Outsourcing
c|net, 7/1/02: EDS downplays WorldCom impact
By Tiffany Kary
After a significant stock drop, Electronic Data Systems said Monday that WorldCom's accounting scandal and possible bankruptcy will not impact the bottom line of the information technology services company, despite several multibillion-dollar contracts they have with WorldCom.
Since the WorldCom accounting scandal came to light last week, shares in EDS have fallen more than 35 percent. Shares were $47.50 a week ago--the day before the WorldCom news broke--and were down $6.70, or 18.03 percent, to $30.45 at the close of trading Monday.
[more]
Computerworld, 7/1/02: EDS ends outsourcing talks with P&G
By TODD R. WEISS
A potential outsourcing deal between services vendor Electronic Data Systems Corp. and consumer products company Procter & Gamble Co. (P&G) ground to a halt today when EDS terminated its proposal.
[more]
IT Week, 7/1/02: OUTSOURCING INTERVIEW - LOW PRICES CAN MASK POOR DEALS
BYLINE: Mark Street.
IT Week: Fierce competition has resulted in some attractive outsourcing deals. As a consultant, do you think it is now a good time for firms to sign up with outsourcers?
Stephen Koutros: Companies should not outsource just because suppliers are offering the lowest prices in 10 years. And they certainly shouldn't enter into a contract with an outsourcer with the sole intention of saving money. Ideally a firm should be looking for low prices backed up with the appropriate service level agreements (SLAs) or value. But surely lower prices are a good thing?
You should take advantage of low prices, but there is usually a catch with these deals. For example, the contract might only be for two years instead of the more usual five, or it may be backed by an inadequate SLA.
At the same time, contracts may not make provision for additional resources that may be required half way through a five-year term. These cheap deals may also be less flexible and fail to reflect any increase or decrease in business.
So is it still a sellers' market?
The suppliers at the end of the day are masters of the deals because they have been doing them for the past 20 years. It's very unlikely that they will offer a deal that is lower than cost price and expect to make it up on volume. Companies choose to outsource for cultural and strategic reasons rather than price.
Is now a good time to renegotiate outsourcing deals?
Any time you feel that your deal is not meeting your needs is a good time to renegotiate. Renegotiation results from dissatisfaction, and the fact that a deal brokered two to three years ago is no longer competitive, as current prices can lead to extreme dissatisfaction. However, it is worth remembering that changing supplier will carry with it transition costs that can very quickly turn (a new) deal into a false economy. There is a huge learning curve when a new supplier takes over a contract and many other issues that are hard to account for when first drawing up costs.
What do companies need to consider when broking a new deal?
There are certain parts of the service that can be commoditised. There is a huge advantage in using different suppliers for each of these commodities.
The advantage of avoiding sole outsourcing is that you are not going to the negotiating table with complete information. A good starting point is to calculate the cost of keeping processes in-house. Many companies are surprised by how high their internal costs can be once they add up the costs of human resources, and the total cost of ownership of hardware and software infrastructure. This information is essential for drawing up sensible SLAs.
Do you expect business process outsourcing to catch on?
Business process outsourcing is in its infancy - it's rather like IT outsourcing was around 15 years ago. A lot of firms are looking at it or running pilot schemes, as they are not sure where or how it fits in with their strategies. The idea behind business process outsourcing is that it allows a firm to offload certain functions so it can concentrate on its core competencies. There are certain parts of a business that should never be outsourced, such as the business intelligence function.
ABOUT STEPHEN KOUTROS
Stephen Koutros is managing partner of consultancy TPI Europe.
Before joining TPI, Koutros was European managing director of Alliente, a spin-off of Hewlett-Packard that provides a range of indirect procurement services to leading companies.
Koutros moved to Alliente from Cap Gemini Ernst & Young where he was responsible for the design and delivery of the firm's Global e-Procurement service.
[complete article above]
IT Management
CIO, 7/1/02: The IT Inside the World’s Biggest Company
WAL-MART IS BIG. To understand just how big, consider that on Nov. 23, 2001, the 40-year-old retailer sold more than $1.25 billion worth of goods in a single day. The company has 4,457 stores, 30,000 suppliers, annual sales of more than $217 billion—and one information system. According to CIO Kevin Turner, running centralized IS with homegrown, common-source code gives Wal-Mart a competitive advantage and helps the company maintain one of the lowest expense structures in retail.
[more]
8:03:34 AM 
|
