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4 lessons from the Hertz vs. Accenture IT disaster

A tremendous amount of information and specific insight can be gleaned by analyzing projects gone wrong. Here are four lessons IT leaders can apply to any outsourcing agreement.

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Project successes tend to result in a lot of the same conclusions that every team identifies (e.g., we had a great team in place, or we had good leadership supporting it). Disasters, on the other hand can offer some of the best learning opportunities.

The Hertz vs. Accenture lawsuit filed last year provides some particularly valuable insights. This case, involving a digital transformation, teaches us that it’s important to know best practices for holding your vendors accountable, specifically when you're leveraging agile-at-scale. 

Using all publicly available information, we highlight what went wrong with Hertz and Accenture and why it went wrong. 

Setting the stage

Most people know Hertz as a rental car company with about 10,000 locations globally and roughly a half a million vehicles.  In 2012, Hertz acquired two additional rental car companies, Dollar and Thrifty, and, leading up to 2016, the stock price had fallen roughly 85%.  Hertz was under pressure from three forces:

  • Ridesharing companies Lyft and the Uber were disrupting car rentals. One report stated that on expense accounts, Uber and Lyft charges had gone up by roughly 75% while rental cars had gone down by 23%.
  • The price of used cars had not grown at the pace that Hertz, one of the top five resellers of used cars, had expected. With a half million cars in their inventory, Hertz was taking a pretty big hit on the valuation of its inventory.
  • Hertz was under tremendous pressure from its competition. Avis had been fundamentally executing better than Hertz the last two-to-three years which put pressure on the books.

While Hertz was achieving its financial objectives, the management team was distracted. There was some suspicion as to whether they were appropriately reporting financials.  As a result of an SEC investigation in 2014, Hertz was forced to restate five years’ worth of financials.  This ultimately led to the replacement of the CEO, followed by another CEO replacement nine months later because the first one didn't fit.  They had also gone through an organizational restructuring and moved their headquarters to Florida and then outsourced their IT. 

All of these pressures created a situation where the company was conditioned for change, but they had also lost a lot of intellectual knowledge and institutional knowledge.  

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