CIO Forum: The Virtual IT Organization

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September 22, 1997

CIO Forum:
The Virtual IT Organization

By Bob Ridout
IW 500 slug hen DuPont & Co. announced last December that it intended to form an IT alliance with Computer Sciences Corp. and Andersen Consulting, many of our customers-and even some competitors-asked what DuPont, known for having a strong internal IT operation, expected to gain from such an outsourcing arrangement. The answer is simple: variability and flexibility in the IT services and solutions available to all the businesses within the organization.
In fact, this type of alliance may be suitable for other large, global, and divers e organizations that face a changing business model. Wholly owned businesses are shrinking, and more joint ventures, acquisitions, and divestitures are taking place, creating a need for more independence within various business units. Business lines have a growing need for greater flexibility and speed of operations. This translates to change with respect to the entire realm of IT within the organization. In some cases, solutions can come from the outside.
How do companies find suitable partners for something as critical as IT operations and services? One of the first things we did was form a creative-sourcing-alternatives team to evaluate potential IT partners and determine what role each of the partners would play.
The challenge for any company seeking IT partners is to figure out a way to preserve and enhance its internal IS organization, along with the accumulated industry knowledge and expertise. It must also gain access to enhanced IT services and solutions that will provide competitive advantag es in the marketplace. The IS organization itself needs to focus on growth and diversification-ensuring access to leading-edge technologies, broadening the career opportunities for its people, and providing for competitive economies at affordable costs for its operating units.
DuPont is creating a "virtual IT organization" that takes the strengths of two IT service firms and blends them with DuPont's knowledge of its industry. DuPont retains a large IT operation, and the team that will lead and manage the alliance. CSC will provide global IT services-maintaining data centers, networks, distributed computing, and generic applications at DuPont's Wilmington, Del., headquarters and at various plant sites. Andersen will provide chemical business solutions designed to improve manufacturing, marketing, distribution, and customer service.
Among the major benefits organizations can expect to realize from such an alliance:

Increased flexibility and speed, both from a variable cost standpoint and in delivering business solutions;

Access to new technologies and skills;

Work elimination through differentiated and/or reduced service levels;

Ongoing productivity improvement;

Operational reliability and infrastructure renewal;

Enhanced training and development opportunities for IT employees.

Of course, there are inherent risks in outsourcing. One is the possibility of decreased employee morale and retention. Existing IT professionals are a key asset in outsourcing; if employees get discouraged or leave, that can jeopardize negotiations. Open, honest communication is key to overcoming this.
It's also vital that companies avoid adversarial relationships with sourcing partners and thoroughly understand the capabilities of the service providers. This will lower the chances of undeliverable or inadequate service.
All risks can be overcome. The key is to define your objectives and develop a detailed planning and researching process, followed by tho rough contract negotiations and legal documentation. Then you can identify and overcome the risks associated with outsourcing.
Bob Ridout is VP and CIO at DuPont & Co.

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