Vested outsourcing replaces the often adversarial relationship between service provider and customer with a “win win” agreement in which both sides share the benefits achieved by outsourcing. In this case study, researcher and author Kate Vitasek explains the role time and trust play in developing a vested relationship.
The challenge: In 2005, Diversey, a leading global provider of commercial cleaning, sanitation and hygiene solutions for businesses, faced heavy debt, had flat sales and a new Chief Financial Officer who wanted IT spending cut in half from its present level of about five percent of sales. Diversey decided that outsourcing a large portion of IT functions with an offshore partner was the best way to reach the CFO’s financial targets.
Evolution of the solution, Part 1: The Diversey IT team realized the best way to achieve aggressive cost saving was with a classic “Lift and Shift” approach. In 2006 Diversey signed a five-year outsource contract with Wipro, a global IT service provider. The approximately $100 million contract covered Diversey’s entire IT management, including infrastructure, application development and support, and small project management. The deal succeeded. By year two Wipro had delivered the targeted financial and organizational benefits that Diversey sought. Perhaps more importantly, the companies had developed mutual trust and respect.
Evolution of the solution, Part 2: The parties were ready for the next stage of their partnership. “We wanted to shift the focus and make IT an enabler to the business,” said former Diversey CIO Brent Hoag. “By creating a Business Service Catalogue and leveraging cloud computing, business units would have access to a wide variety of services. Our vision was that business units would be able to ‘pay as you go’ for the services they wanted. If we could do this we felt IT would be seen as adding value to the business versus being an overhead.”
In January 2010, the companies decided to renew their contract, extending it to December 2014. The scope of the contract was expanded to achieve the objectives Hoag outlined—including Service Desk and Deskside support services.
The final step: Vested Outsourcing: The next stage was to move from good to great. “Diversey was already thinking about our IT outsourcing efforts as a continuous improvement effort,” Hoag explains. “We already had great success and were about to embark on the third generation of our relationship with Wipro.” During their research they learned about the University of Tennessee’s research on highly successful outsourcing deals and wanted to learn more. “Together we decided to participate in its Deal Review process as a way to help us learn how we might take our outsourcing relationship to the next level.”
This review performs an in-depth diagnostic into the contract pricing model, governance structure and performance metrics of an outsourcing relationship, and evaluates overall relationship trust levels between both a customer and their service provider through an online survey. It provides the companies with recommendations that can create a true Vested partnership, based on collaboration, alignment and shared values.
The Deal Review revealed the companies were well on the way to creating a highly collaborative win-win Vested relationship, and gave it a ranking of 3.7 out of 5 – with 3 being “Good” and 5 being “Great,” meaning both parties were operating in harmony and delivering transformational results and value beyond what either party could deliver themselves. The review, said Diversey Chief Technology Officer Kiran Vedak, “helped us to see the shortcomings clear in front of us and get a sense of urgency to address them.”
Conclusion: Diversey and Wipro have come a long way since 2005. Diversey’s IT group has gone from old school and expensive to nimble and cost-effective. In September 2010 Diversey was listed by InformationWeek as one of the top 10 US manufacturers that are leading innovative deployment of information technology. Overall, Diversey was among the top 200 companies recognized for technology innovation in the world. The pair also received the ‘IT Outsourcing Project of the Year’ in November 2011 by the National Outsourcing Association (NAO).
The awards are great, but the real value comes from applying innovation in IT. “Diversey’s recognition is a significant achievement and reinforces our commitment to find new and innovative ways to make our business more efficient and deliver added value to our customers,” says Norm Clubb, Executive Vice President and CFO. ““Our pioneering work in cloud-based computing is improving collaboration among our 10,500 employees while also demonstrating the ways that IT can reduce the environmental impact of our operations.”
Kate Vitasek is a faculty member at the University of Tennessee’s Center for Executive Education and is the author of Vested Outsourcing: Five Rules That Will Transform Outsourcing and The Vested Outsourcing Manual, both published by Palgrave Macmillan.