Outsourcing: A Means of Business EnablementBy Lawrence Walsh | Posted 2008-04-30 Email Print
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Shell’s outsourcing deal will enable it to focus on core business operations.
Royal Dutch Shell, the world’s third-largest oil producer, is touting the $500 million annual savings that will result from its massive outsourcing deal with Electronic Data Systems (EDS). However, the real lesson from this experiment may be business enablement.
In December 2007, Shell announced its intentions to outsource nearly all of its IT operations by June 2008. The result would eliminate more than 80 percent of its IT workforce—3,200 employees—mostly in the United Kingdom. Plano, Texas-based EDS won the lion’s share of the $4 billion multiyear contract, with data center operations and support landing in the lap of Germany-based T-systems.
While the cost saving is undeniable, Shell CIO Alan Matula said in published reports that the true objective is getting the company focused on its core business operations.
For many large enterprises, IT operations are becoming a distraction. It’s not that IT doesn’t add value, but the costs—in terms of time and energy toward ensuring consistent availability and security—are taking time away from exploring revenue-producing business opportunities.
For instance, Chrysler recently signed a multiyear, multimillion-dollar IT outsourcing deal with Indian outsourcing giant Tata Consulting Services. This will relieve Chrysler of the burden of internal IT management, as well as dealing with multiple third-party providers, thus enabling the struggling automaker to focus on its products.
And security and storage software vendor Symantec is exploring outsourcing for a significant portion of its IT operations. After dozens of acquisitions and significant market growth, Symantec says it’s become increasingly challenging to ensure its IT footprint is harmonized across each data center and desktop.
Analysts say this trend reflects enterprises’ need for flexibility and agility in responding to business needs. Cost-cutting simply isn’t enough of an outsourcing justification anymore, they say.