IT sourcing strategy guide for enterprise CIOs
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IT infrastructure outsourcing and multisourcing are tricky tasks for enterprise CIOs, but bringing the IT Infrastructure Library (ITIL) framework into the process can make large-scale outsourcing deals more palatable.
The Procter & Gamble Co., an $80 billion a year consumer-products company based in Cincinnati, with more than 135,000 employees in 80 countries, has gone through several rounds of IT outsourcing, starting in 2003.
"We were embarking on a fairly rapid global expansion, and we felt like we needed to have the capacity and capability to meet that global expansion and business expansion with IT infrastructure and application capabilities," said Daryl Goetz, Procter & Gamble's global IT Service Management (ITSM)/ITIL manager.
Seven years ago, the company decided to outsource a large portion of its IT organization, including infrastructure, networking and applications. The IT infrastructure outsourcing vendor, Hewlett-Packard Co., in Palo Alto, Calif., also took responsibility for support in those areas, including the replacement of applications and hardware and the development of new products.
Like Procter & Gamble, which launched its ITIL framework in 1997, HP is an ITIL shop, Goetz said, with equivalent levels of maturity.
"We've had a lot of success with ITIL," Goetz said. "It's a good foundation and capability for structurally having clear, defined process."
That same year, Procter & Gamble also outsourced its HR applications to IBM Corp., and its on-site utility work to Chicago-based Jones Lang LaSalle Inc.
"While the [outsourcing to Jones Lang LaSalle] is not unique to IT, it gave us a touch of multivendor," Goetz said. "Obviously, we had to coordinate among all of them."
Foreseeing a further desire to diversify in the future, Procter & Gamble made a strategic decision to reexamine its outsourcing contract with HP after five years. When 2008 rolled around, "we decided that the network portion of that was a key driver to our globalization and our integration capability with our acquisitions, so we decided to look at re-outsourcing that portion to another vendor," Goetz said.
Following a review process, Procter & Gamble chose British Telecom, now BT Group PLC, for its strong ITIL base, success in global networking and cultural similarities between the two companies.
Procter & Gamble's CIO drove the ITIL-aligned multisourcing efforts, assembling a leadership team including the vice presidents of such key IT areas as global databases and infrastructure, a representative from financial services, and the company's employee relationships director, among others.
"Anybody thinking about outsourcing, my very first requirement would be [to determine] how ready you are in terms of standard process across the environment you want to outsource," Goetz said.
In drawing up IT outsourcing contracts with the various vendors, the team focused on integration, meaning the suppliers' responsibility to integrate into Procter & Gamble's existing culture and ITIL framework.
"The key to our success is integrating, not interfacing," Goetz said. "Many of the struggles I've seen have [come from] setting up contracts and looking for suppliers in a very interfacing kind of design, versus an integration design."
Procter & Gamble quickly learned it had to change its own internal measures of success -- the "what counts" factors, Goetz said.
The leadership team worked with non-IT business professionals to understand their business objectives, then created an end-to-end IT infrastructure based on those objectives.
"There was a very direct alignment between the IT infrastructure and application environment and the business needs," Goetz said.
Change management was also considered a crucial need in handling so many vendors, so Procter & Gamble developed processes related to cross-vendor integration points.
"With multiple vendors, we wanted just one flow chart end to end. We had to look at the places where the two vendors needed to work together, like change implementation," Goetz said. "A single vendor cannot just feel it has the total authority to implement change … without communicating with the other vendors, and making sure not to disrupt other vendors' success."
Using manuals and having a process flow in place with clearly defined steps and integration points meant "vendors knew their responsibilities and understood how they worked collectively to both communicate and coordinate their activity," Goetz said.
Goetz also advocated phasing in IT infrastructure outsourcing, focusing on in-process, business-focused measurements, and creating a plan for maintaining the currency of the company's infrastructure, including determining how to pay for it and how frequently it will be refreshed.
Above all, avoid getting stuck in the middle of your various providers by establishing clear objectives, such as service-level agreements and measures of change management success, Goetz said.
"Probably our single greatest challenge is not being drawn into being a referee," Goetz said. Following the firm's previous multisourcing experiences, "as we brought British Telecom on board, we leveraged that knowledge and skill."
Procter & Gamble is not alone in its effort to tap ITIL for IT outsourcing and multisourcing management.
There was a very direct alignment between the IT infrastructure and application environment and the business needs.
Daryl Goetz, global ITSM/ITIL manager, The Procter & Gamble Co.
Rob Whiteley, vice president and research director of infrastructure and operations at Cambridge, Mass., consultancy Forrester Research Inc., said that IT infrastructure outsourcing is on the rise, and enterprises are relying on ITIL to manage such relationships.
Last year, a Forrester survey of 56 global IT-infrastructure outsourcing clients determined that a growing number were turning to infrastructure outsourcing to free up cash and devote more time to using technology to enable the core business rather than more simple "keep-the-lights-on" IT functions.
"A lot of companies are trying to figure out how to continue making cost efficiencies," Whiteley said. In the past, many have lacked processes like ITIL to tackle outsourcing, especially multisourcing, he said.
However, Whiteley said, there's nothing like a good crisis to force change. "A lot of companies looked hard [over] the past 18 months at ITIL and Six Sigma [because of the economic crisis]," he said. Now that more companies have those process improvement methodologies in place, "we feel they're in a [better] position to outsource than in the past five years."
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