InformationWeek
Defining The Business Value Of Technology
November 16, 1998
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Deloitte employs a global director of risk management, whose job is to be the "conscience" of all service agreements, Sprinkle says. "He tells the client what it will take on their part, what commitments they need to make," Sprinkle says. "He also makes sure our guys represent something that's true."
Some integrators and outsourcers are soliciting customer feedback more than ever. PricewaterhouseCoopers has hired an outside research company to continuously ask clients if their needs are being met.
Likewise, IBM Global Services uses a market research firm to evaluate project work and query clients about IBM's skills, business knowledge, responsiveness, and quality of service, as well as the business value the vendor is delivering. "What we are looking for is any gap between the customer's expectations and their actual satisfaction," says Norman Chaykowski, director of customer loyalty at IBM Global Services.
If a customer indicates dissatisfaction, Chaykowski says, "all the red lights go on" and an IBM representative meets with the project manager to go over problem areas. IBM also monitors how it works with other vendors in a contract.
Some IT service providers--including Andersen Consulting, Deloitte, EDS, Ernst & Young, and PricewaterhouseCoopers--are developing "solution centers," places where staff work on specific, large-scale IT projects such as year 2000 remediation or ERP implementations. By providing shared resources to multiple clients from a given location, project time lines and costs could be reduced.
Andersen Consulting began a broad rollout of such centers in 1995 and now has 42 in 12 countries around the world, employing 5,000 people. The centers are focused on technologies such as E-commerce and supply-chain software, and industries such as financial services and utilities.
By having the centers strategically placed around the globe and linked electronically, Andersen can take advantage of different time zones and available resources, says Michael Bass, the firm's global managing partner for solution centers. Before the centers were created, "we had done all work at client sites, which made it difficult to share expertise," Bass says. "Skills and knowledge are scarce. Sharing knowledge speeds up development and reduces risks across multiple projects." He says the centers have reduced the time needed for a typical ERP project by as much as 50%.
Andersen still keeps teams at client sites for much of the integration and front-end work, change management, knowledge transfer, and training; solution centers work on systems design and testing. "Sometimes we have the client's people working in centers with our people if they want a lot of hands-on experience," Bass says. "We do routine client satisfaction surveys and 85% to 90% say they would use the centers again."
Some integrators are striving to make their international services more uniform with offerings in the United States. KPMG, for instance, is going to one set of billing rates. Alliances with other integrators and outsourcers are another way to improve service. Compaq is establishing partnerships with PricewaterhouseCoopers and Andersen Consulting, in which PricewaterhouseCoopers and Andersen would offer business reengineering services and Compaq would provide ERP software implementation services.
Looking Ahead
Even as the systems integration and outsourcing markets mature, and IT organizations and business executives become more savvy in harnessing these services, the rules of the game may be rewritten within the next few years.
One theory, first posited by former American Airlines CIO Max Hopper, is that computer processing will become as widely available and easily accessible as electric power. According to this "utility" theory of computing, all the work that's required to process and analyze vast streams of data into reports or transactions, and to deliver applications to end users for daily business activities, will be removed from the corporate environment. Instead, the operations management, maintenance--and to a large extent design, development, implementation, and enhancement work now done by business IS organizations--will be carried out behind the scenes by utilities.
"Where something is standard and accepted, whether demand deposits for banks, travel reservations, or payroll, it doesn't make sense for everyone to do it themselves," says Hopper, now an independent consultant in Houston. The demand for utilities will come, he argues, "because there is a huge lack of skills, and it doesn't make economic sense to deploy skills so widely when they can be deployed in fewer numbers and places."
These utilities are beginning to emerge. ServiceNet, a joint venture of Andersen Consulting and GTE's BBN unit, next month will roll out a remotely hosted Lotus Notes "netsourcing" service. And enterprise software vendors such as Baan, PeopleSoft, and Oracle are partnering with service providers to offer ERP hosting to small and midsize companies.
Bob Walker, VP and general manager of HP's professional services unit, thinks IT utilities are on their way. "The model of the whole computing environment has changed again with the Internet," Walker says. "Computing and information can be available in a public sort of way, and companies don't have to own that themselves."
For the utility model to take hold, Walker says, network access, security, and a whole new layer of middleware must first be perfected. Within the next two to three years, those pieces should start falling into place, stoking demand for "network appliances" to access IT utilities. HP plans to provide utility components and possibly even operate a utility itself. To that end, it's entering ventures with others for business content. For example, HP last month acquired Open Skies Inc., a supplier of reservation systems for small and midsize airlines. The acquisition marks HP's entry into transaction-based business-process services, and makes HP an active participant in the airline industry.
Select Services
In the near term, integrators and outsourcers expect strong demand for a select group of services. One service is what some refer to as extended ERP, in which service providers help customers expand the benefits of enterprise applications further into the supply chain. Companies increasingly are hiring out quicker payback projects in the area of customer service, such as call-center management, sales-force automation, Web-based sales and service, and customer-focused data warehousing and data mining.
Whether it's for new or more conventional IT services, for many companies the integrators and outsourcers have become essential partners at a time when knowledgeable people are scarce and the tasks at hand are increasingly complex. And some IT chiefs who have been fortunate or wise enough to select the right partner find that the lasting value of the relationship isn't so much the actual work as the knowledge gained by their own employees.
Reflecting on Lubrizol's decision to put so much of its future in the hands of Deloitte Consulting, Le Couedic notes: "We have people in IT whose lives have been affected forever because they discovered different ways to work and do business, and different ways of looking at technology. They will be our own internal consultants for many years."
With so much riding on the success of these arrangements, it's not difficult to see why IT managers need to be prepared to select the right partner.
--with additional reporting by Marianne Kolbasuk McGee
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