Boeing's IT Outsourcing Deals Generate More Savings Than Expected

Executives at Boeing Co. are telling a tale of two outsourcing stories that shows the importance of preparation to the success of an IT services engagement.

The company's decision in 2003 to outsource a range of technology operations to several vendors is resulting in greater savings than expected because IT execs at Boeing followed a meticulous transition plan, says Philip Harris, director of IT sourcing and benchmarking at the aerospace company.

By contrast, the company's rushed effort to turn over IT operations to a single vendor in 1998 following its merger with McDonnell Douglas resulted in numerous foul-ups. "There were a lot of bumps," Harris conceded Wednesday, speaking at Gartner's outsourcing conference in Los Angeles.

In 2003, Boeing outsourced the bulk of its IT operations to Computer Sciences Corp., Dell, and IBM. The move has since helped the company keep IT costs in check and operate more efficiently. "The best-of-breed model has delivered the anticipated savings, plus more," Harris said. He didn't provide specifics, but even a small percentage of extra savings could yield big dollars for Boeing, which spends more than $1 billion annually on information technology.

Boeing awarded CSC two six-year contracts worth a total of $150 million to manage its servers and mainframes. IBM received a three-year, $160 million deal to run the company's voice network, and Dell won a five-year contract to operate Boeing's desktop systems for an undisclosed sum.

The success of the deals is in large part because of the extensive preparatory work that Boeing undertook before signing off, Harris said. Among other things, the company formed a transition committee, led by Harris himself, tasked with ensuring that the smallest elements of the handover were planned for. The company also insisted that vendors competing for the contracts include detailed employee-transition plans in their bids. Harris said his job depended on a smooth transfer. "If it wasn't a seamless transition, then I would have been explaining to my successor why it wasn't successful," he said.

Boeing's turbulence-free IT outsourcing engagements in 2003 stand in stark contrast to its effort to hand over technology operations to a single vendor, IBM, in 1998, following the company's merger with McDonnell Douglas. IBM had previously signed a groundbreaking 10-year, $3 billion outsourcing deal with McDonnell Douglas that Boeing inherited. But Harris said Boeing didn't take enough time to prepare for the transition, which went badly. "There were help-desk tickets piling up on the floor," he said.

Harris said he doesn't blame IBM for the problems, which also included an executive secretary losing all communication with her boss. Rather, he says Boeing's lack of preparation was at fault. Boeing ultimately let the IBM contract expire before bidding out the new agreements in 2003.