If we build it, they will come. In a nutshell, that’s the Accenture growth strategy and, on the surface, it appears to be paying off. Accenture’s recent falloffs on consulting revenues have decreased with the overall market while the BPO offering has exceeded the current industry growth rates. CIO’s take note, Accenture is transforming itself again and savvy CIO’s who understand the Accenture strategy stand to benefit in developing positions of leverage.
At a recent financial investor’s conference in New York, Accenture reiterated its growth strategy. Here are the basics:
- Utilize Accenture knowledge of technology, business processes, and analytics to identify targeted high growth markets. High growth markets are defined as those that information technology is likely to drive disruptive enterprise transformation mandates. Specifically, Accenture has targeted Banking and Insurance, Communications, Life Sciences and Health, Retail and Consumer, and Energy and Utilities.
- Build competencies and an infrastructure in disruptive technologies organically or through tuck-in acquisitions. Accenture defines these technologies as Analytics, Digital, and Cloud. Financial evidence of this strategy is the claim that they have invested $400M in cloud technologies over the past few years.
- Establish business process services that can be marketed to customers as outcome based engagements.
In essence, Accenture is making an investment in technology and competency infrastructure that it intends to extend across a broad range of clients. This infrastructure and leverage will enable a payback for both the client and Accenture. For the clients, it limits the need to invest in a new technology infrastructure, creates a more variable cost structure and increases the certainty of achieving the goals of a transformation. Companies that have become comfortable with contract manufacturing and third party logistics already have made the cultural step of not having to “own” the process. For Accenture, it provides the promise of the ultimate sticky customers, increased intelligence in the overall pulse of the market, and the ability to develop business process and technology competencies that can be extended to the consulting and technology arms. An obvious downside for Accenture is that they are potentially cannibalizing the base for future consulting services as their customers switch to BPO service offerings.
Accenture is not the only company that is pursuing this growth strategy. We have seen the same activity in some of Accenture’s competition. Wipro recently announced the acquisition of a mortgage risk services firm for $75M. This is direct competition to Accenture which has also indicated interest in M&A to expand its mortgage service offering.
With the back drop of the Accenture growth strategy, UpperEdge recommends that CIO’s put the following action plan in place:
- Get educated on Business Process Outsourcing. Do you want to invite Accenture sales and marketing machines to the table in your next consulting opportunity without understanding the strategic issues of BPO engagements? Issues include security, flexibility for BPO switching, and the nimbleness of your remaining IT infrastructure now integrated into a BPO offering. UpperEdge recommends CIO’s get educated on all of the issues and opportunities of BPO services. From the way the markets are moving it is not a question of if, but when will your company be willing to make the move.
- Develop techniques to extract value from the BPO organization without necessarily engaging. Always remember when you engage a consulting organization you are hiring the entire organization, not just the feet they put on your ground. As a part of your consulting package, be sure to include direct access to information that might be available from the BPO organization including: business performance benchmarks, best practice business process designs, talent that has experience, and integration knowledge.
- Understand your negotiating leverage. In the short term, Accenture is placing a greater emphasis on growth than on profits. This provides means for customers to push hard on rates in the big consulting deals in addition to securing highly competitive BPO commercial constructs. But keep your eyes open on scope creep and project execution risks. There is a reason that Accenture’s billings outpace their bookings by an excess of 15%.
BPO services will offer companies the possibility to achieve the next level in potential business performance. But with opportunity also comes risk: CIO’s need to be keenly aware of these risks and prepared to take advantage of the opportunities.
If you would like to learn more about how UpperEdge has helped companies source, gain leverage, and negotiate highly competitive contracts with Accenture, or if you have any questions or comments, please do not hesitate to contact [email protected].