DuPont defines the elements of outsourcing

TORONTO — The diagram is in the shape of a fan. Not the electric kind with the rotating propeller; the kind you unfurl, hold in your hand and wave back and forth.

Each blade of the fan represents a business unit within the chemical giant DuPont,

and each unit has its own CIO. According to Diane Strickler, who projected the diagram as part of her presentation at a business process outsourcing conference Wednesday, those business units would be the size of a Fortune 500 company if they were on their own. When the audience gasped at the density of DuPont’s IT landscape, the company’s director of technology integration merely shrugged. “”What can I say: it’s a complex company,”” she said.

DuPont uses the image as metaphor as much as illustration. The individual blades of a fan accomplish little on their own, but together they are strong enough to move the air. Holding them together is Strickler’s task, who described the challenging, never-ending task of acting as the bridge between these business units and DuPont’s two outsourcing partners, Computer Sciences Corp. (CSC) and Accenture.

“”When we began to look at outsourcing, we were using what we were doing in IT as a model for the rest of the organization,”” she said. “”It wasn’t just happening in IT. It was part of a US$1 billion change.””

DuPont began looking for help more than 10 years ago, after an audit by A.T. Kearny showed the company spending 3.8 per cent of its revenues on IT, as opposed to the industry average of 2.0. Prior to evaluating outsourcers, Strickler and her colleagues reduced its IT spending by approximately 45 per cent through massive cutting and reorganization. DuPont was using about 10,000 applications, for example, 80 per cent of which were custom-developed, but it soon started using vendor-provided software.

It also began shutting down and selling off many of its 120 data centres, working with fewer contractors, and downsizing to 4,000 IT people from 10,000.

“”I think we single-handedly put Digital (Equipment Corp.) out of business,”” Strickler said, adding that it had been purchasing US$110 million a year in equipment annually from the firm but now spend only about US$10 million. “”It was a significant change.””

Though its board was pleased with the spending drop, Strickler said their success presented a catch-22. “”We were now being looked at as a cost centre, and not a centre of value creation,”” she said. “”We had to change that paradigm.””

This is a quandry that many other large enterprises encounter before they make the leap to outsourcing, according to Everest Group CEO Peter Bendor-Samuel, who also spoke at the event Wednesday. “”There is some cost savings that come out of outsourcing, but that’s not all you can derive from it,”” he said. “”We’re really moving into an era where it’s becoming no longer a tactical exercise and much more strategic.””

Though DuPont had originally decided to enjoy the single point of contact provided by one outsourcing firm, Strickler said it was attracted to Accenture’s expertise on software specific to the chemical industry. CSC, on the other hand, wound up handling the plant applications for DuPont’s U.S., European and Canadian operations. Through this process, approximately 3,100 DuPont employees transferred to CSC and about 600 to Accenture. DuPont’s remaining IT staff retain stewardship of its SAP implementation and other key processes, Strickler said.

Since outsourcing in the late 1990s, DuPont has used firms like Gartner to track customer satisfaction, and has seen its rating on a five-point scale move from 3.1 to 3.8 over the last four years. While its original outsourcing contracts covered a 10-year period, Strickler said she has spent much of her time renegotiating them to address areas the company hadn’t foreseen — like the e-commerce capabilities it required as the Internet became a prominent business medium. “”New services keep coming up,”” she said.

Bendor-Samuel agreed. “”We’ve really glossed over how flexible we had to be,”” he said. “”We were signing all these 10-year deals on things like desktops. But who knows what a desktop is even going to look like in 10 years?””

While CSC and Accenture are involved at many levels of DuPont’s business, Strickler said it keeps the outsourcers out of all personnel and planning discussions.

Comment: info@itbusiness.ca

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