Accenture Searching for a Foothold

The name Accenture Israel is always mentioned on these pages in the same breath as Discount Bank's massive computer modernizing project, which has a multiyear budget totaling $155 million. Accenture was the envy of all its competitors when it won the project, due to be completed in 2006, after an extensive search for a company with international expertise in a complex project of this magnitude.

Despite the prestige of the contract, however, Accenture has so far been unable to gain a firm foothold in the local computing market. Although Accenture has won a few projects here and the Israeli office has close to 100 employees, the high prices the company charges and the fact that Israeli organizations still prefer Israeli computer experts has left Accenture with an image identified mainly with Discount, and without any other big contracts.

Accenture is one of the largest business consulting and integration companies in the world. It used to be the business and strategic consulting division of the Arthur Andersen accounting firm, under the name Andersen Consulting, but in 2001 the company was spun off and issued stock on Wall Street. Accenture now has annual sales of more than $13 billion and 93,000 workers worldwide, and is traded at a market value of $24.5 billion.

David Ron, a senior executive at Accenture Israel, is an Israeli who worked for 10 years at the company's American headquarters. When he wanted to come home, he convinced his colleagues in America that it was worth checking out the Israeli market since the company's biggest competitors, McKinsey and DeLoitte Touche, have subsidiaries here.

Accenture's survey of the Israeli market began in early 2000, and when the company entered the bidding for both the Discount Bank project and the Hermesh project at Bank Leumi, a local branch was established.

No regular consulting firm

Gil Gidron, an Israeli expatriate living in Spain and in charge of Accenture's strategic consulting throughout Europe, was appointed president of the Israeli company. Accenture won the Discount project but lost Hermesh, and since then has been employing some 35 Israelis and 65 foreign consultants who relocated to Israel for the duration of the project at Discount.

Accenture is no regular consulting firm. "We don't believe in just writing reports," says Gidron. "That would be like a person going to a doctor whom he trusts and getting a diagnosis, and then the doctor tells him that for treatment he will have to find another doctor. That's why we provide technology integration services, as well as strategic and business advice."

Thus, Accenture's worldwide operations consist of three fields that complement one another - consulting, which provides about 20 percent of the company's revenues; the integration and implementation of technology systems, which account for 40 percent of revenues; and outsourcing for specific business processes in an organization, which provide the remaining 40 percent.

Accenture recently completed a project for Hadera Paper Mills, upgrading and streamlining the supply chain. Other clients include Cellcom and Israel Aircraft Industries, the Dead Sea Bromide Group and Supersol, and Accenture is currently undertaking a comprehensive examination of the merging of the information systems in the Strauss-Elite group.

"In 2003, our annual revenues reached $16 million, and we figure that we will finish 2004 with revenues of $18 million," says Gidron, revealing Accenture Israel's financial results for the first time. "We have been profitable since our inception."

"All in all we are satisfied," adds Ron. "We realize that it takes quite a long time to penetrate any market because we do not operate as a short-term integration company. We function as a client's business partners for years, accompanying every step of the way. That's why it takes time to get to know us. Unlike local integration companies, our business is not in hiring out brains. Our services are hired for our special expertise in solving complex business problems - to which we can bring our international experience. That is why we bring consultants from abroad, as we have done in the Discount Bank project. These people have done similar projects in several large banks around the world."

Offering `added value'

"Unlike other large markets in the world," explains Jimmy Schwarzkopf of the Meta research group, "in the Israeli markets, the overseas consultants in their suits and ties don't really meet with success here. First, because they are very expensive compared to prices in the local market, apart from which the information technology managers of organizations here like the local Israeli integration companies. They have been working with them for years, are used to them, and know how to get their prices down.

"Accenture Israel has no significant position in the Israeli information technology market, apart from the Discount Bank project. With prices from abroad they cannot succeed here, because Israeli managers do not usually see Accenture's advantages over the other companies as justifying the price. Still, there are instances in which the situation is different - if, for example, an Israeli management is specifically looking for someone from abroad to come and make deep changes in a company. That happens mainly in big corporations. Accenture will only have a chance to gain a stronger position in the local market if it buys an Israeli company, with Israeli methods and local prices."

Gidron and Ron prefer not to disclose details of their plans for the future, but certainly agree that their prices are a problem for the Israeli market.

"Around the world we are the biggest assimilators of ERP (enterprise resource planning) for SAP (service application provider)," explains Gidron, "because ERP is software that manages all an organization's critical business processes, and our knowledge in strategic consulting only contributes to better implementation. Here in Israel, we have been unsuccessful at winning even one big SAP assimilation project, whether due to the prices, which are a lot lower here, or due to specific demands that we cannot meet. We did not compete for the projects at the Israel Electric Corp. or Kupat Holim Clalit because they demanded previous experience in the Israeli market in such projects. Although we are new here and do not have that type of experience, we have extensive experience with other big electric companies around the world, and that was not taken into consideration here, which is a shame."

"Our target audience is big organizations that are looking for added value," says Gidron. "We did not come to Israel to provide regular consulting services, because we can offer added value in strategy, direction and method, along with the installation of the appropriate technology. There are still Israeli clients who understand this, and we are directing our efforts at them."

In spite of everything, Gidron has good reason to remain calm - if the Discount project is declared a success, other Israeli organizations will be prepared to pay Accenture's high prices.