Sharing Gains, Risks: A New Type of Outsourcing

Accenture's Martin Cole describes a new type of outsourcing his company is pioneering: business transformation outsourcing, which covers strategy as well as operations.

With a focus on business transformation outsourcing, Accenture is pioneering a type of outsourcing deal in which it will share gains from customers business advantage, along with risks. Martin Cole, whose office is in Hartford, Conn., is managing partner for outsourcing at Accenture, with executive offices in Dallas, which last year had $11.8 billion in revenue. Last week, Cole explained Accentures approach to the changing landscape of outsourcing with eWEEK Executive Editor Stan Gibson.

How do you define business transformation outsourcing?

Outsourcing covers a broad range. There is infrastructure outsourcing, maybe the most prevalent over the last 10 years, where companies have outsourced things like data centers and disaster recovery. There is application outsourcing, and there is business process outsourcing. Then there is a unique offering that brings many of those elements together: business transformation outsourcing. Through business transformation outsourcing, we cover strategy as well as operations.

Is business transformation outsourcing like re-engineering, which was a popular term several years ago?

Business transformation outsourcing includes a re-engineering component. We do not believe in taking the current environment as is, lifting it up and dropping it on Accenture. Thats not going to get the optimal results. We want to go beyond that and improve overall performance.

With regard to re-engineering, companies were pushing the notion of coming in, re-engineering your processes and promising significantly improved results. But in our BTO [business transformation outsourcing] offerings, we go beyond redesigning and re-engineering to carry forward the new processes operationally. Its the difference between offering advice and actually executing on the advice that you offered.

What outcomes are you shooting for in a typical BTO engagement?

Generally, BTO has an impact on both the bottom line and the top line. The goal is to help improve a customers position in the marketplace and overall profitability. That may be driven by cost reduction, improved customer service, bottom-line profitability or productivity measures.

A lot of people who talk about business outcome tend to focus on savings. But thats not a business change or transformation. There is greater value in improving the way a business operates and helping it grow.

Historically, companies have been offering outsourcing to help companies re-engineer their balance sheet. That doesnt answer the question of what generates value. We focus on business transformation—on outcomes that create sustainable value.

Is there a customer that comes to mind?

We worked with J Sainsbury [plc.], the U.K. grocery retailer, to reduce the cost of their IT operations and then redeploy those savings to new IT programs. They launched a new customer service interface on their Web site and a home shopping capability called Sainsburys-to-You. Theyve also been redeveloping their supply chain systems as well as warehousing, inventory, staffing and other things. We saved them $50 million in IT that we were able to redeploy. We know that their stock price has improved during the course of our relationship.

Next page: How the sharing of risk and reward works.