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Accenture’s New Strategy: Implications for Scalability in Banking BPO

NelsonHall recently attended Accenture’s annual analyst meet in New York City. We had the opportunity to discuss operations (BPO and IT infrastructure management) market initiatives, a major focus area for Accenture, representing $6bn in revenues (~20% of total revenues), with Accenture executives.

Accenture and is betting heavily on “Digital” to create the “new Accenture” and has re-organized outside its industry sector-focused operating groups into four entities:

  • Accenture Strategy: Business and IT strategy are of equal importance and indivisible, with Digital being a key component of business strategy
  • Accenture Digital (SMAC): all businesses will become digital businesses in the future. Accenture now has 28k employees in Accenture Digital, which is now a $5bn business. Within Accenture Digital, Accenture’s strategic growth initiatives are:
    - Interactive ($1bn in revenues) for sales, marketing, and e-commerce design across channels
    - Mobility ($1bn in revenues). Currently Accenture is working with major mobility ISVs developing applications across markets and industries. A key focus is to create connected products for customers to access data on product performance and apply analytics
    - Analytics ($3bn). Three areas of focus are: market intelligence, big data, and advanced analytics
  • Accenture Technology delivery: Accenture highlights the following key attributes:
    - Scale: Accenture has ~50 global delivery centers, 200k operations staff, out of a total 300k staff
    - Skills: 80k staff were hired in the last 12 months, reflecting the scale of Accenture’s hiring and training capability.
  • Accenture Operation: combining BPO with IT infrastructure management, and increasing looking to target “Platform-as-a-Service” opportunities.

However, alliances remain very important to Accenture, which is seeking competitive advantage from being the major partner of leading and key ISVs. Accenture, unlike some of its competitors, does not wish to become a software company and will always look to partner first, only creating software when adequate third-party software is not available. Accenture is looking to differentiate in its partnerships by developing distinct industry-specific offerings with ISV software at its core.

Accenture is looking to provide end-to-end services across consulting, development, integration, deployment, and operations. Delivering an entire project, vision to enablement to operations, means that responsibility for project outcomes cannot be avoided.
The strategy has four key impacts on how Accenture delivers operations services. All operations must be able to include:

  • Intersection of business and technology: Accenture pursues opportunities requiring operational redesign that leverages IT
  • End to end services: as stated above, from vision to enablement to delivery for an entire process if the client requires
  • Everything must be brought to market as a service (IaaS, BPaaS, SaaS): The ability to scale volumes, in both directions, in increasingly volatile businesses, requires that Accenture be able to deliver services in an automated, standardized fashion
  • Deliver at speed, at scale, around the globe: The ability to stand up new, large engagements on much shorter notice, with less custom planning, than was possible in the past.

How will Accenture be able to achieve its goals?

Accenture has committed to scale operations offerings up and down much faster than industry norms of the past. Banking is notorious for volatility in the demand for operational support. For example, from Q1 2013 to Q1 2014 Wells Fargo, the largest mortgage originator in the U.S. saw loan originations fall by 66% (during the same time period home purchase loans fell 14% and refinancing fell 70% according to the Mortgage Bankers Association). When demand is growing, growth in operations demand can be equally fast. Layered on top, the industry faces heavy seasonal variations in volume (home buying occurs predominantly in the summer).
Banks need two way operational scalability, but most BPO vendors commit scalability with a fee for availability. Either the fee comes from standby fees or from reduced SLAs for service on short notice. Given today’s severe cost constraints on operations and increased compliance requirements for process execution, banks are finding the standard route to operational flexibility to be unhelpful. Internal operations are not able to address the problem more successfully than external vendors.

The way Accenture is aiming to deliver mortgage high operational scalability at consistently high operational execution is by:

  • Supporting a broader range of loan products and markets than most mortgage processors. Currently Accenture mortgage BPO supports retail mortgages, leasing (equipment and real estate), and auto finance. It currently covers the U.S. and Brazilian markets. Load balancing across multiple products and markets, from standardized delivery centers reduces the overall volume spikes
  • Aggressive re-architecting of processes on proprietary platforms delivered by the cloud. The Cadence acquisition brought Accenture a SaaS mortgage origination platform. The platform can be deployed internally or used on Accenture’s platform. Accenture is enhancing the solution to automate an increasing percent of the processing. By retooling the platform itself, Accenture is reducing the reliance on labor for productivity increases
  • Training: Accenture initially acquired most of its mortgage BPO staff directly from the banks themselves. It has used its Cary, North Carolina delivery center to maintain onshore mortgage domain capability. It has now set up an underwriting academy to train its mortgage staff. New hires go through an introductory program for underwriting in ~12 weeks. The program is underpinned by the training techniques Accenture uses throughout its business. Cooperative work skills are a key part of the training strategy, and enable Accenture to mitigate the effects of volume spikes by reassigning employees to new product types and clients as required by a changing market.

In mortgage Accenture has a large mortgage BPO (M&L BPO) business compared to most vendors, but this still is a small percent of the overall market. As Accenture adds clients, and increases its M&L BPO footprint within existing clients, it will gain scale and processing volatility at the same time. Addressing that challenge effectively will require continuous investment in automation and analytics to drive operational flexibility. Unlike banks, Accenture does not struggle with legacy systems designed for a fundamentally different challenge (i.e. to process an increasing array of product types). It is building a customer centric view of the operations environment based on increasing application of “Digital”.

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