Top Dealsof 2007.

by FAOT Staff

In 2007, the F&A outsourcing industry paused to digest a few things and ponder its future, like a boa that has swallowed a pig.

“I’ll be honest, 2007 was a much slower year than 2006. People were digesting the deals of 2006, and a lot of firms were evaluating, rather than doing,” said Phil Fersht, research director at AMR Research. However, he added, “There were 107 multiprocess FAO deals in 2007—a 20 percent increase over 2006.”

Everest Research Institute VP Katrina Menzigian noted, “There were fewer end-to-end deals in 2007 than in ’06, and they were smaller in terms of scope.” Like Fersht, she cited the strength of 2006. “When you have a strong year, it takes time for the industry to digest those deals, which affects how aggressively they pursue new deals for awhile.”

But as existing deals mature, we can expect to see expansion of the scope of those deals as a source for new business. Although companies might not be signing up as many new clients and sending out flamboyant press releases, we will continue to see growth—of a different order.

Two to three years ago, outsourcing was all about getting the really big companies to adopt FAO and to sign major global deals with a handful of big outsourcing entities. “Now, you see more of the larger mid-sized companies,” said Menzigian. “There’s been an expansion of the buyer base, and with that comes a different adoption pattern.”

Fersht looks forward to discrete engagements, upon which companies will build. “It’s about building partnerships,” he said. “Until a vendor understands your business, you can’t build a true partnership.”

In the meatime, here is a selection of the deals that made headlines in 2007.

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BAE Systems Australia
Xchanging
($277 million, procurement)
BAE Systems Australia, the defense and aerospace company, appointed Xchanging, the business processing services company, to provide procurement services to BAE Systems Australia as part of a five-year outsourcing arrangement. The accord proposes that Xchanging will manage A$300 million ($277 million at press time) of spend during the term in the following indirect spend categories: information technology; travel; facilities management; maintenance, repair and overhaul; office supplies; and fleet. The deal extends an existing relationship between the companies.

BT Group
Accenture
($575 million, extension)
BT Group and Accenture go back a long way, to an HRO deal in the 1990s. Two years ago, the companies re-upped and added a few twists. In early 2007, BT Group began transferring 50 percent of its reporting, planning, and analysis functions to Accenture, a decision that stretched the boundaries of F&A outsourcing by connecting it to finance strategy. The scope of the outsourcing engagement is broad. Guided by and accountable to BT Group’s senior finance executives, Accenture is delivering higher value finance and accounting services, including management reporting, financial planning and analysis, month-end closings, and budgeting and forecasting services—all from its Chennai facility.

Centrica
WNS/EXLServices
($5.8 million)
The complexity of this deal makes it notable. As a spin-off of British Gas Plc, Centrica was growing so fast it could barely keep up (at one point it was adding 65,000 customers per week). The deal entailed switching systems and outsourcing simultaneously, a tricky juggling act. WNS handles the pay-as-you-go customers and correspondence, 40 percent of the company’s F&A business, and involves 1,000 offshore FTEs. The other 60 percent went to EXL Service for the credit customers and outbound debt trail, involving 1,600 offshore FTEs. On the U.K. side, the contracts involve 2,400 FTEs between the two suppliers.

Georgia-Pacific
Affiliated Computer Services
(N/A)
ACS earned a seven-year contract to provide F&A services for Georgia-Pacific LLC, a global manufacturer and marketer of tissue, packaging, paper, pulp, and building products. ACS will deliver a wide range of F&A solutions, including accounts payable services, cash applications, travel expense management, payroll tax, and accounting services. Georgia-Pacific employs some 50,000 people at more than 300 locations in North America, South America, and Europe. The services were expected to transition to ACS early this year.

Microsoft
Accenture
($185 million)
Accenture has signed a seven-year contract worth $185 million with Microsoft to provide both finance and accounting and procurement services as the company racks up yet another large-scale, bundled BPO win. The deals brings together several business processes that Microsoft had previously outsourced among several different vendors. On the F&A side, Accenture is now handling accounts payable and travel and expense services, plus some of what Accenture calls “record-to-report” functions including fixed assets, general ledger, and treasury and statutory reporting. Procurement services covered under the contract include category management and order processing. The contract includes operations in 92 countries outside the U.S. in 36 languages. Microsoft was already an Accenture customer.

NXP Semiconductors
Capgemini
($12.5 million)
Although not enterprise in the sense of being worth more than $100 million, this contract covers services from soup to nuts. NXP Semiconductors signed Capgemini to provide a full range of F&A services, including procure-to-pay and record-to-report. Under this five-year agreement, which extends an existing relationship, about 110 professional based in India joined Capgemini’s BPO Excellence Delivery Centre in Chennai (Oct. 1, 2007). This brings Capgemini’s total number of Indian BPO experts to around 1,500.

The Nielsen Company
TCS
($1.2 billion)
Although not strictly an FAO deal, this contract signed last October was a whopper, and will include F&A elements. Under the proposed 10-year agreement, valued at approximately $1.2 billion, TCS will assume responsibility for IT and operational processes and help Nielsen integrate and centralize multiple systems, technologies, and processes on a global scale. TCS also will assume responsibility for certain F&A and HR business processes, which will be executed on new BPO platforms built by TCS. The BPO platforms will help Nielsen consolidate and transform processes and systems into a single platform, thereby providing real-time access to organization performance and reporting. The BPO services cover end-to-end financial services in such processes as accounts receivable and payable, billing, credit & collections, and general accounting.

Philips
Infosys
($250 million)
In addition to providing F&A services, this contract called for Infosys taking over Philips' finance and administration business process outsourcing centers spread across India, Poland, and Thailand for $28 million. Under the seven-year contract, Infosys will provide finance and administration services and the processing of purchasing orders. For the first year, Infosys will service Philips at a reduced billing rate. Beyond that, Infosys will have the freedom to service other clients. Approximately 1,400 employees shifted from Philips to Infosys, including top executive Michel de Zeeuw (one of FAO Today’s Superstars of 2007, see p. 32). For more information on this deal, see the cover story in the September/October 2007 issue of FAO Today.

Steria (Xansa)
BT Group
($257 million, extension)
BT extended its existing contract with Steria (formerly Xansa) to provide the more basic F&A services such as transaction processing, ledger, payroll, accounts payable, cash, treasury, and ledger as part of a six-year, $257 million award. The extension will take the deal up to 2014. Xansa will continue to manage BT's U.K. operations for finance and accounting, transaction processing, and ledger and payroll services, drawing on Steria’s onshore and offshore capabilities in India. The extension covers finance and administration processing, accounts payable, cash, treasury, payroll, ledger, and reporting services. BT’s Andrew Kemp, group director of reporting, planning, and analysis, cited the provider’s in-depth understanding of BT’s business as one of the reasons for the continued relationship.

Thomas Cooke
Accenture
($400 million, extension)
Thomas Cook has extended its business process outsourcing deal with Accenture by 10 years. The contract covers application, network and infrastructure management and finance, accounting, and human resources services at the tour operator, which has 33,000 employees. A five-year deal was originally signed in 2002 by MyTravel, with which Thomas Cook merged in June of last year. Accenture will provide management services for Thomas Cook’s back-office systems, including its SAP-based enterprise resource planning software. Finance and accounting services provided by Accenture include accounts payable and receivable; general ledger accounting support and management reporting; and payroll services for Thomas Cook’s U.K. employees. Accenture will deliver the services through a shared-services center in the U.K., leveraging additional resources from its global delivery network.