Outsourcing shake-up revives Thomas Cook

A series of outsourcing deals at Thomas Cook helped streamline the business and turn around the travel company's fortunes,...

A series of outsourcing deals at Thomas Cook helped streamline the business and turn around the travel company's fortunes, delegates at the Outsource World conference were told.

In 2001, Thomas Cook was losing money and only had enough cash and bank reserves to last nine months, according to Ian Ailles, managing director, specialist businesses at Thomas Cook.

The company had restructured into two businesses - the profitable Travelex foreign exchange company and the struggling Thomas Cook holiday chain.

Ailles said Thomas Cook's IT outsourcing arrangements were seen as an important step in helping it return to profitability.

"One of the ways we focused on getting ourselves out of a really deep hole was getting the suppliers we wanted and having a long-term relationship with them so they were almost part of the business," he said.

In the first quarter of 2002, Thomas Cook signed a 10-year, £120m outsourcing deal with Accenture for centralised IT services to manage its dispersed finance, human resources and IT functions. About 400 Thomas Cook employees moved to Accenture under the deal.

In the UK, Thomas Cook also outsourced its mainframes and client servers to a subsidiary of German airline Lufthansa and farmed out its distribution systems to Indian supplier Syntel.

The use of different suppliers can create headaches if the responsibility for delivering services between suppliers is unclear. Thomas Cook put Accenture in overall charge of many of the outsourced services.

"We initially said the suppliers had to work together and take joint responsibility, but in the end our largest outsourcing supplier [Accenture] took responsibility for several services," said Ailles.

The Accenture contract took a "risk and reward" approach under which the supplier pays penalties or receives bonuses depending on its performance.

Accenture's performance is judged on the achievement of a business plan and other criteria, including its "cultural fit" with Thomas Cook and how innovative it is as a service provider, Ailles said.

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