Thomas Cook: Finance and Accounting Outsourcing

Accenture and Thomas Cook UK and Ireland have over the past six years built a unique and highly effective relationship to support the travel company’s remarkable transformation.

The success of the relationship is reflected not only in Thomas Cook’s return to profitability, but also in the way the two companies work together to position the business for long-term success.

Client background
Thomas Cook Group plc is a €12 billion (approximately US$17.73 billion) international leisure travel group that was created in June 2007 by the merger of Thomas Cook AG and MyTravel Group plc. The merged company employs nearly 33,000 people, operates a fleet of 97 aircraft and serves more than 19 million customers.

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Back in 2001, despite its long-held reputation for service and its highly recognized brand, Thomas Cook operated in an industry known for its low margins and intense competition. The need to streamline operations became particularly pronounced later that year, when the terrorist attacks of September 11 wreaked havoc on the international travel sector and contributed to a worldwide economic downturn. Travel companies that had enjoyed a successful financial run were now facing considerable losses.

Complicating matters for Thomas Cook UK and Ireland was the fact that the division’s three business units—sales, tour operations and the airline—were not integrated. Each business unit had its own management board and infrastructure, financial processes and IT systems. Everything was decentralized–each business had, in effect, its own back office. In a changing industry with discount airlines and new Internet-based travel service providers with much lower cost structures, these back-office inefficiencies threatened the company’s very viability.

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 outsourcing 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 70 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.

When Thomas Cook merged with MyTravel in June 2007, the back-office outsourcing deal once again proved its worth—this time by contributing significantly to the integration of the newly formed Thomas Cook Group plc. Thomas Cook set an aggressive timeframe to have the integration completed in just four months to coincide with the start of its fiscal new year and the start of the winter travel season. This was an ambitious goal, considering that the merger practically doubled the organization’s size, customers, employees, systems and processes over night. Thomas Cook asked Accenture to manage the integration of MyTravel’s back-office functions to Thomas Cook’s outsourcing operations.

"The relationship with Accenture has allowed us to complete our merger with MyTravel in almost unbelievable time" commented Juergen Bueser, Group CFO, Thomas Cook Group. "The speed and pace by which we managed this transformation is for me still pretty unbelievable".

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 all of its operations for the first time.
The outsourcing arrangement also provided a successful means of post-merger integration for Thomas Cook and MyTravel,—all back-office finance and IT systems were fully integrated in less than five months. Six months after the merger, the Thomas Cook Group broke into the Financial Times Stock Exchange (FTSE) 100 for the first time.

The benefits of the agreement extend beyond a new level of financial improvement and clarity. In conducting its day-to-day operations, Thomas Cook UK and Ireland has greater customer focus, more flexibility to adjust to business changes, and improved operational efficiencies.

According to Manny Fontenla-Novoa, chief executive of the Thomas Cook Group, “Accenture’s involvement is allowing us to focus on our customers and our core competencies. At the same time, the strategic sourcing arrangement is providing us with greater control of our back-office functions. While many people assume outsourcing means ‘letting go,’ Accenture has implemented tools and processes that give us a much greater visibility into our operations. With this visibility, we’ve been able to unleash new capabilities and insights into the marketplace in a way we could have never done before.”