HfS Network

Accenture bags Ariba's sourcing practice to extend its global category management capabilities

October 06, 2010 | Phil Fersht

It's trunk-time for Ariba, as it sources its managed services business to Accenture

Procurement technology and services provider Ariba has found a heavyweight home for its outsourcing business with Accenture.

Having made the decision, in recent years, not to expand its outsourcing business beyond its not-inconsiderable client footprint, Ariba also attempted a partnership with HP's BPO business which never got off the ground.

Today, Accenture announced a significant move to incorporate Ariba's managed services business into its own global procurement and sourcing operations, which adds considerable category expertise to both Accenture's existing European procurement services operation in Prague, Czech Republic, but also Ariba's onshore procurement services center in Pittsburgh.

HfS Research views this move as significant for a number of reasons:

  • Many Ariba services and technology clients have been demanding additional global sourcing support for years, where Ariba hasn't had the capacity to take on the additional business.  Accenture provides the scale, technology implementation expertise, consulting skills and existing procurement delivery infrastructure (onshore, nearshore and offshore) to take advantage of this demand;
  • Procurement BPO clients are demanding more category expertise through direct (not solely indirect) procurement channels.  Accenture have bolstered these capabilities with Ariba;
  • Ariba's personnel adds valuable institutional knowledge to bolster Accentures sourcing consulting capabilities;
  • Accenture has significant added expertise and scale to deliver both direct and indirect sourcing for US-headquartered industrials, manufacturing, CPG, hi-tech, telco and retail customers;
  • Accenture now moves ahead of the pack with its Pan-European procurement BPO capabilities;
  • Accenture can more effectively stave-off aggressive competition for procurement BPO engagements, from emerging providers, such as InfosysBPO and TCS, which have been making inroads into global customers;
  • Acquisitions in services are more effective than partnerships - especially where institutional knowledge and deep domain skills are concerned.  Accenture has picked up a heritage business to re-energize its existing sourcing BPO business, while much of its aggressive competition are settling for niche "tuck-in" acquisitions that add incremental value, but often do not bring the global scale and competency an acquisition of this magnitude can bring.  It's not always about buying technology, sometimes acquiring people talent is important - and procurement is one of those areas where you need people skills and ingrained domain knowledge to deliver complex engagements.

Posted in: Business Process Outsourcing (BPO)Procurement, Engineering & Supply Chain Outsourcing

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1 Comments

7 Comments

  1. Kevin Potts
    Posted Oct 15, 2010 04:58 AM | Permalink Reply

    Phil - thanks for the insight here. This event sheds a point of view on how BPO firms straddle a complex business model conundrum. I.e., am I primarily a technology provider (i.e., software developer) or am I primarily a strategic consulting firm? Because BPO deals can combine consulting services with technology, some BPO providers try to do both. Ariba did this and ultimately realized it wasn't core to their software business. It appears to me that Accenture is taking a different path - and not dictating the technology platform needed. I believe that choice is good for customers and will ultimately make Accenture more successful. Taking this hybrid approach - letting customers work with a best of breed BPO/services company and a best of breed software technology - provides customers the flexibility to move their programs as they evolve.

    Kevin Potts VP of Product Management and Marketing Emptoris, Inc. http://emptorisinc.blogspot.com

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