shared objectives to guide the partnership. | | | | change." |
| The arrangement turned out to be "highly successful," | | | | That communication begins at the top. In working with |
| says Colin Goodall, CFO of BP Europe. "It enabled us | | | | outside firms, BPX sets up high-level joint-governance |
| to concentrate on our core business of exploration | | | | boards made up of members from all companies |
| and production, and resulted in substantially reduced | | | | involved in an alliance. At another level, Andersen |
| costs." Indeed, as processes were streamlined, the | | | | Consulting has taken on about 500 employees from |
| speed of payments increased and costs dropped 40 | | | | the oil companies, meaning BP will still have access to |
| percent. Three years into the arrangement, BPX's | | | | the knowledge these employees have accumulated. |
| financial operational costs were just half that of the | | | | What's more, those employees now have a more |
| average North Sea energy firm. | | | | secure future: If BP had consolidated in-house |
| That groundbreaking arrangement has not only lasted, | | | | operations, jobs would have been lost, says Goodall. |
| it's grown into an increasingly sophisticated network of | | | | But now, those people work for a company where |
| relationships. A number of other oil companies are now | | | | their skills are at the heart of the business. |
| using the shared service. Andersen Consulting has also | | | | |