Q&A: For electrical firm, outsourcing is about finding the right partner
Mayer Electric, an 80-year-old electrical distribution company with 50 locations in eight states, has a fairly lean IT shop for a company its size. CIO Barry Carden's department is made up of 14 associates, including developers, business analytics administrators, database administrators, network managers and the help desk. Where it makes sense, Carden takes advantage of third party services, including Exchange server hosting, expense management and billing services.
Having worked for Mayer for 26 years, Carden has seen the good and the bad of outsourcing relationships. In an interview with FierceCIO, he discussed some of the characteristics that define good third-party services, and how handing the billing process over to a partner saves money and improves productivity.
FCIO: What are some of the challenges you've found working with third party providers?
Carden: Our experience over the years of working with different suppliers told us that a lot of providers want us to adapt to them. We mail invoices on a nightly basis. We run about 4,000 invoices a night. There are times we're going to have special needs, such as a customer who wants invoices pulled out a certain way. Typically if you're working with a third party provider, you kind of go with their out-of-the-box solution or it can get pretty expensive.
FCOI: How long have you been outsourcing your billing processes?
Carden: We have been outsourcing the mailings of our invoices since right around 1998. For us, it's really about finding the right partner to work with. Originally we had a relationship with a company that was a fairly significant player in the billing industry, but around 2001 they went in another direction and wanted to work with much bigger companies than Mayer. We found another provider, but it was not able to provide the level of service we wanted. We switched to a third partner that did a lot of billings with banks. That relationship was very rocky. Some of the downfall was their single point of failure. They didn't have backup facilities. If anything went down, they were down.
The other thing we learned the hard way was that our mail was getting grouped in with other companies' mail. If another company made a mistake, the whole group of mail would be rejected. The provider then would actually take the mail out and go around town and stuff it into mailboxes out on the street. Once all of this came to light, we had to find another company. We went through an evaluation process and selected Billtrust.
FCIO: In what ways is your current third party billing supplier an improvement over past suppliers?
Carden: A lot of times when you see growth in a third party provider, you'll see service issues. Billtrust has grown a lot since we became a customer, but it has managed to grow without affecting me in any negative way. That is highly unusual.
Also, a lot of times when I'm working with third parties, eventually I have to pick up the phone and call their CIO and say, what the heck is happening? That's the biggest thing about outsourcing--losing that control. You always end up having to make that phone call. With Billtrust, that has never had to happen. I know their key people, and I can call them if I want to, but I don't have to. Maybe once a year, something is going to go wrong, but they have always responded when there's an issue. They give you feedback on what the problem is and what they're doing to correct it. I have developers who have close relationships with their developers, but my developers are not having to come to me and say, hey we're trying to this get done.
FCIO: Does your current provider adapt to your needs?
Carden: Billtrust can integrate to a lot of different back office accounting systems. We have some customers that receive a physical paper mailing and some customers that receive an electronic mailing. Some of our customers prefer to receive a fax, and some prefer a file format for a back office system.
FCIO: How much are you saving?
Caden: About 24 percent of our customers receive their bills electronically and that translates to about $50,000 savings in mailings a year. We're saving around $37,000 a year from bullpenning. If we've got a customer who is doing a lot of small purchases from us, we can hold those invoices up to four or five days or until we hit a maximum. When a threshold is met, they will group the invoices and do one mailing. I've got a huge opportunity for savings from bullpenning alone.
If you did all of this in-house, you'd have two salaries, sorting machines leases and mailing software to take advantage of postal discounts. You're probably looking at $350,00 to $400,000 savings all total.
FCIO: How hard was it for your users to adapt to the latest third-party system?
Carden: It was probably a 30-minute training session for them. Our CFO told me years ago, it is not the users' job to understand your job. It is your job to understand their job. I took that bit of information and have used it for the last 23 years.