Thomas Cook UK and Ireland: An Innovative Outsourcing Arrangement Paves the Way for High Performance

Accenture collaborated with Thomas Cook UK and Ireland in an innovative 10-year co-sourcing arrangement to deliver a series of major change programs and continuous improvement in service delivery to drive long- term growth and high performance.

Client background
Thomas Cook UK and Ireland is a leading travel company and one of the most widely recognized and respected brands in the world. The business employs some 12,000 staff, operates almost 600 travel shops and takes more than 3 million customers on holiday every year.

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In 2001, Thomas Cook had a strong reputation for service and a well-recognized brand, however, due to a history of mergers and acquisitions, the company's business units—sales, tour operations and the airline—were not operating as an integrated business.

In the face of new competitors in the travel industry with much lower cost structures—such as online travel businesses and low-cost airlines—these inefficiencies were threatening the very future of the company. Thomas Cook management responded to the challenges by enacting a multi-process, transformation program to cut costs, improve margins and vertically integrate operations. The business transformation plan included reducing the high cost of providing a breadth of back-office functions by creating a shared services center.

Accenture's continuing research into the characteristics of high-performance business indicates that top companies achieve mastery in non core areas by teaming with trusted third-party providers. In its efforts to become a high-performance business, Thomas Cook UK and Ireland partnered with Accenture in a collaborative outsourcing relationship to share the risks and rewards of a redefined back-office operation.The main component of this agreement was a cost-effective shared services center co-located with Thomas Cook UK and Ireland's headquarters in Peterborough, United Kingdom. Accenture and Thomas Cook designed the shared services center to be a multi-process center—bringing IT, finance, payroll, and HR administration under one roof. Accenture also implemented a single, integrated SAP platform that increased visibility into business performance.

Under a new contract signed in 2004, Thomas Cook wanted to build on the success of the co-sourcing arrangement and create additional value by tapping the skills and know-how of the Accenture Global Delivery Network. Under this new agreement, Accenture transitioned approximately 60 percent of the shared services workload to the Accenture Delivery Center in Bangalore, India. The majority of the work was migrated in just six months, with the transition completed in 11 months and all transitions goals met on time and on budget.

"Our choice of partner was crucial. They had to understand the business, but also encourage innovation…this new innovation discipline is energizing us continually to seek performance improvement," says Ian Ailles, Thomas Cook UK and Ireland's (former) managing director of specialist businesses.

The outsourcing program has enabled Thomas Cook to successfully achieve a major business transformation that is laying a solid foundation for high performance. Through the outsourcing model and many other cost saving initiatives, the company was able to improve operations and reduce its cost base by £140 million in just 18 months. The more recent expansion of services to utilize Accenture's global delivery center network has resulted in an additional 30 percent savings—delivering to Thomas Cook one of the lowest cost models in the industry.

Aside from cost savings, a range of value-added benefits have also been delivered including a single, integrated SAP solution across the entire organization that has enabled the company to accurately measure its operations. Finally, the innovation stipulation in the outsourcing contract with Accenture, which is one of the key metrics Accenture is measured on, also helps ensure a culture of continuous improvement to maintain Thomas Cook UK and Ireland's position at the forefront of the travel industry.

The success of the Accenture / Thomas Cook UK and Ireland partnership has resulted in a number of awards: the 2006 Gold Award for best outsourcing consultancy from the UK Management Consultancies Association, the 2007 Outsourcing Excellence award for the best program in the European Union, and winner of the 2007 FAO Research Award of Distinction.

"To change a business of this size at the speed it happened [16 months] and to deliver the dramatic financial results is an incredible success story. We are now well positioned to move and to continue to grow the business." – Carl Dawson, CIO, Thomas Cook UK and Ireland.

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