Transforming a Back-Office FUnction: Lessons from BAE Systems' Experience with an Enterprise Partnership
Mary C. Lacity, David Feeny, Leslie P. Willcocks
Senior executives continue to seek ways to transform back-office functions, such as information technology, human resource management, finance, and accounting. Can these functions be managed to simultaneously reduce costs and improve service? Historically, senior executives have taken four approaches to transformation: do-it-yourself, management consultants, fee-for-service outsourcing, and even the occasional joint venture. While these approaches remain viable for various contexts, a new one has emerged that warrants attention: the enterprise partnership, where a customer and supplier create a jointly owned enterprise that both services the customer investor as well as seeks external customers. However, this is not a traditional joint venture with equally shared risks and rewards. Rather, the supplier bears more risk and the primary purpose of the enterprise is to service the customer investor. The enterprise partnership addresses the lack of alignment in fee-for-service out-sourcing while minimizing the customer risks of a joint venture. This paper discusses pros and cons of all five approaches. It then illustrates the new enterprise partnership model by presenting the human resource management partnership between BAE Systems and Xchanging. It concludes with ten lessons for selecting and managing back-office transformations. Many of these lessons are intriguing because they seem to counter common wisdom, such as selecting a supplier with generic business competencies rather than domain specific knowledge, selecting a culturally "incompatible" supplier, and delaying due diligence until after the deal is underway.
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