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0Project Independence – Operational Due Diligence & Synergy Report | July 2019
DRAFT / CONFIDENTIAL
Outsourcing: Our Managers’ ExperienceFall Conference, Miami, Florida
November 20, 2019
NCREIF
1NCREIF Committees Outsourcing Survey | November 2019
Table of Contents
1 Survey Results 3
2 Outsourcing Overview 32
2NCREIF Committees Outsourcing Survey | November 2019
Survey and Meeting Objectives
NCREIF issued a outsourcing survey in September, 2019. We had 91
respondents that covered fund managers, outsource providers (including
many who have been on both the investment management and
outsource provider sides) and consultants.
The survey was developed after the March conference and included
participation and input for all the NCREIF committees. Key Objectives for
the Session:
• Provide details on investment managers experiences with outsourcing
• Promote a discussion regarding outsourcing including its benefits and
challenges
• Encourage sharing of information between NCREIF participants
3NCREIF Committees Outsourcing Committee | November 2019
DRAFT / CONFIDENTIAL
01 Survey Results
4NCREIF Committees Outsourcing Survey | November 2019
Survey Results
NCREIF issued a fund administrator outsourcing survey in July 2019. Below provides on
overview of the responses and results of that survey.
• The survey received 91 responses.
• The three most common outsourced areas are; Property Management, Property Accounting (Not
Fund Accounting), and Tax.
• When functions are outsourced they are most commonly outsourced via an on-shore arrangement.
• The majority of respondents who do not use outsourcing services indicated they did not plan to
implement services; 18 of the survey respondents indicated this was because of a loss of control
over the activity(s).
• After implementation of the platform the developments noticed were; reduction in staff, decrease in
turnaround time for deliverables, and reduced oversight requirement.
• The biggest drivers of an outsource decision were technical expertise and resource constraints
with 28.1% and 27.1% of respondents citing these as the most important drivers, respectively.
• 71% of respondents spent between 1 - 6 months or longer on implementation.
• The pros of outsourcing most often cited was external expertise and ability to scale operations
efficiently.
• The cons most often cited was lack of control and limitations on quality control.
Summary
5NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 1-3
NCREIF’s annual survey resulted in 91 participants with the following responses.
Inv
estm
en
t
Man
ag
er
Serv
ice P
rov
ider
(Au
dit
/ T
ax / C
on
su
ltan
t)
Ou
tso
urc
e S
erv
ice
Pro
vid
er
So
ftw
are
Ven
do
r
Inv
esto
r /
Lim
ited
Part
ner
67.0%
Oth
er
14.3%
6.6%
0.0%2.2%
9.9%
Q3: What type of funds do you manage?
• The majority of respondents identified as an investment manager. Two participants identified as other including: (a) Strategic
Advisor / Consultant; and (b) NCREIF Employee.
• The majority of respondents manage funds of between $1B and $10B.
• For question 3, respondents were able to select multiple answers – with more respondents managing closed-ended funds than
any other fund type.
Q2: Average size (AUM) of your fund(s)?Q1: What is your perspective?
No
t A
pp
licab
le
Less t
han
$1B
$10B
-$25B
$1B
-$10B
Gre
ate
r th
an
$25B
13.2%
7.7%
20.9%
6.6%
51.7% 44.0%
Clo
sed
-en
ded
Fu
nd
s
Op
en
-en
ded
Fu
nd
s
Deb
t F
un
ds
11.0%
Sep
ara
te A
cco
un
ts
39.6%
All o
f th
e A
bo
ve
No
t A
pp
licab
le
36.3% 36.3%
9.9%
6NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 4
Do you outsource services or provide services for the following areas?
Valuation Management
(n=82)
Partial
22.9%
Performance Metrics
(n=82)
Outsource
Tax
(n=82)
9.8%
Investor Administration
(n=80)
23.5%
41.5%
Fund Accounting
(n=83)
10.0%
9.6%
Property Accounting
(n=81)
Cash Management
(n=82)
45.8%
18.8%Property Management
(n=80)
Research
(n=83)
0.0%
15.9%
104
27.5%
Other
(n=30)
InternalN/A
103
102
102
101
104
102
25.6%
102
101
100
37.8%
54.9%
15.0% 41.3% 18.8%
12.1% 22.9%
18.5% 14.8%
13.8%
45.7%
15.9%
8.5%
13.8% 55.0%
13.4%
22.0%
13.3%
28.1%
13.4%
32.9%
68.3% 8.5%
59.0% 19.3%
76.7% 13.3%
14.6%
Survey Responses
• The 3 most common outsourced areas are; Tax, Property Accounting, and Property Management.
7NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 4
Do you outsource services or provide services for the following areas?
Internal Partial Outsource Outsource N/A
• Performance Metrics
(68.3%)
• Research (59.0%)
• Cash Management
(54.9%)
• Valuation Management
(37.8%)
• Tax (32.9%)
• Investor Administration
(27.5%)
• Property Management
(55.0%)
• Property Accounting
(45.7%)
• Tax (41.5%)
• Property Management
(18.8%)
• Property Accounting
(18.5%)
• Valuation Management
(15.9%)
Note: N/A likely represents service
providers
Top Three Outsource Areas by Category
8NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 4
Do you outsource services or provide services for the following areas?
Vendors Used for Outsource Services
Cash
ManagementCompliance
Investor
Administration
Performance
Metrics
Property
ManagementTax
Valuation
Management
• JP Morgan • Jackson
Walker
• BNY Mellon
• Burgiss
Private
Informant
• Citco
• Alter Domus
• McMorgan
• NVC
• Real
Foundations
• State Street
• UMB
• MSCI
• The
Townsend
Group
• Avenue5
• CBRE
• Colliers
• Cushman &
Wakefield
• Greystar
• J Companies
• JLL
• Legacy
Partners
• Lincoln
Property
Management
• Matrix
• Steven Scott
Management
• Deloitte
• E&Y
• KPMG
• PwC
• RSM US LLC
• Altus
• Chatham
• RERC
9NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 5
For functions that you outsource, can you share whether you outsource to an on-shore, off-
shore or captive organization?
28
25
22
35
22
20
17
39
41
28
7
9
3
9
3
5
2
10
9
3
4
3
2
3
3
38
37
47
26
52
50
58
19
19
2
0
Fund Accounting
(n=75)
Investor Administration
(n=76)
69
Property Accounting
(n=72)
Cash Management
(n=73)
Property Management
(n=79)
Valuation Management
(n=78)
Tax
(n=80)
0Performance Metrics
(n=68)
0Research
(n=69)
0
Other
(n=31)
76
75
72
73
79
78
80
68
311
Survey Responses
• When functions are outsourced they are most commonly outsourced via an on-shore arrangement.
Off-Shore
Internal Captive
N/A
On-Shore
Response Composite
Response %
On-shore 49.6%
Off-shore 2.7%
Captive 8.1%
N/A 39.5%
10NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 5
For functions that you outsource, can you share whether you outsource to an on-shore, off-
shore or captive organization?Top Three Outsource Areas by Category
Internal Captive Off-Shore On-Shore N/A
• Performance Metrics
(14.7%)
• Research (13.2%)
• Cash Management
(13.0%)
• Fund Accounting (5.6%)
• Cash Management
(4.4%)
• Valuation Management
and Investor
Administration (4.1%)
• Tax (77.3%)
• Property Management
(71.2%)
• Valuation Management
(68.5%)
• Research (60.3%)
• Performance Metrics
(57.4%)
• Cash Management
(50.7%)
Note: N/A likely represents service
providers
11NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 6
If you do not use any outsourcing services do you plan to implement outsourcing?
Yes -
in 3
to
6 m
on
ths
Yes -
in 1
to
3 m
on
ths
Yes -
in g
reate
r
than
6 m
on
ths
(n=
2)
No
(n=
20)
0.0%
9.1%
0.0%
90.9%
Survey Responses
12NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 7
If you do not use an outsourcing model and do not plan to implement outsourcing, can you
please provide the rationale for your choice? (Please check all that apply)
Wo
uld
see a
red
ucti
on
in w
ork
qu
ality
(n=
11)
10.4%
Imp
lem
en
tati
on
is
too
dif
ficu
lt
(n=
1)
Oth
er
(n=
7)
Tu
rnaro
un
d t
ime o
n
acti
vit
ies w
ill b
e d
ela
yed
(n=
9)
Co
st
str
uctu
re i
s in
lin
e
wit
h e
xp
ecta
tio
n,
no
need
to
ch
an
ge (
n=
11)
Req
uir
es a
dd
itio
nal
ov
ers
igh
t an
d m
an
ag
em
en
t
(n=
7)
Lo
ss o
f co
ntr
ol
ov
er
the a
cti
vit
y
(n=
18
)
Acti
vit
y i
s t
oo
sen
sit
ive
to o
uts
ou
rce
(n=
3)
13.4%
1.5%
26.9%
4.5%
16.4% 16.4%
10.4%
Survey Responses
13NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 8
What were the key drivers of the outsourcing decision, or what do your clients consider
drivers for the outsourcing decision? Please rank (1 being most important and 7 being least)Survey Responses
12.5% 25.0%1.6%
7.8%18.8%6.3%Technical Expertise
(n=64)
27.1%
9.4%
100.0%
30.0%
25.8%
20.0%
100.0%
11.4%
11.5%
4.3%5.7%
17.2%
Resource Constraints
(n=70)
21.3%
Tactical / Repetitive Function
(n=64)
Cost
(n=62)
9.8%
0.0%
11.5%
23.4%
13.1%29.5%
100.0%
9.4%
3.3%
3.1%
Expense of Fund
(n=61)
27.4%
16.1%
80.0%
33.9%14.5%3.2%
100.0%
0.0%
8.6%
35.9%1.6%
5.7%
1.4%
48.4%
6.5%
0.0%
4.8%
28.1%
2.9%
2.9% 100.0%
3.2%Geographical Concerns
(n=62) 3.2%8.1%4.8%
100.0%
100.0%
Other
(n=35)
7
3
4
6
5
2
1
• The biggest drivers of an outsource decision were technical expertise and resource constraints with 29.8% and 28.5% of
respondents citing these as the most important drivers, respectively.
14NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 8
What were the key drivers of the outsourcing decision, or what do your clients consider
drivers for the outsourcing decision? Please rank (1 being most important and 7 being least)Survey Responses
80
6
13
6
59
97
13
19
56
52
39
82
26
46
58
31
144
46
32
100
169
63
117
49
24
180
155
150
56
69
19
190
113
197
66
149
23
40
11
Resource Constraints
(n=62)
1
Technical Expertise
(n=64)
0
2
Cost
(n=62)
2
Tactical Function
(n=64)
3Expense of Fund
(n=61)
Geographical
(n=62)5
415
0
0163
116
Other
(n=35)
541
521
511
442
282
3
7
5
6
4
2
1
• This graph shows a weighted representation of the survey results by assigning a number to each ranking (i.e. 1 = 7 points, 2 =6
points, 3 = 5 points, etc.).
• This shows that resource constraints, cost and technical expertise are the largest drivers for an outsource decision.
15NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 9
How much time did you or your client allocate to the selection process (vendor selection
through contracting)?Survey Responses
Gre
ate
r th
an
6 m
on
ths
1 t
o 3
mo
nth
s
Less t
han
1 m
on
th32.0%
3 t
o 6
mo
nth
s
10.0%
29.0% 29.0%
• The time spent on the selection process was evenly split between 1 to 3 months, 3 to 6 months, and more than 6 months of an
average of 30%.
16NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 10
What activities did you or your clients perform during the selection process? (Please check
all that apply)
67.5%
Ven
do
r re
fere
nce c
hecks
Fo
rmal p
rocess
do
cu
me
nta
tio
n
Req
uest
for
pro
po
sal
bu
ild
-ou
t an
d d
istr
ibu
tio
n
Pro
of
of
co
ncep
t p
rocess
Vis
it t
o p
rov
iders
op
era
tio
ns
61.0% 62.3%
36.4%
45.5%
Survey Responses
17NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 11
Did you our your clients use a third party to assist with the selection?
Yes
No
80.0%
20.0%
Survey Responses
• 17% of respondents used a third party to assist with vendor selection.
18NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 12
If you used a third party, please indicate the benefits you feel you received from using a
third party (Check all that apply)Survey Responses
• Benefits received utilizing a third party include a formal approach, time savings, balanced assessment of vendors and allowing
existing resources to remain focused on existing job functions.L
imit
ed
or
no
valu
e
to p
rocess
Oth
er
(pro
vid
ed
exte
nsiv
e
RE
an
d o
uts
ou
rcin
g e
xp
ert
ise)
En
ab
led
a b
ala
nced
asses
sm
en
t o
f v
en
do
rs
Pro
vid
ed
a f
orm
al
ap
pro
ach
Cre
ate
d t
ime s
av
ing
s
Allo
wed
exis
tin
g r
eso
urc
es
to r
em
ain
fo
cu
sed
on
exis
tin
g jo
b f
un
cti
on
s
24.4%
7.3%
31.7%
17.1%
14.6%
4.9%
19NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 13
What approach to implementation did you or your clients undertake?
Process
reengineering and
then outsource
Lift and shift (no
significant
process changes,
moved existing
resources onto
an outsourced
platform)
15.1%
Hybrid (some
activities
remained at
Fund level)
Parallel
processing
Pilot followed by
go/no go decision
prior to full
implementation
New services
acquired via
Outsource
provider
Other
24.5%
7.6%
30.1%
7.6%
11.3%
3.8%
Survey Responses
• 30.1% of respondents used a hybrid approach to implementation, with some activities remaining at the Fund level.
• Two respondents indicated an ‘other’ approach to implementation including:
‒ A lift-out on existing systems then paralleling with go/no go decision on a fund by fund basis to transition to Outsource
provider's platform; and
‒ Taking different processes and rationale based on the service being implemented. number of these services have been
outsourced since inception.
20NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 14
How much time did you or your clients allocate to the implementation process (project kick-
off to stabilization)?
6 t
o 9
mo
nth
s
Less t
han
3 m
on
ths
3 t
o 6
mo
nth
s
9 t
o 1
2 m
on
ths
Gre
ate
r th
an
12 m
on
ths
37.0%
18.0% 18.0%
12.0%
15.0%
Survey Responses
21NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 15
What parts of the implementation went well, or what client activities provide for a successful
implementation?Survey Responses
• Buy in of outsourcing and involvement from all stakeholders in the process.
• Low turnover on the Fund administration side.
• Process documentation and providing information to the outsource provider in advance of the implementation.
• Using program/project management was key to providing needed structure.
• Engagement and experience of the outsourced service provider.
• A robust oversight program and communication process including weekly status updates.
• System knowledge of outsourcing company and willingness to accommodate requirements including data
transfer.
• Piloting the program allowed for refinement in process and accelerated the overall implementation.
• Technology build out and ensuring parallel testing during implementation.
• Cash management, investor reporting, and information delivery.
• The clients employees were lifted out by the outsourcing firm. This provided the outsourcing firm to retain the
history and knowledge of the client.
Key Takeaway: Oversight, Testing and Communication contribute to Success
22NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 16
What parts of the implementation could have been improved, or what should a client avoid
during implementation?
• There needs to be a clear set of responsibilities on both sides including an understanding of expectations.
• Using pre-determined templates helps to drive the process.
• Client ownership of oversight of outsourcer and a defined escalation process for outsourcer issues/questions
makes for a more efficient transition.
• Time constraints between the vendor and Fund made the process more drawn out.
• Clear contract negotiations and vendor selection are critical.
• Level and knowledge of staff assigned by outsourcing vendor including an understanding of the Fund structure is
critical.
• Data migration and determining standard services promised were not met timely making for an inefficient
implementation.
• Parallel processing and QA/UAT of deliverables are key.
• Duplication of tasks makes for an inefficient implementation.
• Making too many changes at once hinders success.
• Consideration of ad-hoc requests and if charges will be incurred for the scope of work.
Survey Responses
Key Takeaway: Taking time to plan is critical
23NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 17
Survey Responses
• Take longer to determine the responsibilities and workflows for each process.
• Allow time for the unexpected.
• Devote a more substantial amount of time to implementation
• Consider contingencies for timing delays. Involve more people who didn't have financial reporting responsibilities
(hard to support conversion and BAU at the same time).
• Pass off data ASAP to shift responsibility and ask for sample deliverable's upfront that could be leveraged from
other funds/clients rather than creating from scratch.
• Bring more data to the initial set up to decrease the amount of revisions after.
• Implement parallel testing.
• Start up front - this is easy to do with new Funds.
• Avoid making too many changes at once, wait on the transition until the new staff has been fully onboarded and
is familiar with the accounting/organization.
• Spend more time identifying areas that require "interpretation" versus repetitive process (i.e. CAM calculation vs
processing A/P).
What would you do differently if you were able to complete the implementation again?
Key Takeaway: Setup project governance with key stakeholders
24NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 18
What does the stabilized platform look like vs. implementation platform? Please check all
that apply.
4442
6
40
34
22 22
42
20
28
Increased
turnaround
time for
deliverables
No change
in oversight
requirement
Reduction
in staff
No change
in staffing
Increase
in staff
Decrease in
turnaround
time for
deliverables
No change in
turnaround
time for
deliverables
Reduced
oversight
requirement
Decrease in
direct
contact with
outsource
team
Increased
oversight
requirement
• The majority of respondents saw a reduction in staff, decreased turnaround time for deliverables and reduced oversight
requirements following the implementation of outsourced services.
Survey Responses
25NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 19
What were the key pros of outsourcing services?
• Expertise (e.g. administrator is more well versed in local laws for foreign fund vehicle, technical expertise,
internal accounting, cash management).
• Scaling up or down operations is easier with vendor than internal hiring and eliminates burden of recruitment
process.
• Lower overall cost and cost savings (e.g. many outsourced functions can be charged to the Fund).
• Time efficiencies.
• Allowing the Fund to concentrate on core competencies (e.g. portfolio management and client service) and
maximizes the skillset of staff.
• Independence and transparency to investors (e.g. valuations, open end funds with a trading NAV).
• Better data collection and reliable platform.
• Ability to rely on a specialist for a non-core function.
• Efficiency in handling high-volume, low intensity activity.
• Not having to manage staffing requirements.
• Transparency in cost assignment.
Survey Responses
Key Takeaways: Technical Expertise and Scalability
26NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 20
What are the cons of outsourcing?
• Lack of control (e.g. systems) and oversight requirements.
• Limitations on quality control.
• Oversight of the outsourcer inevitably involves some level of duplication of effort (e.g. accounting).
• Limited customization.
• Cost is still high – including initial cost, even though we save on internal resources.
• Requirement to educate vendor staff about our company policies and processes
• Knowing the details when necessary of the underlying transactions is not an immediate, easily accessible
recovery of answers.
• Longer turnaround times and change management.
• Many firms are technology oriented and lack the product knowledge.
• Business processes of outsourcing firm can be too segmented (e.g. several accounting functions handled by
different teams).
• Outsourced investment decision-making (stock- or property- picking) means that we are not flexible – “We are
bettors at the betting window, not horse breeders or horse trainers”.
Survey Responses
Key Takeaways: Loss of Control and Quality Issues
27NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 21
How have you structured the oversight with the outsource partner, or what is the
recommended structure for oversight? Check all that apply
35.0%
Specific resources to
manage relationship
Within job description
for relationship mgmt
14.5%
Rely on Outsourcing
provider reporting
50.5%
Survey Responses
28NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 22
How well does communication work, or what is the preferred communication protocol?
Please check any that apply provide for a successful implementation?
36
25
28
7
1 1 1 1
Executive
steering
committees
SLA with
reports on
specific tasks
It remains
challenging
Written updatesRegular
scheduled
meetings via
phone or Skype
Outsourced
team is onsite
for dedicated
support
Ad-hoc
meetings, no
set schedule
In-person
meetings
Survey Responses
29NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 23
Are you still able to have the ability to address ad-hoc requests, or do you run into
scope/responsible party issues, or as a provider how do you address ad-hoc requests?
• 20 out of 38 respondents indicated they are still able to address the ad-hoc requests and the vendor is normally responsive.
Sample responses include:
‒ As a condition to outsourcing the manager must agree that ad hoc reporting is part of the scope of the work and a no fault 30
day termination clause is used to enforce that feature.
‒ Ad-hoc investor requests were part of the services we agreed upon up front. When any other change to a deliverable arises, the
contact may be negotiated.
• Other responses include:
‒ This is dependent on the outsourcing firm and relationship of business.
‒ Scope clarity is always a conversation – beware of scope creep.
‒ The ad-hoc issue is one that needs to be addressed upfront with the vendor, and the client has to take responsibility for the cost
aspect. Base-line model vs. full flexibility; this effects the quality of work product.
‒ This is an area of challenge as many ad hoc requests overlap into both parties responsibilities.
‒ We typically pull in additional resources.
‒ Sometimes there are scheduling conflicts and some scope issues, but mostly it all works.
‒ We as a provider put in a workflow for ad hoc requests and if we maintain the required information we respond to the ad-hoc
request.
‒ We have the ability to address ad-hoc requests but it takes time and a significant amount of communication on both parties. In
addition, these types of requests bear cost which can add up.
‒ Run into issues, delayed timing, administrator unable to service many of the requests.
Survey Responses
Key Takeaway: Plan for Ad Hoc Reporting/Requests Upfront in the Contracting Process
30NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 24
Would you complete the outsourcing initiative again?
Survey Responses
No
5.8%
Yes
90.4%
• One respondent indicated they would not complete the outsource initiative due to decreased quality of reporting and the financial
reporting process takes longer with the Outsource provider. The second respondent indicated the initiative did not meet
expectations
31NCREIF Committees Outsourcing Survey | November 2019
Survey Results | Question 25
Could you go back to an internal/insourced model, or have you had a client revert to an
insourced model?If yes, what would be the challenges?
• Staffing issues, internal resources and training takes time.
• The only way to go back is to buy/build the system support which would be difficult.
• Setting up all the systems again.
• Finding high quality staff quickly to handle the work.
• Making sure systems are set up to efficiently handle the increased work load and make sure
staff devotes appropriate time to deliverables.
• Internal IT structuring and data reintegration.
• Time pressure -- most of the work is done at the end of the quarter.
• Shifting costs back to the advisor.
Survey Responses
Yes
54.3%
No
48.6%
If no, what are the key impediments?
• Cost and staff
• Adding headcount, ability to charge expense to investors.
• We do not have the internal skill set now to insource property-picking.
• No, all systems and setup is now owned by the fund administrator.
• No, we never had an insource model.
• Lack of technical knowledge. The technology changes are occurring so fast, that a firm
would have to decide if it is a technology company supplying real estate products or a real
estate company with a technology group.
• Client expectations.
32NCREIF Committees Outsourcing Committee | November 2019
DRAFT / CONFIDENTIAL
02 Outsourcing Overview
33NCREIF Committees Outsourcing Survey | November 2019
Back Office Functions Viewed as a Continuum
The Back Office has changed significantly over the last 30-40 years focusing on efficiency
and cost reduction.
DECENTRALIZED CENTRALIZEDSHARED
SERVICESOUTSOURCING OFF-SHORING
EFFICIENCY AND COST REDUCTION
Support service functions exist within each business unit,
with minimum consistency across
business units
Centralized functional departments provide a standardized level
of service to business units
“Business within the
Business” that
provides a menu of
services to business
units on a predefined
cost basis
Use of a 3rd Party to undertake specific tasks or processes usually with a high level of autonomy
Use of a 3rd Party to undertake specific
tasks or processes, in a different country
with lower labor costs
34NCREIF Committees Outsourcing Survey | November 2019
Drivers for Outsourcing / Off-shoring
The ability to grow and scale are key drivers for outsourcing / off-shoring.
Overview
GROWTH▪ Acquisitions and mergers have dramatically increased properties, leases and subsequently staff.
NEW BUSINESSES▪ Many real estate companies have grown through joint ventures and subsequently accounting staff.
TECHNICAL EXPERTISE▪ Many companies need technical expertise in areas on a part time basis to address specific issues.
LABOR AVAILABILITY AND COST▪ Many markets have extreme labor shortages with ever increasing salaries.
CYCLICALITY▪ Many accounting & finance processes are very cyclical and are difficult to staff the “peaks” (i.e. CAM, Planning,
Cash Application). Acquisitions & Mergers exacerbate the problem.
SCALE / STAFF AUGMENTATION▪ Using offshore resources to augment existing staff and provide a scalable platform.
35NCREIF Committees Outsourcing Survey | November 2019
Insource / Off-shoring Decision Flow
Sourcing alternatives are then considered with decisions made as to which capabilities are
candidates for outsourcing
Overview
Outsource / BPO / Off Shore
No
Requires
specialized
knowledge?
Available
outside?
More
cost effective
outside?
Variable
workload?
Can offload
peak?Strategic?
Yes
Define
performance
requirements
Outsourcing
Opportunities
Retain work in-house (in-source, if world-class)
Yes Yes Yes Yes
No No No No
No Yes
36NCREIF Committees Outsourcing Survey | November 2019
What Do Companies Typically Outsource / Off-shore?
The following graphics illustrates functions/processes companies typically consider for
outsourcing / off-shoring.
Property
AccountingConsolidations
Monthly /
Quarterly
Close
Legal Entity
Reporting
Transaction Processing
Record to Report (General Accounting) Order to Cash
External Reporting
Statutory
Reporting
Regulatory
Reporting
Rating
Agency
Relations
Key Not Typically
Outsourced
Less Commonly
Outsourced
Most commonly
Outsourced
Investor
Relations
Fixed
Asset
Accounting
Tax Planning
Compliance
Financial
Reconciliati
ons
Benefits
Admin /
Accounting
Inquiry
Handling
Daily P&L
Mark to
Market /
Middle
Office
Investor
Reporting
Premium
Accounting
(Ins)
Re-Insurance
Accounting
Investment
Accounting
/ Fund
Administrati
on
Order Entry Billing
Cash
ApplicationsCollections
Bank
Reconciliation
Trust /
Treasury
Management
Requisition
Materials
Purchasing /
Procurement
Payment
Processing
Accounts
Payable
T&E
Processing /
Reimburseme
nt
Procurement
Card Admin
Procure to Pay
Performance
Reporting
37NCREIF Committees Outsourcing Survey | November 2019
What Do Companies Typically Outsource / Off-shore?
The following graphics illustrates functions/processes companies typically consider for
outsourcing / off-shoring.
Strategic
Planning
Budgeting &
Financial
Planning
ForecastingAccounting /
Tax PolicyInternal Audit
Financial
Analysis
Internal
Consulting
Project
Management
Finance
Function
Management
Business Decision Support
Planning Control
Finance Management
Human
Performance
Management
Training &
Development
Business
Liaison
Expense /
Revenue
Allocations
Performance
Measures
Multi
Dimensional
Reporting
Profit Center
/ Customer /
Producer /
Profitability
Acquisitions
&
Divestitures
Risk
Management
(CM)
Research
Property
Management
Management Reporting Specialized Expertise
Valuations /
Valuation
Management
Key Not Typically
Outsourced
Less Commonly
Outsourced
Most commonly
Outsourced
Tax Strategy
38NCREIF Committees Outsourcing Survey | November 2019
Lessons Learned
The following are observations of several real estate investment and management
companies who have leveraged outsourcing / off-shoring.
Lessons Learned | Selecting an Outsource ProviderLessons Learned
• Track Record
• Security
• Client Base
• Redundancy
• # of Staff
• Service Offerings
• Staff Turnover
• SSAE 16
• Financial Strength / Capital
• Staff Development / Training
• System Experience
• Quality Management Systems
• Implementation Approach
• Dedicated / Shared Staff
• Data ownership
• Locations
• Clearly define requirements for functions / processes to
be outsourced.
• Outsourcing / Off-shoring should be looked as an
extension of a company’s team that requires
management, training and oversight.
• Additionally, there are often cultural differences that
should be acknowledged and leveraged to create sense
of team.
• Outsourcing/Off-shoring works well for repeatable
processes, however, areas that require interpretation
need greater oversight.
• Conducting a proof of concept prior to committing to
outsourcing / off-shoring will provide confirmation of
capabilities and also may highlight issues not considered
initially.
• Check references and learn from mistakes other
Companies made when outsourcing / off-shoring.
• Change management is a key component of the transition
to an outsourced and especially an offshore solution.
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