Accenture wins Telenor contract; University of Michigan's SSO finally kicks off; and Canada suffers onsite-outsourcing backlash

Rakesh Sangani, SSON Editor-at-large, evaluates what's behind the recent headlines Telenor award Accenture $215 million 5 year outsourcing deal Telenor announced that it has selected Accenture to accelerate the implementation of a global shared services vision across companies within the Telenor Group. Accenture will provide services spanning F&A, HR, IT and transactional procurement / purchases. The aim of the agreement is to support Telenor Global Shared Services in achieving world class support services. The 5 year contract is worth $215 million and is designed to increase Telenor efficiency and quality significantly across the relevant shared services. "This is about meeting our customers’ needs. We secure quality and efficiency through leveraging scale and volume across the Telenor Group. This partnership will enable us to establish shared services into new global areas. To meet future business models, we will need new and innovative ways of operating, gain competencies from partnerships and establish sustainable cost structures", says Hilde Tonne, EVP and Head of Telenor Group Industrial Development. My Point of View It was not a surprise that Accenture were able to win this deal given their long standing relationship with Telenor. It seems that they once again provided an innovative pricing structure to beat the competition (including Wipro who managed to get to the final round). What is interesting about this transaction is the desired growth of the shared services centre model for Telenor into new geographies and the expansion into new functions desired. Whilst the growth into new geographies with the current in scope shared service centre activities is certainly achievable through a vision of one global model for a particular function, the expansion into the other functions will be much more challenging from a political perspective, navigating through internal stakeholders. I expect this will be a long and arduous journey for Telenor with Accenture. Onsite Bank Outsourcing in Canada leads to backlash Royal Bank of Canada (RBC), Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce – four of Canada’s largest banks, have stopped handing out fresh outsourcing projects temporarily after the recent RBC/iGate controversy My Point of View In recent months, there has been an increase in anti-outsourcing sentiment in Canada caused by the recent RBC/iGate (outsourcing provider that acquired Patni and became a $1 billion company) scandal. For those of you that have not heard about it, there has been outrage in Canada following the news that onshore iGate staff were replacing RBC "veterans". When it was learned that RBC might be using iGate employees to replace some of its IT staff, the Canadian federal government ordered an investigation, putting a huge spotlight on the bank’s sourcing strategy. The backlash comes at a time when the unemployment rate in Canada stands at 7.2% and remains above levels seen before the 2008 recession. RBC has been using an onsite outsourcing model, which has become increasingly popular within the banking and financial services industry. Many of the global banks, including UBS and RBS, are replacing the use of onsite contractors and permanent staff as part of an onshore-offshore solution. The onshore piece of the equation is being increasingly provided on site, at the buyer offices. The benefits of this type of arrangement include a better understanding of the business, and integration with the culture and brand of the bank or financial services institution, improved relationships with the people with whom they interact and quicker set-up timeframes. Whilst Canada may not like it, the reality is that Onsite Outsourcing is here to stay, and it is just another model that can be leveraged across the shared services and outsourcing spectrum! University of Michigan to set up captive shared services to annually save $17m The University of Michigan has selected Accenture (NYS: ACN) under a management consulting agreement to support implementation of a new Shared Services Centre designed to improve operational efficiency by providing more cost-effective, flexible administrative services. Approximately $17 million in annual operational cost savings are projected by the university through improved process, organization and technology-enabled efficiencies that lead to greater productivity. The Shared Services Centre will provide finance and human resource services and is targeted to launch operations in 2014. The move to shared services is a major component of the University's Administrative Services Transformation (AST) strategy, and follows detailed benchmarking, planning and design efforts that began more than three years ago. My Point of View Given that the University of Michigan has spent three years going through benchmarking, planning and design, the solution should certainly be well thought through! The aim is to drive operational improvements and provide a top tier service level in a cost effective manner, and one imagines that the savings target will be a key focus for the University which is under cost pressures. Universities across the globe are reviewing their methods of reducing costs and shared services and outsourcing is increasingly leveraged as a mechanism to achieve better services at lower costs. Yale, London Metropolitan and Sussex University are just some that have leveraged these models. Expect more universities to follow suit as shared services and outsourcing becomes the norm in this industry! A lack of vision and strategy is hurting shared services and outsourcing capabilities! My Point of View If you were to build a business would it be sensible to do so without a vision, strategy and business plan? Would you focus on providing a product / service that was the cheapest, best or a balance between the two? How important would culture and brand be for the business, to ensure that you were working as a team with aligned goals? These are the questions that we should be asking in a shared services and outsourcing context. For too long these capabilities have focused on cost reduction and investments have been difficult to achieve. For too long has the views of the leads been myopic focusing on short term gain over sustainable long term benefit. Shared services and outsourcing capabilities should be treated as mini businesses in their own right. They need to justify their existence to the rest of the business, providing value to business stakeholders and indirectly to shareholders. We should start by considering why these capabilities exist in our businesses, and how they are impacting the business objectives. What is the vision for the shared services and outsourcing capability, how will it inspire staff, the business divisions and the marketplace. If it is just to provide functional cost reduction then the "shared services and outsourcing business" will have a short lifecycle with the laws of diminishing returns providing the biggest barrier to long term sustainability. If one has a strong vision, underpinned by a realistic strategy, enabled by a culture that brings people together and a brand that attracts and retains the best talent, increases the scope of services, and provides true "value" for the firm, then one has built the capability of the future – the Shared Services and Outsourcing business model has to change! [Editor's note: our new columnists, Dr. Carine Peeters, echoes the call for a "formalized strategy" in her recent column regarding global sourcing.] [inlinead]

Accenture wins Telenor contract; University of Michigan's SSO finally kicks off; and Canada suffers onsite-outsourcing backlash

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