Is extreme outsourcing, consolidation worth it

18.04.2006
Last week, Accenture signed a seven-year applications outsourcing deal with Unilever to run all of Unilever's application development, implementation, and support. Unilever believes it can save approximately US$700,000 in the first year.

At the same time, Accenture will be migrating all of Unilever over to a single system based on SAP's offerings. The theory, and it is just a theory at this point, is that IT efficiency -- in this case, moving from a thousand different systems to a single vendor solution -- is a competitive advantage.

Pascal Manhes, Accenture's global managing director for application outsourcing, tells me that Accenture will help Unilever harmonize its business processes across Europe with a pan-European SAP system that will lower TCO and globalize sourcing. It will also lower training costs and increase the efficiency of deploying all resources, including staff, Manhes says.

In theory, you could walk into any Unilever office anywhere in Europe and you would feel right at home, says Josh Greenbaum, principal at Enterprise Applications Consulting. With a single software instance, everyone is working from the same page with the same product definitions, supplier catalogs, partnership models, and business processes.

"It should, in theory, cut down on a tremendous amount of integration costs, which is the largest single IT expenditure," Greenbaum says. You can be certain neither Unilever nor Accenture invented what we might call extreme outsourcing and extreme consolidation. It is happening here in the States. Consolidation is a huge driver in the enterprise.

But we should also look at the downside. The immediate negative is the loss of IT jobs. Accenture said it will hire 300 Unilever people and retrain the rest. Accenture plans to set up an "Academy," Manhes says, "for displaced Unilever staff to identify and close skill gaps to improve their job prospects."