Need more evidence your company's sourcing strategy must change with the business? Look no further than E.I. DuPont de Nemours & Co.
Twenty years ago, information technology at DuPont functioned more like a brain trust than a service. IT operations were heavily into research and involved in a lot of alpha and beta testing, said Maryann Holloway, director of global alliance management and IT operations at DuPont. Information technology was also costing DuPont $1.2 billion a year.
The Wilmington, Del., giant was beginning its transition from "conservative chemical manufacturer to dynamic science company" in the late 1980s, Holloway said, and IT needed to change too.
A period of belt-tightening followed, including layoffs and infrastructure consolidation. By 1996, IT spending was halved to about $650 million. But now the IT operations lacked the flexibility to serve a company that was rapidly reinventing itself through billions of dollars of divestitures and acquisitions all over globe, according to Holloway. "We had eliminated work and consolidated but didn't invest in people or new technology or, especially, process management," she said.
A year later, the company did another reckoning of its IT offerings, this time focusing on sourcing solutions that would keep costs down, especially fixed costs, and also enable IT to support DuPont's business strategies, which were being driven by talented employees not just in the U.S. but also worldwide. The result in 1997 was the "Big Bang Deal," as Holloway called it, with El Segundo, Calif.-based Computer Sciences Corp. and then-Andersen Consulting, now Accenture.
The momentum didn't let up, when in 1998 DuPont used consultants from MIT's Sloan School of Management to devise a strategy for putting IT as close to the business units as possible. The result was the DuPont peacock, a fan-shaped organizational graphic of IT functions, with some 20 business units represented as feathers, external and internal IT providers embedded in the feathers, and the whole gaudy show sitting on the base of DuPont's global CIO.
"We remain the integrators of all our service providers," Holloway said, adding that the toughest part is the governance. "You need to know what you're going to do together and what you need to do separately. That who/how part is the hard, hard work." Subcontractors are held to the same air-tight service level agreements as the providers. "You don't get an out because a subcontractor doesn't come through," Holloway said.
In retrospect, Holloway could point to several factors that helped in the groundbreaking 1997 transition. First was having a capable, dedicated integration team that "was comfortable with ambiguity," she said. People who "don't have to have quick, concise answers" are a big plus in a complex, politically charged project. Second was sponsorship from senior management, right up to an engaged CEO. The third factor was having clear business objectives and an understanding of why the task is being undertaken keeps the project on track. The transition also depended on corporate IT being "more transparent" with its pricing, which helped force the provider to be more transparent and helped drive behavior in the business units. Finally, DuPont did bring in outside expertise, including public relations assistance.
Going with a winner?
On Dec. 19, 2005, DuPont renewed its contract with CSC, extending it to 2014. The $1.9 billion deal, which Holloway described as flexible, with a well-structured master services agreement, bucks a trend to shorter deals. Questioned about the long-term deal, Holloway said DuPont wants to work "with good, solid companies" and CSC is a "winner" with an "outstanding track record" and "competitive pricing."
Holloway gave her talk the day after CSC confirmed it was seeking a buyer and cutting some 5,000 jobs, most of them in Europe. Asked if the news gave her pause, Holloway said DuPont does not expect the layoff to have an impact on its account. "We're very service-level driven with CSC," she said. "CSC may change ownership, but I am still expecting the same account team to meet our needs."
Take good inventory. "Understand what you have today. You'll get the best price if you have your house in order," Holloway said.
Set clear rules of engagement and well-defined statements of work.
Moving from a cost-cutting environment to demand-driven IT is hard. "When you don't have the money, it is easy to say no," Holloway said. Drawing the line in a demand-driven IT culture is hard work. It requires a deep understanding of the strategies of each business unit.
Let us know what you think about the story; e-mail: Linda Tucci, Senior News Writer