Outsourcing Strategies and Risks

This assignment delves into the multifaceted world of outsourcing. Students are tasked with analyzing various outsourcing strategies, evaluating associated risks, and exploring established frameworks for effective outsourcing management. The discussion encompasses the influence of globalization on outsourcing decisions and highlights best practices for mitigating potential challenges.

Contract

TABLE OF CONTENTS
I) INTRODUCTION........................................................................................................................3
II) OUTSOURCING PROJECT OVERVIEW................................................................................3
III) CLIENT PERSPECTIVE..........................................................................................................5
Sourcing model............................................................................................................................5
Client's outsourcing strengths and weaknesses............................................................................6
Retained capabilities....................................................................................................................6
Risk attached with outsourcing....................................................................................................6
Expectations of Hilton Hotel.......................................................................................................7
IV) SUPPLIER PERSPECTIVE.....................................................................................................7
V) RECOMMENDATIONS............................................................................................................9
VI) CONCLUSION ......................................................................................................................11
REFERENCES..............................................................................................................................12

I) INTRODUCTION
Organisations that work at international levels have to segregate their operations by
taking help from outsourcing firms. Hilton is a multinational hospitality giant. Due to its
widespread functioning in various countries, outsourcing became the first and foremost step for
managing certain services. To fight with growing competition and maintain the brand reputation
it has gained, Hilton processed part of its business functions by getting into an outsourcing
contract with Accenture. The latter firm is an information technology expert and provides global
service desk for Hilton. Outsourcing is essential because it helps in maintaining external and
internal audits regularly. On the other hand, client and suppliers can improve their competencies
which will help them in acquiring greater profit shares. The agreement between both companies
was for a long term and formulated in December, 2010.
Contracts are an essential component of business relations. This assessment is aimed at
providing information regarding pure contracts that occur between two business firms with
outsourcing relations. The description about different perspectives of clients and suppliers both
will be focused with deeper analysis. Indicating these aspects will help in attaining an
understanding of sharing operations that are related to outsourcing which can be in the form of
facility management, manufacturing or call centre support.
II) OUTSOURCING PROJECT OVERVIEW
Hilton outsourced its business operations of global level desk management to Accenture
in 2010. Both companies are huge in their own field of industry. Hilton functions as a hospitality
organisation. It has to deal with real time customers and their demands. In order to develop its
reputation, company must give first preference to consumers and clients. At international level, it
is not easy to manage millions of consumers1. Hence, the firm decided to indulge in an
outsourcing contract with information technology. Known for its high end services in strategy
consulting, digital, technology and operational services, Accenture has gained widespread
recognition.
Every business organisation has to maintain a rhythm with progressing world.
Outsourcing gives clients an opportunity to handle certain functions efficiently. The contract
1 'Hilton Worldwide and Accenture Announce Multi-Year Technology Services Agreement' (2010)
<https://newsroom.accenture.com/news/hilton-worldwide-and-accenture-announce-multi-year-technology-services-
agreement.htm> Accessed on 13th January 2017.

was officially declared valid on December 8, 2010. It was a mutual consent contract and signed
on multi year basis. This innovative collaboration is still functioning in the present time.
Customer support and global desk management were outsourced by Hilton. This helped in
redressing complaints of customers that were engaged by Hilton.2 It is important for every
business organisation to meet the expectation levels of customers.
Software technology has developed in the past decade to perform multiple functions in
just short period of time.3 It will only be utilised if properly implemented. Hence, firms like
Hilton decided to inculcate technological advancements like smart gadgets in their operations.
Not only supply chains were improved but employee skills were also developed. Accenture helps
Hilton in property management, transactions and other digital hotel operations.4 It would be
highly difficult to coordinate such a huge network on global scale without technology. The
outsourcing company also runs in collaboration with further service provider. This third person is
Avanade a business technology service provider which is a subsidiary of Accenture.
This decision is a sensible and cost effective measure for both organisations. Daily
operations are easily conducted when portion of operations is managed by another effective
management team. For better understanding, an instance can be taken like: A team of 100
members is working to accomplish certain goal. The leader has to manage this big team without
any help is a cumbersome task. Hence, he thinks of dividing responsibilities to middle managers
who will further manage the work. This organisation system is internal sourcing. Here, leader is
Hilton and middle manager is Accenture.5 Although the latter company is not at all compelled to
be a slave but has to render its services until outsourcing contract terminates.
III) CLIENT PERSPECTIVE
Hilton hotel has signed up first time the outsourcing deal for providing application
development. Earlier it was not having any experience in the same field. Though Hilton was
2 Dean B McFarlin and Paul Sweeney. International organizational behavior: Transcending borders and cultures
[2012] Routledge.
3 Lili Marziana Abdullaha and June M. Verner. Analysis and application of an outsourcing risk framework [2012]
Journal of Systems and Software 85(8) pp.1930-1952.
4 Linder, Jane C. 'Outsourcing as a strategy for driving transformation.' [2004] Strategy & Leadership 32.6
(2004): 26-31.
5 Accenture bags multi-year technology services contract from Hilton Worldwide' (2010)
<http://www.cbronline.com/news/verticals/the-boardroom/accenture-bags-multi-year-technology-services-
contract-from-hilton-worldwide-151210>. Accessed on 13th January 2017.

working globally so, it was having knowledge about several customers but advancement in
technological services was the first time experience for Hilton. Outsourcing is the first
experience for Hilton hotel. The contract covers support services for property management
system of Hilton and its transactional websites covers approximately 3600 hotels worldwide in
the chain6. As it provides technological support to the organization so, it is highly beneficial for
the entity. Accenture is one of the leading technology firms so, this innovation has given an
optimistic outcome to Hilton hotel. Company was able to deal with international clients so, it
was capable to deal with this technical advancement but due to poor experience in outsourcing,
there is the risk of leakage of data.
Sourcing model
Selected model of outsourcing is appropriate for Hilton as its aim is to take innovative
initiatives for enhancing services of the organization worldwide. The selected model is giving
expected results thus, it is completely suitable and can give huge benefits to the entity. It has
given optimistic results such as award-winning customer satisfaction, increasing growth and
also, enhanced brand image of entity. With the help of this contract, property management
becomes easy for the cited firm7. According to the contract, Accenture has to perform in global
delivery network for Hilton. Accenture said that it will leverage its services for strengthening the
technological capabilities of Hilton and to improve efficiency so, it is appropriate. On the other
hand, outsourcing dealing is quite risky as there is high chances of leakage of data.
Client's outsourcing strength and weaknesses
Hilton hotel is the global brand which is having wide networks across the world. It is the
major strength of Hilton which has made it capable to make an outsourcing contract. Due to
global presence, people are well aware will the brand name. It has a strong relationship with its
existing customers and people are highly satisfied with the services. It is the major outsourcing
strong point of client. Hilton's financial capabilities are strong that is another strength of this
organization. So, it is an easy deal with such advanced innovative technologies and can update it
6 Frank Keuper and Kai-Eberhard Lueg. Shared Services in 2020. In Finance Bundling and Finance
Transformation (pp. 409-421) [2013] Springer Fachmedien Wiesbaden.
7 Sam De Silva. Key Contractual Issues with Logistics Outsourcing [2012] Outsourcing Management for
Supply Chain Operations and Logistics Service pp.388.

timely. In addition to this, it has huge number of properties across the world which is one of the
strengths of company.
Though Hilton has good knowledge and wide network but before this contract, it never
engaged in any type of outsourcing agreements. So, it has less experience to operate such
advanced technologies that is the major outsourcing weakness of Hilton.
Retained capabilities
Retained capabilities related to outsourcing services have been developed in Hilton hotel
and it has supported in implementing software development program that has been formed by
Accenture group. Company has focussed on non-differentiating elements of technology like data
service centres, E-mail and other networking services. Initially criteria has been set related to
quality, speed, cost and technical requirements. Areas have been identified initially that require
innovation at faster speed and on the basis of that, contract has been signed with Accenture8.
Existing financial and human resource system has been developed for implementing the property
management system.
Risk attached with outsourcing
The major risk associated with this outsourcing contract of Hilton with Accenture is that
leakage of data. Accenture is a leading technological company that works for many other
organizations that who are dealing in the same hospitality industry. There is high risk of leakage
of confidential deals of Hilton such as information about its properties, financial performances,
strategies, etc. Apart from this, here is risk that Hilton has no previous experience to deal with
outsourcing and it is being never engaged with any advanced technologies9. So, failure of
managing these technical equipment are another risk which is in this outsourcing deal.
Expectation of Hilton
Hilton has made outsourcing contract for the first time. It is expecting that this agreement
will support in improving customer services of cited firm across the world. It aims to enhance the
performance of business to a great extent. It is expecting to enhance its technical capabilities
8 Robert L Mathis, John H Jackson and Patricia Meglich. Human resource management [2016] Nelson
Education.
9 Navi Radjou and Jaideep Prabhu. Frugal Innovation: How to do more with less [2015] PublicAffairs.

with the help of this outsourcing deal10. Also, it is aiming that transactional websites will be
beneficial in attracting international customers towards the organization.
IV) SUPPLIER PERSPECTIVE
1. The multi-year agreement entered into by both Accenture and Hilton can be characterized
as beneficial to both companies. Apart from the other specific areas covered under
agreement, supporting brand to provide service at global desk of all hotels of Hilton is
another additional service which is being provided. Accenture views this relationship as
an exclusively innovative collaboration which shall enable company to enhance the
current level of experience and knowledge with respect to the hospitality industry.
Moreover, this association has also allowed supplier firm to develop their capabilities in
relation to the next generation systems. Furthermore, this collaboration has made supplier
company one of the new entrants in Hilton's worldwide global network which in turn has
provided them the opportunity to leverage on provision of services in the field of
hospitality. Along with the development of technological services for Hilton, Accenture
would be able to strengthen their technological capabilities and efficiencies. In order to
deliver high quality services, company has also collaborated with one of its subsidiaries,
that is, Avanade which is also engaged in business technology services. This in particular
has proved to be extremely beneficial for the supplier firm as it has been utilizing
Avanade's excellence with their own to realize magnificent results.
2. Accenture has over the years earned a brand name in market and has been ranked at good
positions for effectively implementation, high quality deliverance, maintenance of client
relationship and the scale of services which it has been providing. It is interesting to note
that company before entering into a contract with firms of another nation undertakes the
assessment of Country Attractiveness.11 With respect to this, it initially screens the entire
market followed by which it assesses the market in terms of potential that it possesses
and also, the business market in general. In this regard, it can be said that supplier firm is
extremely vigilant in the manner it moves and makes decisions. It is also interesting to
10 Kate Atkin. The Presentation Workout: The 10 tried-and-tested steps that will build your presenting skills
[2015] Pearson Higher Ed.
11 Paik Yongsun and David Y. Choi. 'The shortcomings of a standardized global knowledge management system:
The case study of Accenture.' 2005 The Academy of Management Executive 19.2 (2005): 81-84.

note that company has entered into collaboration with various firms from different
regions of the world which is inclusive of big names such as Deutche Bank, Starwood
Hotels & Resorts and Schlumberger. This clearly established the fact that company has
marked its presence in different sectors of a market as well as in varied parts of the world.
The direct implication of this fact is that experience and knowledge of Accenture is
highly diversified and accustomed to work for Hilton at the global level. The present
collaboration shall require the supplier company to undertake operations at a globally and
hence, expose them to risks at a larger level. For instance: Hilton has marked its presence
in almost every part of the world and has been operating at a massive level in comparison
to some of their other clients. In response to the same, supplier firm is required to
undertake its operations at such a large level and also accustom its services to different
regions in which Hilton hotel is currently operating or expanding its reach. In order to
provide services in a particular market, company shall be required to function in
accordance with the prevalent trends of the market which may be unknown to company.12
This in turn shall lead to eruption of uncertainties and lack of knowledge over certain
areas. Therefore, this is one of the risks which company undertook apart from the intense
competition in market.
3. Apart from the magnificent monetary benefits the company shall receive from this
collaboration agreement, Accenture will have value in terms of enhancement of their
capabilities in the specific field of hospitality industry. Moreover, company shall now
have access to different countries of the world which were not within the scope of
operations of company. This association as well as deliverance of quality services shall
further enable supplier organisation to enhance goodwill in market and make a bigger
brand name.
V) RECOMMENDATIONS
Hilton group has taken a significant initiative for outsourcing their software development
program to Accenture. The decision has been taken for adopting advanced and innovative
technology in existing business practices running in the entity. Accenture will be working for
12 Michael Wendelboe Hansen, Peter D. Ørberg Jensen and Bent Petersen. 10. drivers and strategies of
international service firms in emerging markets [2016] Handbook of Contemporary Research on Emerging
Markets. pp.223.

developing software for Hilton and technical support services will be offered for managing the
operational activities. Major work includes designing a transactional website for the enterprise
that will cover 3600 hotels and focus will be given on developing effective technical software for
the organization. Accenture will be supporting for creating a global service desk for Hilton that
will aid for enhancing the service level of enterprise. Multi-year agreement has been signed
between both the companies for rendering property management services for giant hospitality
firm, that is, Hilton. Accenture is a leading technology firm and it has a wide experience for
offering software management services for its global client. It is vital that Hilton group should
take necessary measures for mitigating the risk that are associated with signing an agreement
with Accenture. These are some recommendations which can be used by Hilton for accessing
technical services that are offered by Accenture. Some recommendations are described as:-
(I)
 Collaboration made with Accenture will support in bringing innovation at faster pace in
the enterprise and necessary business functions will be executed with more efficiency.
There is risk that protection of data and confidential information of entity will be
affected. It is vital that appropriate instructions should be given to Accenture group for
securing confidential information of the enterprise. While signing the contract, both
parties should get agree on terms and conditions that are mentioned in the same. It will
support in clearing all necessary details and better services should be rendered to the
clients as well.
 Employees of Hilton group needs to be imparted with necessary skills and capabilities so
that they can perform their assigned work effectually. Training program can be organized
and staff members can be informed about various new technical advancements that have
been adopted in the entity.
 Accenture will be feeling difficulty in providing services to a new business client in
hospitality industry. There are some risks that are associated with providing property
management services to client and it is vital to take significant steps for reducing the
negative impact of the risk. For resolving the issue expert professionals can be hired who
will give the best possible efforts for delivering superior quality software development
services for client. Moreover, requirement and expectations of business client can be
understood and framework can be prepared on the basis of which software can be

designed and developed. Prototype model can be adopted for developing the software and
it will support for making necessary changes in project as per the need and desire shown
by client.
(ii)
Suppliers can extract value from the contract by delivering effective services and meeting
the expectations of Hilton group. It will help in increasing the duration of agreement period and
more financial revenue and profitability can be achieved by the enterprise. Innovative and
advanced technical services can be offered and focus should be given on providing effective
service management services to the business clients. New clients will also be increased by
positive word of mouth given by Hilton group and existing consumer base of Accenture will be
enhanced as well. Supplier is at risk that there might be failure in delivering property
management services to the enterprise.
Experienced professionals can be hired so that better and innovative IT services can be
rendered to business client, Hilton. In addition to this, there might be risk that funding for
implementing the Software development system in Hilton will not be received on proper time.
Advanced payment system can be adopted for mitigating this risk and it will support in gaining
required funds that are needed for delivering effective property management system for Hilton.
Analysis of requirement and expectation of consumers can be done properly so that IT services
can be delivered as per the expectation shown by Hilton. Proper evaluation will help in
developing and designing the software products as per the need of client.
(iii)
Supplier and Client can achieve win-win situation in contract by complying with all the
terms and conditions that are mentioned in agreement. Hilton group should provide necessary
financial investment so that required software development program can be implemented in an
effective way. It is required that appropriate data, facts and information that is required for
executing technical functions should be given to Accenture so that better property management
system can be developed by them13. Research and development department of Accenture should
focus on developing innovative solutions for delivering effective service management for its
13 Javalgi Rajshekhar Raj, Benoy Joseph, Granot Elad. and Gross Andrew. 'Strategies for sustaining the edge in
offshore outsourcing of services: the case of India.' [2014] Journal of Business & Industrial Marketing. 28(6).
pp.475-486.

business clients. Hilton hotel can go for change management process so that necessary
modification in the technical field can be effectually executed and it will support in bringing
innovation at a faster pace in the enterprise.
(iv)
Relation between Suppliers Accenture and Business client, Hilton will become strong
when both the parties will fulfil all necessary terms and conditions that will be mentioned in the
contract. It is assertive that both the parties should be loyal to each other and focus on meeting
expectations of each other so that needs of suppliers and clients will be fulfilled properly14. In
addition to this, duration of agreement can also be enhanced if supplier delivers better quality of
work. Permanent agreement can be signed between Hilton and Accenture for offering better and
effective property management services. In addition to that work for developing new software
can be given to supplier and it will aid for enhancing business relations between Hilton and
Accenture.
VI) CONCLUSION
Present report concludes that it is vital that for signing an agreement that all necessary
terms and conditions should be followed. Suppliers and clients can reach in a win-win situation
by meeting the expectation of each other and complying with all the conditions that are being
mentioned in the contract. It is assertive that better precautions should be taken by Accenture for
maintaining confidentiality of data, information and facts.
14 Wirtz Jochen, Tuzovic Sven and Ehret Micheal. 'Global business services: Increasing specialization and
integration of the world economy as drivers of economic growth.' [2015] Journal of Service Management. 26(4).
pp.565-587.

REFERENCES
Books and Journals
Frank Keuper and Kai-Eberhard Lueg. Shared Services in 2020. In Finance Bundling and
Finance Transformation (pp. 409-421) [2013] Springer Fachmedien Wiesbaden.
Javalgi Rajshekhar Raj, Benoy Joseph, Granot Elad. and Gross Andrew. 'Strategies for
sustaining the edge in offshore outsourcing of services: the case of India.' [2014] Journal
of Business & Industrial Marketing. 28(6). pp.475-486.
Kate Atkin. The Presentation Workout: The 10 tried-and-tested steps that will build your
presenting skills [2015] Pearson Higher Ed.
Lili Marziana Abdullaha and June M. Verner. Analysis and application of an outsourcing risk
framework [2012] Journal of Systems and Software 85(8) pp.1930-1952.
Linder Jane C. 'Outsourcing for radical change: a bold approach to enterprise transformation'
[2004] AMACOM Div American Mgmt Assn.\
Linder, Jane C. 'Outsourcing as a strategy for driving transformation.' [2004] Strategy &
Leadership 32.6 (2004): 26-31.
Michael Wendelboe Hansen, Peter D. Ørberg Jensen and Bent Petersen. 10. drivers and
strategies of international service firms in emerging markets [2016] Handbook of
Contemporary Research on Emerging Markets. pp.223.
Navi Radjou and Jaideep Prabhu. Frugal Innovation: How to do more with less [2015]
PublicAffairs.
Paik Yongsun and David Y. Choi. 'The shortcomings of a standardized global knowledge
management system: The case study of Accenture.' [2005] The Academy of
Management Executive 19.2 (2005): 81-84.
Robert L Mathis, John H Jackson and Patricia Meglich. Human resource management [2016]
Nelson Education.
Sam De Silva. Key Contractual Issues with Logistics Outsourcing [2012] Outsourcing
Management for Supply Chain Operations and Logistics Service pp.388.
Wirtz Jochen, Tuzovic Sven and Ehret Micheal. 'Global business services: Increasing
specialization and integration of the world economy as drivers of economic growth.'
[2015] Journal of Service Management. 26(4). pp.565-587.
Online
'Hilton Worldwide and Accenture Announce Multi-Year Technology Services Agreement'
(2010) <https://newsroom.accenture.com/news/hilton-worldwide-and-accenture-
announce-multi-year-technology-services-agreement.htm> Accessed on 13th January
2017.
'Accenture bags multi-year technology services contract from Hilton Worldwide' (2010)
<http://www.cbronline.com/news/verticals/the-boardroom/accenture-bags-multi-year-
technology-services-contract-from-hilton-worldwide-151210>. Accessed on 13th January
2017.