Accenture set to take back purchasing

23 April 2003
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24 April 2003 | Geraint John

Top management consultancy Accenture is poised to bring its procurement back in-house just three years after outsourcing it.

Sources have told SM that the US-led firm, which employs more than 75,000 people worldwide and spends hundreds of millions of dollars annually, is unlikely to renew its contract with ICG Commerce beyond December, when a break clause becomes active.

Alex Milward, a partner in Accenture's London office, confirmed that the company was "reviewing the options", but said no decision on the ICG contract had been taken, although one was likely "within weeks".

Accenture outsourced its travel, offices supplies and other indirect procurement for seven key countries - the US, UK, Canada, France, Germany, Spain and Ireland - and transferred 60 staff to ICG at the beginning of 2001 in a five-year deal.

Karl Pick, ICG Commerce's vice-president for the UK and Ireland, and one of the staff who transferred from Accenture, would not comment on details of the contract between the two companies. But he insisted that the relationship was "very good" and that ICG had exceeded its cost saving targets.

An anonymous case study on ICG's website claims it saved 20 per cent more than its $60 million target in year one.

Pick denied that losing the contract with one of its biggest clients - thought to be worth around $12 million a year - would be a serious blow to ICG.

When it outsourced, Accenture did not consider procurement to be a core competence.

But business process outsourcing (BPO) has since become a bigger part of the company's business, and in some parts of the world - including the UK - earnings from outsourcing now exceed those from consulting.

Industry insiders say that not managing its own internal procurement has become something of an embarrassment for Accenture when it comes to selling the service to others. One described taking purchasing back as "a logical step given its current strategy".

Accenture wants to capitalise on strong growth potential for BPO, including procurement among multinationals and public-sector bodies.

Milward said that Accenture was "in discussions with lots of clients about outsourcing their procurement", particularly in North America.

A report by analysts IDC last September predicted that the worldwide market for procurement outsourcing would grow from $5.3 billion in 2001 to $12.2 billion by 2006.

A "relentless focus on cost reduction" and the challenges of implementing new technologies such as e-procurement were the main drivers, it said.

SMapr2003

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