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FedEx Makes Strategic Shift

As part of a broader strategy to cut costs and modernize its IT, FedEx offered a voluntary buyout to IT and select other workers as it adjusts its talent mix by giving more work to service providers.

FedEx needed that development speed when its main rival, UPS, launched a new service, called My Choice, in October 2011 to let package recipients redirect their packages en route. Creating such a service is a big challenge for package-delivery companies because most of the information they have and the services they provide focus on the shipper, not the receiver. FedEx launched a competing service this quarter called Delivery Manager. "We had to step on the gas, no doubt," Carter said. Delivery Manager would've been almost impossible to do without a single address look-up service, he said.

Another fundamental change at FedEx IT is its move to a private cloud architecture for its data centers. A private cloud in FedEx terms means that all its servers, storage and networking configurations are designed for what Carter calls "general-purpose computing," so that they can run any application workload rather than be dedicated to one function.

FedEx began this private cloud effort after the IT organization mapped out the company's future data center needs several years ago, and the board of directors balked at the capital cost. Using a private cloud architecture instead, FedEx built a data center in Colorado Springs, Colo., that consumes about one-third the power as was originally planned, in about one-fifth the physical size.

Before moving an application into the Colorado data center, which opened in early 2011, the applications were rewritten to run on a common software stack to allow for workload shifting. While some of the software used to run FedEx's data center continues to be proprietary, "we will be OpenStack compliant in a short period of time," Humphries said, referring to the open-source private cloud platform.

The Colorado data center is located at an elevation of 6,000 feet, letting FedEx cool the building using the outside air instead of costly air conditioning. The design is modeled on the ultra-efficient, standards-based data centers that Internet giants such as, Facebook and Google have built. And that infrastructure will let FedEx move some computing capacity to public cloud services from the likes of Amazon, Rackspace and Verizon in the not-too-distant future. FedEx is set to convert a data center based on the same private cloud architecture near its Memphis headquarters.

FedEx faces significant risks from the scale of its change. Carter knows he's losing important technology expertise by cutting staff, but he said he's convinced that the voluntary, staged buyout will help transfer that expertise gracefully to third-party service providers.

While Carter downplays any negative impact from the transition, he doesn't downplay the scale of the change the FedEx IT leadership team is trying to pull off. Said Carter: "People, organization, processes, technology, platforms -- everything that we were doing is being reset."

Editor's Note: After further discussions with FedEx CIO Rob Carter, the editors made a few minor changes to the headline and story.

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User Rank: Apprentice
5/7/2013 | 3:15:54 PM
re: FedEx Makes Strategic Shift
FedEx is making a move I've been advocating for a long time, and that is to focus on what are their core competences! If a large company like FedEx is doing it, what about those to whom IT is an even lesser area of world-class expertise!
User Rank: Strategist
5/8/2013 | 3:19:01 PM
re: FedEx Makes Strategic Shift
FED X is joining the bandwagon. The disassembly of the American I.T. workforce. Recycle employees to contractors. People do not matter any longer, it is all about money. Time to Recycle the entire country and get new leadership that believes in America, the American workforce, and humanity.
This is not an upgrade, but a down grade. Do you think that Obama care is really going to be as good as the Corporate plan? Hummmmm....... This has been happening around the country for the past 12 years. Everyone will be a contrator....or replaced by India! " FedEx posted $361 million profit in its most recent quarter on $10.95 billion in revenue." They cannot afford full time I.T.????
Tech Guy
Tech Guy,
User Rank: Apprentice
5/12/2013 | 1:30:46 PM
re: FedEx Makes Strategic Shift
They'll tell their employees that they're the key to their success but their actions indicate that their employees are expendible! According to a USA today article, it appears that Fed Ex will be offering computer repair services too! Is this type of service offering part of their core business or competences? It's a numbers game and I've experienced it from the inside as a former truck driver who has recently reinvented himself with a Bachelors Degree in Computer Science specializing in Computer Information Systems. My hope is that they outsource the work to American companies located in the USA!
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