HOCHTIEF: Procurement Outsourcing

To build and maintain its long-term success, Germany-based international construction services provider HOCHTIEF is focused on continually developing its global core competencies, as well as its ability to provide innovative solutions that exceed customers' requirements and expectations in local markets.

Recognizing the opportunity to streamline some of its procurement processes, HOCHTIEF selected Accenture because of its extensive experience in delivering procurement management services. Through its dedicated entity—Accenture Procurement BPO Services—Accenture transacts billions of dollars worth of expenditure on behalf of its clients around the world each year. Also important was Accenture's commitment to working closely with clients to define tangible and measurable objectives, service levels, key performance indicators and innovative risk-sharing deal structures. Finally, Accenture provided the global capabilities and the relentless focus on operational excellence needed to deliver significant bottom-line value for HOCHTIEF.

As a company always on the lookout for innovative ways to remain a lean organization while improving its operational effectiveness, HOCHTIEF recognized the opportunity to streamline some of its procurement processes.

Specifically, the company was interested in consolidating the procurement of non-strategic goods and services not directly related to its construction operations. Under its initial way of working, procurement of these items was managed by individual organizational entities. Consolidating these parallel procurement activities in a shared services environment would, the company believed, reduce costs and provide greater visibility into the company's procurement activities and expenses. According to Dr. Martin Rohr, executive board member, HOCHTIEF, "In the interest of our shareholders and the company overall, we needed to realize these savings as quickly as possible. Therefore, we decided to source this service externally."

The selection of the right outsourcing provider was key to this program's success. As Dr. Rohr put it: "We weren't looking for just an anonymous service provider, but for a partner: a company, that brings along strong experience and success and that has the same cooperative mindset." That partner was Accenture.

Under a five-year outsourcing agreement, Accenture is now managing the purchase of non-strategic goods and services. The contract currently covers 16 material categories including IT hardware, office supplies, furniture, tools and security items.

To deliver the outsourced service, Accenture deployed a highly skilled team of procurement specialists and established a new set of processes to source products and services centrally for the HOCHTIEF companies in Germany, Austria and Luxembourg. Internal communications vehicles such as news tickers, the intranet and a "road show" were created and rolled out to keep employees informed about the changes ahead, describe the new system being put in place and answer any questions they might have. This proactive communication in preparation for the launch of the new procurement platform and processes was crucial to ensure buy-in and secure the overall success of the project.

While the team defined the scope of the program according to HOCHTIEF's requirements, it built the program to be flexible enough to support HOCHTIEF's evolving needs and drive innovation. Accenture also developed an electronic procurement platform, which enabled a high degree of transparency around buyer behaviors and created an electronic marketplace to maximize group purchasing. In addition to an online procurement portal, the new electronic system includes a catalog platform, order functionalities and a reporting capability. To round out the outsourcing program, Accenture created a help desk function to ease HOCHTIEF's transition to the new way of working. The procurement help desk is driven mainly by the need to provide immediate support for any kind of question, user training and buying support.

According to Tossan Souchon, global procurement lead, HOCHTIEF, "The fast and smooth implementation of the project was very important to us. It actually took less than four weeks after signing the contract that the first order was handled via the electronic platform."

Accenture's comprehensive and customized procurement solution allows HOCHTIEF to concentrate on key suppliers, using a consistent framework of contracts.

It bundles procurement volumes, reduces the number of vendors and streamlines procurement management with standardized processes. It improves transparency concerning the company's organization-wide buying behaviors. Perhaps most important, the bundling of HOCHTIEF's procurement functions, combined with Accenture's buying power, is generating net savings of 23 percent for seven of the categories and double-digit savings for the entire project.

A large part of the program's success is due to the deep collaboration and trust that exists between Accenture and HOCHTIEF. According to Mr. Souchon: "From the very beginning, Accenture has seen itself as a part of the HOCHTIEF procurement organization: Targets were jointly defined, results are measured and analyzed collaboratively. We share the profits, as well as the risks. Through Accenture, HOCHTIEF gets access to a comprehensive procurement solution, which is essentially financed through the savings achieved."

While the outsourcing arrangement is still in its early stages, the future looks bright. "Our experience with Accenture is excellent. We adopted a policy of open books, which fosters trust and transparency. We will continue to expand this procurement platform: We plan to include our European subsidiaries and—in the next step—will work with our big international subsidiaries like Turner and Leighton to ensure we can realize synergies for our mutual benefit," says Dr. Rohr. In fact, the HOCHTIEF management board recently agreed to expand the procurement project to cover the United Kingdom, the Czech Republic and Poland.