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Finance as a First-Mover, Literally

Novo Nordisk's offshoring effort pays dividends.

As U.S. companies restructure their finance departments in pursuit of greater efficiencies (see “The Incredible Shrinking Finance Department“), the experiences of one European health-care/pharmaceutical company might be worth a closer look.

Like other companies, Copenhagen-based Novo Nordisk was drawn to offshoring for the labor-cost advantages it offered. But along the way it has seen other benefits emerge.

For one, the success of an offshoring project that currently has 100 of the firm’s 700 finance staffers based in Bangalore, India, has inspired other parts of Novo Nordisk, such as IT and HR, to follow suit. In three years the firm’s Bangalore office will reach a head count of 500, building on the initial wave of low-value-added labor to include not just finance staffers but others from virtually all parts of the company, including business consulting.

“Finance was a ‘first-mover.’ I’m really proud to see the big organizational impact that the shared-service center in Bangalore is having,” CFO Jesper Brandgaard says.

Its relatively mature offshore operation has also helped the company respond to a foreign-exchange challenge. The Danish kroner is pegged to the euro, whose value declined 14% against the dollar this year. “Within a window of just a few months, our costs shot up significantly,” says Brandgaard. For a company with 45% of its 30,000-person workforce based in a high-cost country like Denmark, it’s easy to see why.

And India isn’t just a source of low-cost labor; it also has customers. “It’s become brutally clear that the growth opportunities are in emerging markets,” Brandgaard says. “We need to be actively redistributing resources to those markets. In our industry, I think Europe will be in the doldrums for the next decade. It’s just extremely hard to get growth here.”

As for job losses, Brandgaard says the company’s “evolutionary” move to Bangalore has bolstered retention, both at home and in India. Most Danish employees have remained with the company in other positions, while in Bangalore, Novo Nordisk has avoided the high turnover so common there by offering employees something that most outsourcing firms can’t: the chance to work for a well-known global brand.

The company now has about 300 finance employees at its Copenhagen headquarters, and the gradual embrace of offshoring is facilitating a rebalancing of skills there, away from administration and toward management — with managers increasingly being asked to focus less on established markets and more on emerging markets. Meanwhile, finance costs as a percent of revenue, which ran about 1.3% in 2005, should reach 1.0% this year, Brandgaard says.

Which workforce-oriented cost-cutting actions is your company considering in 2010 - 2011?

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