Eliminate back office

Back Office: the departments in an organization that are not directly involved in generating cash for the company. For example, the IT department in a company, or the accounting department in a broker-dealer organization. These departments are absolutely indispensable, because if they were not, they wouldn’t exist.

But does it really make sense to have such a cost center in the organization? Specially when you have options around it. A couple of ways to eliminate the back office would be by outsourcing your back office to someone else or developing expertise in the work you do in your back office to an extent where you can make it part of your business offering.

Your back office is for some one else the “front office”, or the core business offering. So instead of putting resources in your back office and diverting your attention from your core business, a better option would be to look for the best choice out there and outsource your back office. Benefits of this approach are cost savings in most cases, since you will be choosing from a pool of service providers, and ability to pay more attention and resources to your core business.

Another option is to expertise back office work and spin-off the back office into a money generating business. This has been a very successful operation in the software industry, more since the advent of software as the service. The most visible example that comes to mind is Amazon S3 and related services. Amazon hosts big servers through its IT department to power its online store. Amazon now uses the expertise of its IT department to provide a host of services to enable other businesses use its infrastructure and do computing in the cloud, eliminating its back office by turning it into a profitable offering.