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Accenture and IBM Playing from the Same Playbook in Shaping Their Future | Sherpas in Blue Shirts

August 4, 2014

Accenture appears to be picking up its pace of acquisitions and making a series of big moves. This is not a new tactic for Accenture; historically nearly every time you turned around there was another Accenture acquisition. But clearly the pace has quickened and the size of the acquisitions has increased. It’s important to understand how this acquisition strategy helps to shape the provider’s future, for it sends a signal to the entire industry.

Like IBM, I think Accenture recognizes that the services market is changing, so it seeks to move into new territories. The April 2014 acquisition of i4C Analytics vaults Accenture securely into the digital world, and acquiring Procurian in 2013 launched the firm’s procurement group services. Both of these acquisitions are examples of creating access to new markets in which Accenture will be able to navigate the changing services marketplace and ensure they are in the leadership position for next-generation services.

Any service provider tries to grow its practice organically, particularly when it creates offers that are significantly different from their existing offers. However, this strategy is difficult, slow and expensive, and it often confines a provider to a lower market share. Both IBM and Accenture are using the same playbook — moving to deal with this dilemma by buying fully formed companies with established value propositions and working business models that have already been developed and perfected.

Accenture historically developed practices from scratch and successfully scaled them, so spending more time and resources acquiring companies is a bit of departure for Accenture. But we at Everest Group think Accenture’s strategy is to marry acquisition into its impressive record of organic development rather than a complete sea shift in developing new offers.

I think we can look forward to an ongoing acquisitive posture from Accenture as it seeks to extend its businesses. The provider is paralleling IBM’s well-demonstrated move into new service areas through acquisitions, and seeking to drive explosive or significant growth off the new platforms.

The Industry-Wide Significance of Accenture’s PureApps Acquisition | Sherpas in Blue Shirts

June 17, 2014

Accenture recently announced its acquisition of PureApps, a UK-based Enterprise Performance Management (EPM) provider. Our understanding is that it’s a full-service provider for all Oracle Hyperion EPM and BA solutions. Nevertheless, PureApps is a small firm and the revenue won’t make a noticeable difference to Accenture. So why is Accenture buying PureApps? My opinion: they are buying a niche player as an influence point with a stakeholder group that is growing in importance in the technology and in BPO services.

PureApps’ services in implementing Oracle Hyperion give them relationships at the office of the CFO. As I recently blogged, the office of the CFO is growing in influence for tech spend, especially in the transformation space. With this acquisition, Accenture gains the advantage of a set of services and immediate credibility in serving CFOs.

This is a nice — and important — acquisition as it gives Accenture the following benefits:

Enables more relevance and a counter play to the CFO access sphere that Deloitte and the Big Four consulting firms currently enjoy for large-scale transformation projects.
Strengthens Accenture’s position in the European markets.

Bottom line: the acquisition is a smart play for stable growth in the core consulting/transformation space, which will continue to grow as the digital world gains momentum.

Accenture Goes for More Analytics | Sherpas in Blue Shirts

June 13, 2014

Earlier this week, Accenture announced that it has acquired PureApps, a UK-based specialist in Oracle-based Enterprise Performance Management (EPM). PureApps enables clients to analyze financial data to gain insights into corporate performance, to measure and improve organizational effectiveness, and alignment to strategy. PureApps enhances Accenture’s capabilities for services to the CFO, and enhances its consultancy services in the UK and Europe and global shared services offering. This is good timing by Accenture when many large organizations are looking to get increased visibility into their financial performance.

PureApps is to be integrated into Accenture’s Finance and Enterprise Performance practice, part of Accenture Strategy. The acquisition fits into Accenture’s focus on increasing its analytics capabilities through acquisitions.

Another recent example of this strategy is the acquisition of i4C, announced on 30 April 2014. Italy-based i4C is a provider of advanced analytics applications (AAAs), turn-key industry- and function-specific solutions. The i4C ACE platform allows analytics to be built and integrated into workflow without the need to do any coding. It uses industry specific logic and maps business processes into the application with configuration tools. Its portfolio includes some applications for energy, finance, retail, manufacturing, and telco sectors and a set of other applications, such as predictive asset maintenance tools.

Everest Group estimates that the market for analytics BPS, alone, is set for 30% CAGR to 2015. Accenture has made steady investment in its analytic capabilities over the years but the most recent acquisitions, those of PureApps and i4C, in quick succession show that the service provider is positioning for the predicted growth in demand for analytics. It is also filling the gaps in its portfolio by adding different flavors of analytics (e.g., EPM and predictive analytics) to its existing capabilities such as customer analytics.

Business Process Outsourcing or Operations or Management or Services? What’s with the Name? | Sherpas in Blue Shirts

May 13, 2014

Nomenclature for third-party provision of business process related services (typically called BPO or Business Process Outsourcing) has stirred up quite a debate in the industry. Is it just a marketing exercise or a step in the maturation of the industry? Clients have to feel the difference before they are willing to adopt a new name; otherwise it is purely marketing.

Most of the conversation is about replacing the letter “O” in BPO. Accenture retained the “O” but are calling it “Operations.” Nasscom along with several other service providers started calling it BPM (Business Process Management). Several industry stakeholders have asked for Everest Group’s opinion, so here’s my list of different acronyms (in ascending order of my personal preference):

BPM (M=Management)	My least favorite. The name should at least convey what it means. BPM tends to confuse the BP? industry with workflows and process management tools and technologies that enable BP? delivery but are not truly representative of it. With BPM, I tend to think more Appian and Newgen rather than Genpact, TCS, and Accenture.
BPO (O=Outsourcing)	It accurately describes the market, but I can understand why people do not want to associate the industry with just outsourcing which often connotes commoditized offerings providing cost reduction through arbitrage. It also has a certain social and political stigma associated with it. A word of caution though – outsourcing is not the same as offshoring but is a superset that may include offshore, nearshore, and/or onshore delivery.
BPO (O=Operations)	Nice play of words but again seems to imply “operational” value creation and not the “transformational” capability of BP? in terms of value creation.
BPS (S=Services)	My current favorite as essentially BP? is an industry where a third-party provides enterprises with services across horizontal business processes (order-to-cash, procure-to-pay, hire-to-retire) and industry-specific business processes (mortgage processing, claims management, meter-to-cash). Service delivery requires people expertise, process excellence, and technology capabilities, and service performance can be measured across efficiency, effectiveness, and business outcomes.

The industry is desperately seeking ways to go beyond the cost reduction mindset and evolve into a cost+ value proposition. Changing the name of the industry will not be of much use unless the underlying behavior (both buying and selling), solutions, contracts, and performance of the industry change.

However, I fear the industry is just trying to change the name versus actually working on the value, which will leave it open to criticisms. It’s just like putting a new coat of paint on an old car that needs an engine replacement!

So let’s try and go beyond this “name game” and focus on things that really matter.

Photo credit: Quinn Dombrowski

Genpact Pharmalink Acquisition Echoes Other Providers’ Efforts to Deepen Life Sciences Expertise | Sherpas in Blue Shirts

April 29, 2014

On April 23, Genpact announced it had signed an agreement to acquire Pharmalink Consulting, a global provider of regulatory services to the life sciences industry. The move brings Genpact valuable expertise in supporting life sciences research and development functions including regulatory strategy, filing submissions, complex compliance services, and post-licensing activities management. And it well complements Genpact’s traditional stronghold in FAO BPO for major pharma clients.

This strategic play is in line with a wider move by generalist IT-BPO service providers to compete with life sciences technology and process majors such as Accenture and Cognizant. These generalists are ramping up their capabilities in domain-specific areas including drug safety, regulatory services, pharmacovigilance, and clinical data management, to enable more broad-based engagement with pharma customers.

Life Sciences Regulatory Imperatives

The already complex life sciences regulatory landscape is further compounded by stringent quality measures, new drug approval regulations, restricted sales force access to physicians, increasing scrutiny of manufacturing processes, improving collaboration among regulatory agencies, and enhanced pharmacovigilance legislation. We estimate that compliance-related IT spending amounts to nearly 15 percent of the total IT budget of life sciences firms, with three to five percent annual increment.

Recent European data protection regulations call for greater control of personal data. Newer provisions include use of health data for only “absolutely necessary” purposes, as well as an additional onus on data controllers to formulate methodologies to adhere to “data minimization” practices. Pharmacovigilance, drug safety, and clinical data management have become key imperatives in this scenario. New technologies and systems can enable organizations to tackle the regulatory puzzle.

The Inorganic Route to Enabling Domain Expertise

In a significant change and recognition of new market realities, nearly all IT majors have separate business verticals specifically targeting clinical data management and pharmacovigilance. In 2011, Accenture even tied up with the Institute of Clinical Research in India (ICRI) to jointly develop a pharmacovigilance and clinical research program for the Indian market.

And in the last couple of years, there has been an increasing impetus on behalf of service providers to look at M&As to acquire these specific areas of expertise in the life sciences domain. For example, the Accenture/Octagon deal in 2012 signalled an important shift in focus as Accenture attempted to combine its life sciences offerings by adding elements of regulatory management and SI/consulting to have a more integrated portfolio with a cross-functional view. This is based on the belief that the marriage of functional expertise in conventional process-oriented outsourcing services with industry expertise across regulatory, drug safety and clinical trials, make for a very compelling business case. Additionally, regulatory work has been largely project-based, and typically short-term. The enhanced value players bring to the table can translate into longer and more meaningful IT-BPO engagements.

The moves by Accenture and Genpact herald the transformation of life sciences customers’ expectations for greater consolidation and efficiency in the aspects of regulatory activities management, bringing together different tenets such as clinical data management and pharmacovigilance. Service providers that seek to explore, leverage, and consolidate adjacencies in current scope of work, and assume a consolidated and integrated approach to IT-BPO services, will end up with a greater share of the life sciences pie.

Sizing Up PwC’s Acquisition of Booz | Sherpas in Blue Shirts

April 8, 2014

PwC announced last Friday that it completed its acquisition of Booz & Company — now named “Strategy&.” Why did Booz agree to be acquired and why did PwC want Booz? And what does this mean for the services industry? My opinion: It’s a bold move that has the signs of being a game-changer in the global services world.

Booz had a trouble spot. I’ve blogged before about this phenomenon — the growing power of large consultancy groups and service providers’ ability to utilize access to their existing customer base to increase their revenue. It enables the rich to get richer. The champions of this strategy are the Big Four (Deloitte, E&Y, KPMG and PwC in the consultancy arena) and Accenture, Cognizant and TCS, to mention a few in the provider landscape.

Even though Booz had one of the most venerable, respected brands in strategic consulting for the past 100 years, it became increasingly difficult to drive consistent customer access. Booz believes it will be easier to succeed in this strategy of radiating to advantage by meeting client needs within the PwC family rather than having to blaze its own trail.

Using existing customers to grow a services business is a proven model that Deloitte certainly demonstrates in today’s marketplace, and PwC enjoyed the advantages of this model before the SEC asked it to divest services years ago.

PwC perspective

Bringing Booz into the PwC network is a bold commitment signaling that PwC intends to join Accenture and Deloitte as a major transformational player. PwC has been studiously building back its consulting and advisory services since its divestiture, and the Booz acquisition adds the high-end strategy capability that will enable PwC to be a strong value player in advising and driving major transformation deals.

What it means for the services industry

The arrival of PwC Strategy& in the marketplace changes the provider landscape significantly. It adds another true power with a broad set of capabilities stretching from the boardroom and strategy to implementation. And it will contest the market for large-scale transformational work.

In that contest, it will prove interesting to see which providers lose some market share to PwC Strategy&. Will this new power inhibit Deloitte’s growth? Will it affect Accenture and IBM? Will it affect the aspirations of Cognizant, TCS and Wipro as they look to join the transformational party?

One thing is for sure: The transformational dance floor is getting crowded.

Accenture and IBM Continue to Dominate the PO Market | Market Insights™

April 3, 2014

Accenture and IBM continue to dominate the PO market, particularly following Accenture’s acquisition of Procurian

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Accenture Takes Over for CGI | Sherpas in Blue Shirts

January 21, 2014

We just witnessed one of the most spectacular examples of where choosing a service provider based on the lowest price can be a really bad idea. The Obama administration’s recent about-face in contracting with Accenture to take over for the incumbent CGI on the beleaguered healthcare.gov website is a vivid reminder that low price doesn’t necessarily end up being low cost.

Accenture is the premier firm in large-scale systems integration. So we have to wonder: Does the Administration wish they had picked Accenture to begin with?

One has to feel sorry for CGI, for the healthcare.gov build and launch is notorious for the government’s role in poorly scoping and poorly managing the project. So it’s likely that any firm might well have come to grief. Still, this is really just a simple story of penny-wise and pound-foolish decision making.

Government procurement decisions tend to settle on past experience and low price. Accenture is the most-respected provider for complex, large-scale SI projects; but as anyone that has bought services from Accenture knows, its expertise comes at a premium. Yet when a project absolutely has to succeed, the price is worth a premium.

Lesson learned and buyers beware!

If you select a service provider based on price and terms/conditions, you may walk right past the company that would be your strongest partner in delivering the results you want. Perhaps even the government now realizes the hazards of low-cost bidding. When it really matters, buy the best.

LATAM GAO: Competitive for Some, Not so for Others | Market Insights™

January 15, 2014

The Latin American market for foreign multi-national corporations (MNCs) is very competitive: the leading provider (Accenture) has 20% market share, four global providers share ~50% market share, and smaller players account for the remaining third of the market.

On the other hand, IBM and Accenture dominate the LATAM GAO market for LATAM companies, with a combined market share of more than 70%.

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Accenture + Procurian = a Hard to Beat Procurement Outsourcing Capability | Sherpas in Blue Shirts

October 8, 2013

When Accenture completes its acquisition of Procurian, (announced October 3, 2013, and expected to close by end of 2013), the firm will hold a formidable one-third of the procurement outsourcing (PO) outsourcing marketplace.

For non-regular followers of the PO space, Procurian was incepted in 2000 per its own acquisition of Accenture’s ePValue e-procurement venture. The somewhat latent PO market finally found its footing, with a US$1.7 billion and a five-year CAGR of 13 percent in 2013.

While the PO marketplace has become increasingly competitive in the past several years, as evidenced by numerous acquisitions by Xchanging, IBM, Infosys, and GEP, Accenture’s acquisition of Procurian represents a game changer in the PO space, and has far-reaching implications for providers and buyers alike.

The new dynamics in PO?

IBM and Genpact will be impacted, as IBM will no longer be the number one provider of PO providers, and Genpact will lose footing in its strategic partnerships via Procurian relationships with clients such as Zurich, Hertz, and Kimberly Clarke
The PO market will become more concentrated with the two top players – Accenture + Procurian and IBM – accounting for nearly 60 percent of the PO market.

Bottom line, given the combined capabilities of Accenture and its come-back-home compatriot Procurian, this new PO powerhouse should make other global service providers step back and think about their PO service capabilities.

For more details on the Accenture/Procurian acquisition, and Everest Group’s insights on it, please go to: Accenture + Procurian = One-Third of the Procurement Outsourcing Market viewpoint.

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Tag: Accenture