David Schnitt is the chief executive officer of IQ BackOffice, a company that provides full accounting, payroll, and human resources services for companies that decide to outsource those services. The company is focused on mid-sized businesses. David has a BA from Cornell University and an MBA from the University of Michigan. He previously served as CEO of HrMail and as CEO and president of Ledgent. In this interview he gives us a detailed overview of how IQ BackOffice helps customers with their accounting needs and provides us with insights into the outsourcing industry.
Sramana Mitra: David, let’s start with setting some context about IQ BackOffice and about you.
David Schnitt: I spent most of my career at Deloitte, on the consulting side. I did a lot of work there. I started out setting up ERP [enterprise resource planning] systems for clients. That led into re-engineering. I started a re-engineering practice in Deloitte’s L.A. office. At the time, which was the early to mid 1990s, we started working with a lot of clients, re-engineering their processes and setting up service centers.
What we found was that clients were able to dramatically improve their service levels in terms of quality, cost, and time limits. They saved about 50% versus their internal costs. At the time you found that a lot of processes – especially finance, HR, and accounting processes – were spread out in various business units within a large company. We found that by pulling those out of the business units, setting up a shared service center and consolidating them, we were able to achieve the results I just mentioned – not only the cost savings, but also significant improvements in the metrics around those processes.
We had a lot of success with that, and I thought, “This is something mid-sized firms can really take advantage of” because in the analysis we had done, we saw that mid-sized companies, if they take initiatives around automation or re-engineering, really don’t have the economies of scale or the volumes of transaction in these processes to have a positive ROI in their investments. So I thought, “What if we set up a shared service center that mid-sized companies can plug in to and utilize to get all the benefits of larger companies?” If you look at some of the major numbers in finance and accounting, which is our space, large companies on average spend half of what smaller companies spend as a percentage of revenue on finance and accounting. Mid-sized companies are at a significant disadvantage to the larger companies. One of the things we help do, in essence, is level the playing field by giving clients best practice processes and state-of-the-art technology at a fraction of what it was costing them to do it internally. That is what our company is all about.
SM: Where are you based?
DS: We are headquartered in Los Angeles, and we have offices in the Philippines and in India.
SM: How big is the company?
DS: We have a little fewer than 600 people today.
SM: How is that distributed?
DS: We have a little more than 400 in India, 60 to 100 in the Philippines, and 20 in Los Angeles.