Enhancing Corporate

Capabilities Through
Outsourcing

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Copyright 2007 – Equipment Leasing & Finance Foundation
The Equipment Leasing and Finance Foundation

wishes to express appreciation to the following

company for providing the sponsorship to

support development of

Business Process Outsourcing in the

Equipment Leasing and Finance Business
 Executive Summary

Enhancing Corporate Capabilities Through Outsourcing

A Foundation White Paper

outsourcing. This reality is further engrained in service-oriented

Introduction
Our dynamic industry, like all sectors of American
business, faced a myriad of competitive challenges this year
and undoubtedly will continue to do so well into the future.
Consequently, the Equipment Leasing & Finance Foundation
placed a major emphasis in 2007 on examining company
operations and productivity issues for its members. In this spirit,
The Foundation commissioned a white paper on the growing
practice of Business Process Outsourcing.
The white paper examines how outsourcing select business
processes in the typical equipment leasing and finance company
can enhance its capabilities and performance. Within this
context, business process outsourcing focuses on the workflow
within an enterprise. We specifically evaluate how it can be
redesigned and managed to optimize the efficiency of individual
business processes and overall workflow. The author intends to
provide a balanced evaluation of business process outsourcing,
presenting both the advantages and disadvantages of pursuing
this strategy.
businesses, like ours, where digitization has significantly
lessened concerns over distance and location in doing business
globally.
The business models of independent, captive or bank-owned
equipment leasing and finance companies can be significantly
different. This is also true of their business workflow processes.
That notwithstanding, there is no excuse for their leaders to not
consider the potential improvements – some minimal, while
others dramatic – that business process outsourcing can provide to
selected activities.
Our research indicates that there is awareness and interest in
outsourcing. In fact, nearly half – 48 percent - of those surveyed
indicated that they have indeed outsourced a limited number of
processes. Conversely, however, 27 percent said they have never
considered a business process outsourcing strategy. Clearly these
results and interview feedback indicate outsourcing must make
much greater inroads before it can be regarded as a common
industry practice.
Predominance of In-House versus Outsourcing by Selected* Activity

Methodology Included Outsourced

in reported Performed at domestically or
The findings presented in this white paper were derived from headcount corporate HQ internationally
four sources: Function 2006 2005 2006 2005 2006 2005
• An online survey of equipment leasing and finance Outside Field Sales 96.5% 96.5% 1.2% 1.2% 2.4% 2.4%
professionals from a variety of companies with various Marketing / Product
position responsibilities. Development 82.5 83.8 17.5 16.3 0 0

• Lengthy telephone interviews with leasing professionals at Credit Approval

Activities 92.3 93.3 7.7 6.7 0 0
14 diverse lessors, as well as two software companies and
two outsource companies that support the industry. Billing and Cash
Applications 88.4 89.5 8.1 8.1 3.5 3.1
• In-person meetings with teams of leasing professionals
at five diverse companies in the industry, as well as one Customer Service 93.6 94.9 1.3 1.3 5.1 3.9
outsource company.
Portfolio
• A review of current business process outsourcing literature. Management 95.9 95.9 4.1 4.1 0 0
Information Systems 67.7 67.7 24.7 24.7 7.6 7.6
Accounting /
Business Process Outsourcing in Finance / Treasury 88.9 88.8 10.2 9.3 0.9 0.9
Tax 72.3 75.9 24.1 21.7 3.6 2.4
Our Industry Legal and
Compliance 67.1 67.1 20 20 12.9 12.9
In his book, The World is Flat, author Thomas L. Friedman Human Resources 53 53 42.2 42.2 4.8 4.8
describes a global society that greatly values efficiency. Work
Other 96.7 100 0 0 3.3 0
is completed where, how, and by those people who can offer
the best output with a minimal amount of output. This is * Selected refers to functions for which corporate or outsourced was significant
a competitive advantage in all industries in an increasingly in 2007 Survey Report.
transparent world and the essence of business process

Equipment Leasing & Finance Foundation 

Enhancing Corporate Capabilities Through Outsourcing

When it comes to certain business processes, however, The first is the near universal pain associated with outsourcing,
respondents were reluctant to consider outsourcing “core” focusing on challenges associated with transitioning, learning,
functions. This included a variety of business origination collaboration and sharing of information. Secondly, there is
activities, including sales, pricing, structuring and credit. The a major paradigm shift in who is outsourcing and how it is
majority of business workflow processes, however, are generic in done. (More small and mid-sized companies are considering
nature. The only differences from one organization to the next this approach than ever before, many of them Web savvy.) The
are configuration and standards. This is especially true for small third factor is the emergence of Web 2.0 as a business tool and
ticket transactions versus highly structured deals. its impact on communication, collaboration and knowledge
sharing.
GENERIC BUSINESS PROCESSES Based on the input provided by respondents, there appears to
Fig2 Unique – Generic Business Processes be a strong appeal for such a next generation outsourcing model.
More than 75 percent said they would consider a Web server-
Origination &
Market
Analysis
Underwriting /
Funding
Lease Administration
Transaction
End based, on-demand business process outsourcing model via a
browser and Internet connection for a monthly fee. This model
Small
Ticket has been widely deployed in the retail world and holds great
Middle promise for the equipment leasing and finance industry, because
Market

Large /
it addresses issues related to scalability, while delivering value to
Structured
Market all parties.
Generic Unique

NEXT WAVE OF BPO MODELS

Fig 4 Next Wave of BPO Models

Typical Business Process ASP

Outsourcing Models
Virtual Next Wave

On Demand
Processing
There is a range of models for Business Process Outsourcing As is – SaaS
Where is
in the equipment leasing and finance industry. Companies tend
to migrate across the models as needs change. On one side of
the spectrum is the traditional model that essentially takes one Location Systems Scope Config People

or more processes and assigns responsibility for them to an

outsource firm that may or may not use the client’s personnel,
but definitely its existing systems. This outsource model
effectively allows the outside firm to assume management of the
leasing company’s workflow process. The value proposition of Factors Involved in the Structure of
this model is the knowledge and expertise typically provided by BPO Model
the outsource firm. For this model to work, economies of scale
There are a number of factors that influence the structure
must already exist. Shared responsibilities are clear and mutual
of the right business process outsourcing model for any given
learning occurs over time.
company, outlined as follows:
The latest in outsource models is referred to as a “Virtual ASP”
or “Plug and Play.” In this case, the client uses the outsource
 ocation – Where does the process take place? Many
L
firm’s general system with selected configurations. The outsource
outsource vendors think there are significant advantages
firm provides everything necessary to complete the processes,
to initially operating at the location of the client. Working
including any software licenses. The client has no investment in
on-site provides them with a better understanding of the
hardware, software or operating personnel besides designated
business, its needs, workflow analysis and culture.
managers assigned to monitor the outsource firm’s activities.
The value proposition of this model focuses on flexibility and
 ystems – What impact do your systems have on
S
scalability. Smaller firms that have scale issues can simply build
business? Nearly 75 percent of respondents stated a variety
the capabilities needed.
of technology limitations present a great disadvantage for
internally established and operated business processes.
Outsourcing 2.0 – Outsource providers, conversely, typically prefer to operate
Solving Risk and Uncertainty one software system to optimize performance and efficiency.
These modern platforms feature open architecture technology
A new business process-outsourcing model is emerging across and are kept updated through strategic investment.
many industries. There are three driving factors in this shift.

 Equipment Leasing & Finance Foundation

 Executive Summary

 cope – How much business process functionality and

S were skeptical that meaningful economic benefits could
how many process will be outsourced or subject to workflow be obtained through such a strategy. Even if marginal cost
process management. The issues in scope are scale and benefits could be attained, the transition would not be worth
integration. the effort and stress.

 onfiguration – How much differentiation/flexibility in

C  echnical Enhancements – Few people interviewed cited
T
the process is really needed? While many respondents said technology enhancements as a benefit to business process
they value the opportunity to customize certain processes, outsourcing. One reason may be few differentiated technology
they found it hard to quantify the value such customization from workflow management and operational concerns.
provides to their customers, or the value they receive from a However, they do think outsource providers can deliver
profitability standpoint. greater, more flexible technology systems and configurations –
and do so at scale.
 eople – What impact does your team have on business
P
workflow? Some 85 percent of respondents said one of the Obstacles to BPO in Our Industry
major benefits of business process outsourcing is better use
of employees. Interviewees described issues related to hiring There are a number of perceived obstacles to overcome if a
and retaining personnel, training, upgrading capabilities, business process outsourcing strategy is to be successful. They
redundancies and motivation. primarily focus on transitional and control issues, uncertainty
regarding the benefits to be derived, and the relationship
between the outsource vendor and client – who “owns” the
Advantages of BPO in Our Industry workflow?
Business process outsourcing is a business-motivated strategy Regardless of any apparent advantages, respondents view the
for effective workflow management. It stresses continual process of transitioning to an outsource provider as disruptive.
improvement with the benefits increasing over time. Proponents This is the case not only to the current business workflow, but
of this strategy summarize the value and benefits as follows: also to employees and possible customers. Of course, such
disruption can be worth it if tangible and intangible benefits
are a certainty. Such benefits must be balanced against risks
PROCESS INNOVATION – along with an understanding of the risk of taking no action
TOFig.DRIVE BUSINESS
8 Process Innovation to IMPACT
at all. Maintaining the status quo in a changing, competitive
Drive Business Impact
PHASE III marketplace may not be an option.
PHASE II
Strategic Differentiator
Some 90 percent of the respondents agreed with the
Value Creation statement that they would use business process outsourcing
Savings/Value Creation

PHASE I
Product expertise

Cost Arbitrage
End -to-End Solution if they were confident it would improve operations. The same
PHASE 0
Six Sigma
Streamlining
LEAN

Business Analytics/
Full Transparency percentage would approve the strategy if they believed it would

Process Elimination

Lower wages
Re-engineering
Digitization

Best in class
increase their capabilities. Clearly, outsource providers have

Economies of
Platform

“Quick Hits ” for
simplification &
Scale Consolidation
Re-engineering an opportunity and must work harder to build support and
standardization

SLA Introduction

Standardization

Higher

Expand customer
organizational confidence in the effectiveness of their services.
Productivity flexibility

Re-engineering

Time

Savings 5% - 40%
Business Impact
(Revenue,
ADDRESSING THE UNCERTAINTY OF BPO BENEFIT
Fig 10 Addressing the certainty of BPO benefit
strategic value)

$
More
Economic Benefit Cost Certain
of the Investment
Reduction
The following outlines the three accepted primary benefits of Revenue
outsourcing and respondent reactions: Increase

Cost
Today Avoidance
 perational Improvements – Nearly 60 percent of the
O Economic Risk Revenue
respondents said operational improvements are the greatest of No Action Protection
Less
Certain
benefit of business process outsourcing. They believed
Time
gaining new or specialized capabilities, better quality and Glomark -Governan

productivity made this strategy worthy of consideration.

 conomic Improvements – This benefit is cited most

E Respondents expressed greatest concern with the prospect
often when business process outsourcing is first considered. of outsourcing “core” processes. This was referenced earlier in
After all, most companies want lower costs and more this document, but deserves further explanation. A process,
work output. Surprisingly, however, many respondents including knowledge and capability, is considered core to the

Equipment Leasing & Finance Foundation 

Enhancing Corporate Capabilities Through Outsourcing

firm’s success if it is unique, adds clear value and provides an

unmistakable competitive advantage to the organization. EQUIPMENT LEASING BUSINESS PROCESS MOST
LIKELY/LEAST LIKELY TO OUTSOURCE
Making the Decision to
Outsource – or Not
The decision to outsource one or more business processes
begins with a commitment to have the best possible workflow
system. The question one must ask is how open to change is
the organization? The process for evaluating workflow and
determining the best course of action involves several steps:

Appointment of a review leader and workflow

team – Led by a leader who is not adverse to change and
understands disruption is part of the process, the team
includes various business, financial and technical personnel.

Review and confirmation of the organization’s

business model – This includes careful evaluation of one’s
customers, the business’ value proposition, profit model, Selecting an Outsource Firm
business scope and process for managing and controlling
When an organization selects an outsource provider, it
workflow.
is important to remember this is not a traditional business
acquisition. The decision to outsource should also not be
Evaluation of each business process – A number of
treated as an abdication of responsibilities to another party.
factors are taken into consideration when analyzing a process.
Rather, it is the start of what is hoped to be a strong relationship
This includes determining if it is a core function as described
or partnership over time. Management of both parties must
earlier and its nature and criticality to the organization.
understand the business and set reasonable expectations for
Additional factors include its complexity, scalability,
standards and outcomes. The selection criteria for choosing an
automation and scope, among others.
outsource provider varies depending on whether the client is
most interested in outsourcing select processes or is ready to
Identification of alternatives for improving business
embrace a comprehensive outsource solution.
workflow – Companies typically use selective outsourcing
when they are faced with a specific problem, opportunity,
A critical key to the success of the selection process is the
technology change, new organizational reality or compliance
development of an effective request for proposal (RFP) to be sent
issue. A comprehensive outsourcing approach is more
to prospective outsource providers. The typical RFP is developed
strategic in nature, often involving all workflow processes and
with the assistance of a professional consultant with expertise in
supporting technology.
this area, in collaboration with the established workflow team
and legal counsel. In some instances, a request for information
Development of outsource plan – In addition to clearly
(RFI) is sent to a larger pool of potential candidates and, from
stating all financial and productivity/capability goals, this
there, the list is narrowed down significantly to those who will
plan should address all issues critical to transitioning and the
receive an RFP to respond to in much more detail.
subsequent working relationship with the outsource provider.
No matter what form the RFP takes, the overriding factor
in the selection process should be how well a prospective
outsourcing candidate meets the organization’s specific business
needs from a capabilities standpoint. Other factors include
demonstrated experience, reputation, and commitment to
maintaining quality and best practices, and stability – both from
a financial and personnel perspective.

 Equipment Leasing & Finance Foundation

 Executive Summary

Planning and Managing Conclusions

the BPO Transition Despite the industry adage that outsourcing may be for
some companies, but not for us, the fact is all organizations in
Deliberate planning is critical to the smooth transition to
the equipment leasing and finance industry can benefit from
business workflow outsourcing. It is not easy, given the necessary
outsourcing some or all of its business workflow processes. It
changes in strategy, organization and personnel that typically
is an ongoing process to continually transform the business,
occur. Familiar approaches, roles and operating structures are
depending on market conditions.
given up, while new ones are adopted. The key is to remember
While core functions of the business must stay in-house, most
that this transition is more a process than a program with finite
processes are generic and easily outsourced with success. The
starting and ending points.
end result? Better workers for the right jobs that provide true
Factors in successful transitions to outsourcing include:
value and innovation to the overall operation. The quality of
• A commitment to adequate resources. labor output improves, while costs decrease over time.
• Collaboration on the strategic and organizational changes This leads to the biggest benefit of business process
taking place. outsourcing: the creation of a new strategic advantage in the
marketplace and incremental revenue for an equipment leasing
• Acceptance that unforeseen challenges and disruptions to and finance organization.
the business are inevitable.
• Recognition of the potential need for training and skills Business Process Outsourcing: Myths Versus Realities
enhancement.
Myth Reality
• Understanding that both parties have mutual responsibility
for the transition’s success. Outsourcing is about Outsourcing is about improving
• Acceptance of the increased complexity of the organization, reducing costs processes and practices
at least in the short term. When outsourcing, a
Outsourcing is about sharing
• Commitment to regular meetings and thorough company gives up control of
and learning
communication at all times. its business operations
True to a point, but technology
Business needs always
enables business to do more
drive technology decisions
TRANSITION MANAGEMENT PROCESS things
The primary benefit of Labor is more productive and
outsourcing is lower labor knowledgeable; capabilities are
costs better aligned
Outsourcing is about Outsourcing is about using
looking inward to build this competitive advantage
competitive advantage externally to drive growth
The uncertainty of the Risk can be managed – the
benefits of outsourcing is biggest risk to business is
not worth the risk inaction

“My” business processes Most business processes are

are core, unique and generic – they do not differentiate
proprietary or add comparative value

All or some processes can be

Outsourcing is an “all or
nothing” decision
Outsourcing is implemented
all at once
outsourced to one or more
providers if needed
Incremental outsourcing allows
for learning and innovation

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B USI N ESS PROCESS OUTSOU RCI NG I N TH E EQU I PM E NT LEASI NG AN D FI NANCE B USI N ESS

About the Researcher

Michael Fleming, a principal with The Alta Group, was the author of the BPO
White Paper. As the author, he conducted primary and secondary research, in-
cluding numerous interviews with leasing and finance industry executives and
managers, outsource providers and software vendors. The knowledge and experi-
ences of these sources was essential to the content and conclusions. The White
Paper’s content also was based on results of an on-line survey of experiences and
knowledge with business processes and outsourcing.
The Equipment Leasing & Finance Foundation Research Committee assisted
in the development of the on-line survey and provided comments and direction
on the early drafts of the White Paper. The author thanks the several hundred
people whose perspective provided the background, guidance and context for
the White Paper.

EQUIPMENT LEASING & FINANCE FOUNDATION

B USI N ESS PROCESS OUTSOU RCI NG I N TH E EQU I PM E NT LEASI NG AN D FI NANCE B USI N ESS

Acknowledgements

The Equipment Leasing & Finance Foundation would like to gratefully acknowledge
the time and knowledge provided by the
Outsourcing Steering Committee, in development of this study:

Russell F. Hallberg
LEASETEAM, INC.

Steven R. LeBarron
CHP CONSULTING

Richard J. Remiker
MERRILL LYNCH CAPITAL -EF

Robert J. Rinaldi
NATIONAL CITY COMMERCIAL CAPITAL CORP.

Peter Violich
ACCENTURE

Mr. David S. Wiener - CHAIRMAN

Equipment Leasing & Finance Foundation Research Committee
GE CAPITAL MARKETS SERVICES, INC.

Mr. Todd Brinkmeier

MCCUE SYSTEMS, INC.

In addition, a special thanks is due to those ELFA members companies

that added to the quality of the information in this report by generously giving of their time,
experience and insights through interviews and survey responses.

EQUIPMENT LEASING & FINANCE FOUNDATION

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OUNDATION
Your Eye On The Future
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Washington, DC 20006 www.leasefoundation.org