November 15, 1999

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Solution Series:
Outsourcing Lets Honeywell Stay On Course

oneywell Inc. outsourced its mainframe, server, and some engineering systems of its Space and Aviation Control unit, maker of flight controls and jet engines, to SCB Computer Technology. The five-year contract, signed in 1994 and extended another five years, is valued at between $30 million to $40 million a year. The Honeywell unit sold its IT and data-center equipment, transferred IT personnel, and leased space to SCB. Ron Trasente, former VP of IT for Space and Aviation Control at Honeywell, who recently left the company, told InformationWeek that the outsourcing deal lets the company focus on its core business of building flight-control and avionics equipment. "We are not in the information systems business," Trasente says.

InformationWeek: Why did you choose a fairly unknown and midsize outsourcing provider rather than a bigger player, such as IBM or EDS?

Trasente: One of the advantages of dealing with a midsize company is that we have far more leverage than with an IBM. Smaller companies are focused on customers, are flexible, and we have greater control in decisions related to us. We feel more like a strategic partner than just a customer.

InformationWeek: What kind of E-business activities have you undertaken, and how are they affecting your existing outsourcing contracts?

Trasente: Our existing outsourcing hasn't changed. But our E-business efforts are strategic to our core business, so we're keeping control of that in-house. We use a combination of inside and outside skills to develop the E-business software, but we let the outsourced platforms run it.

The bottom line is we focus on strategic issues, letting outsiders handle tactical and operational IT chores. Strategic initiatives include using E-business to improve our customer service, allowing our customers like Boeing and Airbus to access support information, including manuals, and to track order status over the Internet.

InformationWeek: Who do you turn to for consulting and design help for E-business development?

Trasente: We look for people with a track record in E-business. We typically go to small companies that have the expertise, like TechKnowledge, for consulting help. For operational outsourcing such as the one we have in place, we needed to check out the financial resources along with technical competency and track record of the outsourcing provider. For E-business consulting services, which for the most part involves smaller jobs, we are willing to go to startups.

InformationWeek: What outsourcing lessons have you learned?

Trasente: A whole lot. This is what I have to say to others looking at outsourcing:

Don't let cost reduction be the only reason for outsourcing.

Don't relinquish control of accountability.

Don't make assumptions. The contract should include not only today's needs, it should also be flexible to include future strategic needs as they come up.

Look at your balance sheet, and transfer as many of the IT assets and equipment to the outsourcing provider as you can. If we had kept the hardware, upgrading would be a joint operation and messy.

Have a full transitional plan, document it, and be in charge.

InformationWeek: What would you have done differently as far as the outsourcing contract is concerned?

Trasente: We were late in getting into outsourcing--we should have done it earlier. Second, we underestimated the role of mainframes; we thought mainframe activity would diminish faster and signed a contract to get off mainframes in five to six years. In reality, we didn't get off that quickly, and we still have the mainframes.

InformationWeek: What keeps you up at night?

Trasente: The dichotomy of having to balance time to market of our E-business efforts and getting it right. Getting the right outside help is crucial, too.

Photo by Tom Gerczynski

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