Accenture’s not exactly a stranger to dealing with unsavory topics that reach the masses. But the company’s recent engagement with the Canadian Government has put it on the defensive.
A series of press reports revealed details of a previously undisclosed government contract involving workers sourced from Latin America, raising questions about procurement transparency and the place of nearshore providers and workforces in taxpayer-funded operations.
What happened?: Canadian authorities were grilled over a sole-source CAD$208 million (US$155 million) outsourcing contract with tech firm Accenture after The Globe and Mail reported that about a third of the workers involved in the agreement were sourced from Brazil.
- Though the Canadian public has been aware of the contract since last year, government officials initially told the press that practically all of the people employed by Accenture for the contract were based in Canada, with a few being sourced from the US.
The details: Accenture’s services were acquired to administer the Canada Emergency Business Account (CEBA), a government-run loan program set up during the COVID-19 pandemic for Canadian businesses.
- A spokesperson for Export Development Canada (EDC) –the government organization in charge of CEBA– told the Canadian press that a team of 46 software developers were sourced from Brazil for the contract. The agreement also involved 105 Canadians and three US workers doing “front-line delivery.”
- Service was being provided in part by One Financial (formerly Vivere), one of the several subsidiaries owned by Accenture in Brazil.
- The contract –identified as one of the largest signed between the Canadian government and an outsourcing firm– was not proactively disclosed to the public.
The response: Accenture has kept quiet about the controversy. When NSAM reached out to the company for comment, we were told to “please contact CEBA with any questions.” The Globe and Mail reportedly received a similar response.
- Much of the contract’s information has been extracted from Canadian authorities piecemeal, over several months, by the press.
- We reached out to the EDC for comment. They have yet to respond.
Background: Outsourcing contracts have become a hot-button issue in Canadian politics, with tech and consulting firms raising eyebrows due to the increasing size of their agreements and the frequency with which they do business with Canadian authorities.
- Accenture alone received CAD$93.8 million (US$70 million) in Canadian public contracts between 2021 and 2022, according to an analysis by Carleton University.
- Canadian MP Gord Johns told the Globe that “the volume of outsourcing is just skyrocketing”. Johns is among the officials who pushed for a probe into government contracts with consulting firms.
Left unsaid: Organizations tend to keep third-party partnerships close to their vests, particularly if they involve offshore/nearshore providers. For governments, outsourcing operations to a foreign company, with the majority or a considerable portion of the tasks being handled by foreign workers, can be an explosive, politically-charged cocktail.
- Countries such as Ireland, Australia and England have seen their share of outrage and scandal related to the outsourcing of government operations.
The numbers: The average annual salary of a tech worker in Canada’s main cities (Toronto, Montreal and Vancouver) is somewhere between US$65,000 and US$75,000, according to CBRE’s latest data.
- In São Paulo, Brazil’s most expensive city for IT, tech salaries average US$50,000 a year.
For your consideration: Data privacy and security are strong arguments for organizations keeping their operations onshore. Players in highly regulated industries –like healthcare, telecom, finance and security– tend to go for the onshore or in-house option if a task requires handling of sensitive data. Less risky tasks might be sent offshore or nearshore, though.
- The EDC assured that Accenture’s devs in Brazil had no access to personal information from Canadian SMEs.
NSAM’s Take: We’ve been here before. It isn’t common for these sorts of contracts to come to light –either in business or in government–, but when they do, controversy is to be expected.
Service providers are no strangers to the occasional PR firestorm. Accenture’s lack of response, more than a sign of internal concern, might be an attempt to deprive the issue from oxygen and let it die out.
It’s easy to get embroiled in the politics of the story. However, transparency is what’s at the core of it. The growing relevance of nearshore IT is an open secret of sorts; one which is difficult to divulge given organizations’ preference for keeping third-party partnerships under wraps, especially if foreign workers are involved.
At NSAM, we’ve heard it from both sides: buyside executives point to the poor marketing efforts by nearshore providers, and the providers themselves lament the unwillingness of some of their customers –the more prominent ones in particular– to be open about their partnership.
The situation might change soon enough, though. Demand for specialized tech skills is increasing worldwide, with security-related needs pushing organizations to seek outside help. A recent Deloitte survey points to 81% of respondents leveraging third-party partnerships for their cybersecurity needs, for example.
Also, offshore and nearshore territories are building a reputation beyond mere sources of cheap labor, with some firms positioning themselves as innovators.
In short: the increasing need for capable talent and the urgent drive for technological transformation might make controversies like the one discussed above a thing of the past, as long as the parties involved –whether businesses or government organizations– are as transparent as permissible.
If that’s the case, we might be moving into a truly global marketplace for services.