RSS feedsAccenture’s UK’s operations have taken a pasting in the last couple of years. The firm was unceremoniously dumped by Sainsbury in 2005 and found itself back in the headlines last September when it withdrew from its £2bn NHS contract.
Results have not been good either. The firm doesn’t publish UK numbers but analysts at Ovum had seen enough to conclude in a recent report: ‘Europe is under-performing, and the UK is having a terrible time. Revenues have declined over the first three quarters of FY 2006, thanks in part to the NHS fiasco.’
So perhaps we shouldn’t be too surprised that when the firm came to appoint its latest UK and Ireland MD it resisted taking a leap into the unknown and instead turned to an insider, a 20-year veteran of the firm.
In a way it has always been thus. Accountancy Age has interviewed the firm’s last two MDs and both have been Accenture born and bred. But the appointment of David Thomlinson last September marked more than just a new face at the top (and the continuation of a long-established promotion policy), it marked a significant structural shift for the firm.
Like many organisations of its type, Accenture has been run on industry verticals: resources (which Thomlinson himself previously headed), financial services, communications, government and products – covering consumer, retail, manufacturing and the like.
This will continue but now the firm is focusing on three of what it calls ‘growth platforms’. First up is business consulting covering strategy consulting, financial performance, supply chain, customer relationships, human performance and so on. ‘Maybe more classic consulting in terms of working to identify opportunities to create value for our clients,’ explains Thomlinson.
Then comes systems integration technology where its teams develop large technology solutions. ‘In that area we have people both working onshore and increasingly working through what we term our global delivery network which includes people offshore,’ he says. ‘The biggest offshore location is our multiple centres in India where we have 25,000 to 30,000 people.’ It’s an area that’s expanding; since our interview the firm has talked of scaling up to 15,000 workers in the Philippines and it’s growing its offshore development operations in China.
Staple diet
Third, and no prizes for guessing, is outsourcing. ‘Obviously we’ve been doing
all that work for a number of years,’ Thomlinson adds. ‘But what we’re now
saying is we’re having our people specialising around those three horizontals
which go across industry.’
Talk of structural reform is obviously Thomlinson’s bag. He has that classic consultant’s air to him; detailed, ordered and slightly nerdy. You could say the same of engineers, which is where Thomlinson began his career, spending five years working in a team with Norman Foster on the iconic Hong Kong and Shanghai Bank building in Hong Kong.
He joined Accenture in the mid 1980s, initially drawing on his knowledge of the construction industry before moving into the utilities business as the privatisation process kicked in.
Having made partner in 1992, he worked in different parts of the firm before moving to the US in 2001 to apply his utility experience. After a spell in a similar European role he became chief executive of Accenture’s global resources operating group, serving
the mega markets of oil and gas, utilities, chemicals, forest products, and metals and mining and a member of the company’s executive leadership team.
That sort of heavyweight CV adds weight to Accenture’s insistence that its restructuring is also about putting more emphasis on individual countries, not just vertical markets and current areas of growth.
Thomlinson cautions against reading too much into this: ‘It’s not a case of the power has moved from industry back to geography. Our CEO, Bill Green, would say that you know what he wants us to do is have all three dimensions working together.’
Thomlinson’s brief is a big one; he oversees a business that turned over £1.3bn in 2006 (the firm does publicise its latest UK and Ireland figures), employs more than 12,000 people in the UK and Ireland and works for 80% of FTSE 100 companies. It’s a big deal for Accenture worldwide too; the UK is its second largest market in revenues.
Thomlinson won’t be drawn on UK results - or one consultant’s view that Accenture’s business actually contracted by 18% last year - but he does offer more on the turbulence that has afflicted the firm. ‘If you look at the two issues we faced in the UK last year which was the position around the NHS and Sainsburys, you can imagine that year-on-year comparisons become quite distorted.’
Nevertheless in a bid to switch into breezier mode he all but concedes contraction
when he says: ‘I’m certainly very happy to say that, yeah I’m very confident on our current trajectory that we are very much back into a growth position.’
The collapse of its IT transformation outsourcing contract agreement with Sainsbury caused particular pain. The supermarket had signed a £1.7bn seven-year deal in 2000, before renogiating terms in 2003 and extending the contract until 2010. However in 2005 it decided to call time.
‘We had a relationship with Sainsburys over a number of years – probably four or five,’ says Thomlinson. ‘We actually delivered some great results in terms of building new IT capability - really improving the performance of their business. In our business, in professional services, management changes happen. People decide they want to do some things. Taking an outsourcing business back in-house happens. We are quite relaxed in terms of confidence in the work that we did and let’s move on.
‘Clearly, in running a large business in the UK do you want things like that in the press? Of course not. But they have actually had minor impact in terms of our business. Do I want other ones to crop up? No.’
Positive outlook
Yet challenges aside (that’s surely the word a consultant would use to describe the tale of the health service and the supermarket, though Thomlinson does use ‘turbulence’ too) there are reasons to be cheerful.
Outlining the challenges facing Thomlinson last year, Ovum said: ‘We nevertheless think the UK is over the worst. Accenture is often at its most aggressive when bouncing back.’
Among his priorities is a recruitment campaign, though he doesn’t share the view of the Big Four that a lack of good people has held the firm back in recent years. ‘We’re looking to very aggressively recruit people,’
he says. ‘I wouldn’t say that our ability to recruit people is a constraint to our growth. It’s clearly a very important factor and I’m not saying it’s easy. But it’s not actually a constraint to our growth.’
Thomlinson is surprisingly dismissive of the Big Four’s return to the consulting market. ‘If you really look at it, the Accenture business is quite different to the big accounting companies starting up their consulting business. The business they’re doing now - advisory services, added-value and an accounting base - almost reminds me of looking back 10 to 15 years ago in Accenture.’ Ouch.
He continues: ‘If you contrast the business they’re in to Accenture’s, we have clearly much greater breadth and depth. Breadth of services is not just around providing advice, providing reports. But in our long-term relationships we really aim to deliver values.
‘On the edge when we are doing some upfront work, do we compete with them? Sure. Is the business we’re really set up now to deliver to our clients the same business? I think we’ve moved on.’
Health issues
Accenture’s withdraw from its £2bn contract to upgrade hospital and GP systems
across parts of the NHS profoundly affected the business. The firm has retreated
in terms of revenues (it forecast a loss on the contracts of £80m in 2005 alone)
and profile (it generated acres of less than complimentary newsprint). But the
deal also knocked its confidence too, forcing it to review the way in which it
goes about drawing up deals.
‘The contract and the way it was executed, created an unacceptable risk for what is obviously a very large company,’ explains Thomlinson. ‘On these very big programmes you need to have commercial arrangements which create both the right incentives and the right and acceptable apportionment of risk.’
The contracts transferred in January and Thomlinson acknowledges the withdrawal forced the firm to think again. ‘We’re a large company. We’re absolutely willing to take on risk in delivering results, delivering high performance for our clients where that risk can be managed. Clearly as a responsible company to our shareholders we need to be able to manage that risk.’
‘We have reinforced our checks and balances for major contracts. So we have a formal approval and review process for all large deals which is done on a consistent basis across the firm. And as part of that approval process, we would have our own independent review of the commercial terms. And it is not a case of avoiding risk but its being able to identify and have the confidence that we can manage risk to deliver results for our client.’
