Moving the “Back Office” to the “Front Office”

We Americans are not known for being exact in our language, in fact sometimes our use of a word contradicts its meaning. However, we don’t like to be wrong. Fortunately, we have great tenacity and perseverance thus we continue to misuse a word until our definition and use of the word is accepted as correct.

For example:

  1. Entrée: A French word meaning “the act of entering” or “the course served prior to the main course”. Americans use the word to refer to the main course. The American use of this word has become the accepted use in many places throughout the world.
  2. Peruse: “To read through with thoroughness or care”. The common understanding and use by Americans is the exact opposite, to skim or look over in a casual manner. While some sources still consider the American use to be incorrect, other sources, including the Merriam-Webster dictionary, include the American definition as a secondary definition.
  3. Back Office: A modern American business term defined as the departments (staff and systems) that do not interact with customers. However, the Billing and Collections departments, two departments that have direct and frequent interaction with customers, are usually included as part of the back office. There is a growing population of business people who recognize the value and reap the rewards by including these departments in their front office.

Successful companies recognize that billing and collections are a major part of their customer’s experience, especially if they are service providers. They leverage these “back office” functions and transform them from necessary evils of doing business into revenue generating competitive advantages.

Most executives don’t think they need to seriously invest in their back office, but only those executives from companies that don’t have any real competition and who’s products help their customers generate sales are correct. Can you imagine the internal conversations their customers might have? “We just closed another million dollar deal using their service! Who cares how hard it is to reconcile their bills? So what if we have to dedicate five people to manage their account? Just make sure they get paid and on time!”

Most companies have competition and sell on the premise that they lower costs, increase productivity and improve efficiency. When you are selling your service as “faster, cheaper and easier”, it is critical that every part of the customer experience lives up to expectations. If the bills and paying process cause the customer aggravation it lowers the value they gain from using the service. To take full advantage of the billing and payment customer interaction, a company needs to do more than simply provide good billing and eliminate complaints. The goal is to have every invoice demonstrate the value and benefits the customer receives from the service and to encourage continued and increased use. This goal can be achieved by providing details on their adoption, utilization, savings and ROI, information that may not be available from their own internal systems.

Getting more out of your back office requires knowing what is available to leverage and matching it with what people want.

Some companies are able to mine their back office data in aggregate to then create market or industry information. This information can be packaged as a new service or distributed to promote the company, to reinforce the company’s position as the market leader or expert in their industry. At IntraLinks, we created the Deal Flow Indicator (DFI), to provide an early view of aggregate deal flow activity and trends in the global market. IntraLinks created DFI by leveraging our involvement in a significant percentage of M&A deals in the early stages of each transaction which affords us uncommon perspective and insight on global deal flows.

The all-time greatest innovation and leveraging of the back office (Anyone have a challenger for this title?) was when MCI launched the “Friends and Family” discount program as part of their long distance service. In the first year of this promotion alone,MCI added 8 million new customers, increased revenue by $1.2 billion and had a two point increase to their share price. Back in the late 20th century, long distance calls used to be expensive but had substantial off-peak discounts based on time of day and day of week. (Do you remember waiting for the cheap rates at 11pm so you could afford to call your Aunt in Iowa?) MCI realized they could create a real service advantage over AT&T, increase business and add new customers by leveraging existing back office functionality. It was simple, it was brilliant, it made MCI billions and it revolutionized the communications industry in ways that can still be felt today. In 2009, almost 20 years after MCI first introduced “Friends and Family”, Verizon Wireless (part of Verizon Communications who in 2005 bought MCI) announced the launch of their first Friends and Family plan.

To maximize the value of your back office you have to really understand the needs of your customers and be open to unconventional ideas.

In the early 2000’s, after the internet bubble had burst, it was very difficult for start-up or emerging companies to secure lines of credit or loans. While at Arbinet-theXchange, “The world’s largest electronic marketplace for communications trading, routing, and settlement”, we recognized that many of our smaller customers, who were selling services on our exchange, were unable to grow their business due to limited cash and funding. They couldn’t get a credit line from their providers and didn’t have the funds to pay them in advance or provide security. We developed a service called “RapidClear”. By leveraging Arbinet’s positive cash position we were able to offer accelerated payments to sellers for a percentage of the payment. RapidClear was able to be supported by the existing back office at no additional cost while generating a 3% increase in net revenue. More significantly, RapidClear grew the business by attracting new customers and by funding the small and medium size sellers enabling them to complete more transactions on the exchange. RapidClear was one of Arbinet’s cornerstone services and contributed to their five years of hyper-growth from $9 million to $500 million annual revenue and a successful IPO.

Transforming your back office into the front office is the fast path to success. It is only limited by the resources and attention given to it.