When ACE Insurance Group International CIO, Andrew Peel, began shifting away from internal captives toward an outsourced application services model, he figured it was a necessary step to keep pace with growing demands from his internal business partners. A big part of the solution for ACE was to go Nearshore. What Peel didn’t anticipate was that the company’s two premiere outsourcing providers – Accenture and Cognizant – would both struggle right out of the gate to meet project requirements from their nearshore locations in Argentina.
Nearshore Americas has spent the last three months looking into complaints by Martinez and Peel (who in recent weeks left ACE) and our findings – detailed below – reveal both run-of-the-mill vendor management conflicts, but also suggest potentially larger challenges for Accenture’s Argentina operations, employing over 5,500 staffers.
Both Peel and his deputy Hector Martinez, a vice president at ACE, in an exclusive interview, expressed disappointment with the performance of Accenture and Cognizant during the past few years, but both agreed that Cognizant has been quicker to address shortcomings and also has been more responsive to ACE. Both outsourcers control a large majority of offshore IT and BPO services for ACE, a global leader in insurance and reinsurance, amounting, reportedly, to over $100 million in annual billing. ACE, part of the ACE Limited with offices in Zurich, Bermuda and New York, was added to the S&P 500 listing of top US publicly traded companies last year.
Several weeks after Nearshore Americas interviewed Peel and Martinez, Stephen Wasdick, VP of Global Media Relations and External Communications for ACE, got wind of the previous interviews and provided the following comment, attributed to Christine O’Brien, EVP, Technology Chief Administrative Officer: “Any issues are behind us. Accenture is one of our two key partners and satisfaction with their capabilities and service is strong. In fact, we continue to grow our relationship and have recently signed major project contracts with them.”
Nearshore Americas requested that Wasdick expand on what ‘any issues’ referred to, but he declined to provide further commentary on that point.
Another former sourcing executive at ACE, who was deeply involved in projects with Accenture in Argentina and elsewhere, was particularly critical of the global services giant. “They were given a performance plan to make Argentina better and they failed,” said the executive, who asked not be identified. “After the performance plan was enacted they went from terrible to marginal.” He shared that Accenture provided a $2 million credit to ACE for performance shortcomings in the last few years. When asked about the credit, James Finlaw, a spokesperson for Accenture said: “We do not discuss details of our client agreements.” Wasdick later denied that a $2 million credit was provided by Accenture.
Finlaw of Accenture said: “We’re proud of our work with ACE and we have continued to expand our relationship. Any issues from 2009 have long been resolved. We are meeting service level agreements and achieving program objectives.”
After the Accenture performance plan was enacted service went from “terrible to marginal”
Human Capital: Core Issue
The chief criticism of the vendors has been around human capital and attrition. Peel and Martinez had both advocated the use of Nearshore facilities from Cognizant and Accenture, having relied on both firms previously in other geographies. “We choose two providers because we didn’t want all our eggs in one basket,” said Martinez. As a result, Property and Casualty and ERP services were shuttled to Cognizant. And the Accident and Health application services were handed to Accenture.
“With Cognizant, I have seen more quality and more productivity. They want to invest with us. One thing I like about Cognizant, they listen to us,” said Martinez, who noted that Cognizant has an estimated 50 staffers working in support of his projects. “With Accenture, they are not that close to us.”
Peel also made clear that he is not entirely satisfied with Accenture: “We have had some missteps and some early stage growing pains,” he said. “It’s improving, but we’re not where we want to be.”
Overall, Peel characterized his offshoring programs as successful, at least looking at it through a cost-based lens. “The model has worked well,” he said. “We have hit our unit target from cost reduction perspective.”
Reliance on the two multinational vendors had increased in recent years in part because Latin America is the fastest growing region in the world for ACE, according to Peel, who served in the role of ‘International CIO’ and had been with ACE for six years prior to his departure. The firm’s business has been expanding in Mexico, Brazil, Colombia, Argentina, Chile and Peru. Peel pointed out the company’s management team “challenged us to scale and deliver”. The downstream impact was simple: Peel and his team had to use an “outsourcing model that could keep pace.”
When asked about the levels of attrition in Argentina, Finlaw from Accenture said the firm does not share attrition data on a country-by-country basis.
Cognizant: Slow Lane in LatAm
In turn, Peel looked to Cognizant to outline its Latin America roadmap. For Cognizant, Peel said: “We pushed their management to talk about their Latin America expansion plans… They didn’t have a fully developed strategy.”
It should be noted that Cognizant in fact has been slower than many other tier one outsourcing providers (such as Tata Consultancy Services and IBM) to expand in Latin America. The firm has operations in Argentina and Mexico, employing a total of about 300 people, yet top executives continue to claim that they are actively looking to acquire other operators in Latin America.
Despite some early stumbles, Cognizant deployed a ‘senior guy’ from India to their Argentina center who had deep experience in process management and improvement. This person worked closely with Martinez and helped alleviate the lack of alignment between the two parties.
Characterizations of Accenture’s performance in adapting to ACE’s needs were more damaging. The former ACE sourcing executive said, “They have been arrogant. They make promises that they don’t keep. They say they have the right people but they don’t show up.” The executive also revealed that ACE leadership has been frustrated by the fact that Accenture charges a premium “because it’s Accenture” yet the end-product does not warrant “premium pricing.”
ACE’s ties to Accenture have been longstanding. It has relied on Accenture Global hubs in Chennai and Bangalore for outsourced services. Indications are that ACE is into is third year of a seven-year contract (part of which includes the group led previously by Peel) with Accenture.
Attributed to Attrition?
If attrition is at the root of the problems experienced by ACE during its tenure with Accenture Argentina, the client isn’t the only one feeling the pain. In several recent discussions with sources in Argentina, it is clear that economic conditions – including a weakening dollar and inflation in Argentina – are contributing to increased turnover, especially in Buenos Aires where top talent is in high demand. “Small to medium sized companies are faster to react to these problems, paying better salaries that attract under-paid Accenture employees,” said one source. “When Accenture or IBM are ready to increase salaries, they have already lost hundreds of employees.”
But it may not be just about economics. There is a larger question to ask: Are very large, corporate driven outsourcers generally “compatible” with Argentinian culture?
From the viewpoint of the former ACE executive , the answer is no. “They (Accenture) have an attitude that runs through that organization that turns people off in the (Argentina) culture.”
Nearshore Americas also spoke to a current Accenture employee, based in Argentina. He believes that the problems experienced by Accenture are no different than other tier one, multinationals. In his view, they all struggle to retain employees – and he says it has more to do with the nature of the professional environment in Argentina than any possible mismanagement issues at the top of the Accenture hierarchy.
“A lot of people are actively looking at other offers,” he did acknowledge.
Finally, it is not clear how much ACE is responsible for its part in handling – or mishandling – the two large sourcing relationships. The former executive who spoke to us remarked that ACE has definite shortcomings in this area, largely because the entire outsourcing programs are fundamentally driven by saving costs.
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