Source: theHRDIRECTOR 
Date: Summer 2006

The announcement in february 2005 of the contract renewal for the HRO deal between BT and Accenture was a significant moment in the industry and also reflected a considerable escalation of the outsourcing process across Bt’s entire global offering.

THE DEAL
The new contract involves further cost savings for BT since Accenture HR Services now serves all 102,000 BT employees globally, compared to the previous deal’s total of 87,000. For BT, the journey to outsourcing began in 1990 when 14,500 HR professionals served 250,000 employees. There were 26 separate HR systems, 30 telephone help lines and more than 26 physical sites – each aligned to 26 separate geographic districts. By 1991, the company had reduced HR’s transactional lines from 26 to nine key sites.

Its own in-house shared services model was rolled out in 1992, elevating this to what BT describe as an ‘internal trading model’. By 1997, BT was well-positioned to initiate what was seen as a highly innovative strategic move for HR – the outsourcing of transactional services. The aim was simple: to liberate HR professionals from day-today functional tasks in order for them to focus on operational and strategic issues.

"Of course, there will always be questions from outsiders regarding the extent to which HRO cuts into the bone of HR’s capability to undertake talent management and service effectiveness for the client organisation"

In August 2000, the company stepped into the HRO market, signing the flagship deal with Accenture and simultaneously launching ePeopleserve. This was a new 50/50 joint venture between the two parties to offer their unique combination of HR and technology expertise to third party clients. BT and Accenture worked together to form a full, end-to-end HR solution covering the typical employee lifecycle – training, performance, reward, employee relations, safety, health, and exit. A total of 1,100 staff were transferred into Accenture. At this time, any plans to incorporate their entire, and quickly expanding, global offering into HRO were put on hold due to the rapid acquisitions BT were engaged in at the time.

However, from an early stage, problems with the venture soon became apparent, as employee relations and HR policy director, Joe McDavid, explained: “We were persuading people on both sides that we had a commercial, rather than some sort of artificial, relationship. The service wasn’t bad and the costs reduced slightly, but the undertaking didn’t deliver the benefits we expected. As a result, we decided to sell our half of the joint venture [ePeopleserve] to Accenture. After that, the quality of the service we received and the quality of the relationship really started to improve.”

The focus then shifted to delivering enhanced service and relationship management to BT’s employees. By April 2004, the companies were locked in discussions about a new and expanded contract, reaching agreement in January 2005. BT wanted to ensure that Accenture really was the best choice for the future and laid down stringent criteria for the contract renewal. For their part, Accenture were keen to avoid the contract going out to tender. In depth discussions followed as it worked hard to hit the stretching cost reductions and service levels BT expected, to prevent progression to the ITT stage. BT fully acknowledged the provider’s high project performance to date – a point not lost on Duncan Mears, director for Accenture HR services: “On our side was the fact that our customer satisfaction surveys were exceptional – in the high 80s and 90s. The benchmarking activity that BT undertook showed that in the majority of areas we were among the best in terms of performance, quality, and service, and also with the lowest position in price.”

THE RESULTS
Crucially, BT’s decision to renew with Accenture was based on results, not promises. Alex Wilson, global HR director at BT, identified three main reasons why Accenture HR Services were awarded the renewal: “One, they have improved the reputation of the function. Two, they’ve improved service levels and taken out cost which, in mid-contract, is always a great idea! If you’re an HR director and your provider informs you that ‘We can do something to help’, it may give them a win in terms of performance – but it also put me ahead by improving my margins during the life of the contract. Thirdly, taking on the front-line case handling frees your business partners for different types of discussions and interaction with the line.”

Of course, there will always be questions from outsiders regarding the extent to which HRO cuts into the bone of HR’s capability to undertake talent management and service effectiveness for the client organisation. For Accenture’s part, and contrary to much of the negative media on HRO, the provider began to listen to what BT really wanted and then attempted to fulfil the company’s expectations. “We provided highly skilled people with strong and dedicated HR backgrounds, who also understood the telecommunications business, to articulate and transact with BT in a language of understanding their strategy. BT realised that Accenture was a company that could continue to drive this agenda and HR innovation through the next decade”, explained Duncan Mears.

Of course, the journey is still far from over and BT continues to seek improvements in their services and costs as part of the new deal.

LEARNING OUTCOMES
When asked to reflect on the key decisions in assessing any major HRO deal, Wilson highlighted three:

1. Decide what it is you want to achieve. “You need to be clear about the benefits to be derived. Is it cost? Is it service? Is it something less tangible such as freeing HR resources to be upgraded? Be sure of what you’re doing and why you’re doing it; make sure it’s right and test it.”
   Alignment. “Make sure you have some alignment within your organisation. Then, if you have the time and opportunity, think about outsourcing in one go.
2. Alternatively, you may want to consider creating your own shared services model which would reduce some of the cost before outsourcing. In this way, you gain initial benefits which can be supplemented by your provider.”
3. Be a good client – and offer clarity about what you seek and how you intend to measure the returns.

“If you do outsource, be clear about the services and processes you are outsourcing, have them marked and defined and have a clear service level. If you’re not specific about what you’re doing, what the processes look like – if you don’t map it and tightly specify it – your provider could say, ‘We didn’t understand. If you want to do that, it’s going to cost more money’."