In January of 2014, Accenture literally “stood still” to win the Healthcare.gov contract after former system integrator CGI flopped on the initial implementation. I use the term “stood still” because it appears like all other candidates took a step back from what appeared to be a toxic situation. In February, UpperEdge outlined the possible billion dollar payoff this move could provide Accenture, and suggested HHS should take this into consideration when negotiating with Accenture.
One component of our billion dollar payoff projection was the probable win of the ongoing yearly maintenance contract for Healthcare.gov. UpperEdge speculated the contract would be worth approximately $100M per year over the next 3 to 4 years. Late last month, Accenture signed a 5 year deal to provide support services for a reported contract value of $563M.
With Accenture’s additional HHS 2014 wins, previously reported by UpperEdge in September, the new “locked in value” of the Accenture contract is now $630M dollars over the 4 year period which started in January of 2014. With the maintenance deal now secure, UpperEdge is projecting an additional $300M in new contracts for Accenture over the next 3 years related to Healthcare.gov. This brings our expected total fees for Accenture to an estimated $1.3B dollars over a 4 year period. Not bad for winning the initial $45M dollar contract.
As you contemplate how Accenture parlayed a $45M deal into something now 25 times the original size, it is important to consider how you can leverage this with your own future negotiations. One way to leverage this data point is to use it as an illustration of the overall potential value of your business with a future system integrator. Keep the system integrator focused on understanding the bigger, longer-term prize and use this to secure the best upfront deal.
Accenture has done well with the Heathcare.gov deal, but the overall risk profile associated with the Accenture brand has not diminished, shifted yes, but not diminished. The recent signup period for healthcare coverage using Healthcare.gov has gone significantly better than the previous period. This improvement helps enhance Accenture’s brand as it relates to technical competence. The new exposure to Accenture is now the security of Healthcare.gov.
With the recent hacks into major retailers to obtain credit card data and the hole that got blown into Sony’s systems, one can imagine a scenario where a hacking into Healthcare.gov could lead to some fairly significant damage. Having now saved the day for Healthcare.gov, the Accenture brand is firmly tied to the site. With that being said, any significant hack job will be directly tied back to the technical competencies of the system integrator.
So was the $45M dollar deal worth standing still for? I would say the jury is still out.
If you would like to learn more about how UpperEdge has helped companies negotiate best-in-class system integrator agreements and assess and avoid large IT transformation project risks, please do not hesitate to contact [email protected]. As always, we welcome your feedback, comments and questions.