Commercializing the Back Office at Lloyds of London:: Outsourcing and Strategic Partnerships Revisited

With the recent global recession, senior executives are desperate to cut costs from back office functions like information technology, human resource management, finance and accounting. Outsourcing these functions has been the primary cost reduction strategy for the past decade, and remains a viable option. But some innovative companies actually see the potential to participate as a supplier in the outsourcing space. Companies such as Lloyds of London, Bank of America, Barclays Bank, and BAE Systems have transformed high-cost, low-performing back office functions into commercial enterprises by partnering with key suppliers. The suppliers typically centralize, standardize, and web-enable the customer's back office processes, retrain, empower, and motivate transitioned back office staff, and leverage the assets to attract external customers. The results are impressive: lower costs, better service, and revenue generation. Of course, such radical transformation is never pain-free. We aim to help senior executives assess the viability of commercialization of their own back offices and offer eight lessons derived from one customer's experiences.