IT Management - Xerox case study
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Transcript of IT Management - Xerox case study
Outsourcing Global Information Technology Resources
Xerox Background Description
A global enterprise addressing the worldwide document processing market which develops, markets, services, and finances a complete range of products and services designed to make offices around the world more productive.
Xerox Introductions & Market Share
0
20
40
60
80
100
120
1961-64 1965-68 1969-72 1973-76 1977-80 1981-84 1985-88 1989-92
NewProduct
NewCopierIntroductions
0
5
10
15
20
25
30
35
1984 1993
Low-End Copiers
Mid/High EndCopiers
Market Share
New Product & Copier
Introductions
Yet, Net Income is Declining
($1,200)($1,000)
($800)
($600)($400)
($200)$0
$200
$400$600
$800
1993 1992 1991 1990 1989 1988 1987 1986
Net Income
Background Corporate Restructuring — 1992
• Decision Making Moved Closer to Customer
• Greater Focus on Core Competencies
• Focus on Core Business
• Focus on Benchmarks
• Workforce Reduction
Information Management
• 1970s - CIM Established
• 1987 - General Services Division Established
Mission of CIM was now to . . . “develop the IT strategy for Xerox and ensure that it was implemented in all the business units.”
• $500 Million IT Budget
Information ManagementIT Strategy Consulting Firm
Finds Problems• No coordination of money spent each year
• No Corporate-Wide Management of IM Investment Priorities
• A Peripheral Player in IT Management
• Narrowly Focused IM Talent Pool
• Senior Managers Stingy With IT Infrastructure
• Redundant / Overlapping Efforts
• No Staff Development Mechanisms
Centralizing IMWallington Presents at President’s
Council Meeting — April, 1993
• $670 Million spent on IM in 1992 —
• Forecast to grow to $1 Billion by 2000 —
• . . . Amounts to 3.7% of total revenues!
IM 2000 Reengineering ProjectMid-1993
• Identification of IM problem areas
• Strategies to address those problem areas
• Projects implemented to fix problem areas
Goal: Move IM to a new information systems infrastructure.
Problems Revealed
• Aging applications portfolio
• Proprietary technologies from previous structure
• Large spending for legacy systems
• Autonomous culture allowed for costly duplication
IM 2000 - Strategies
• Reduce / Redirect
• Infrastructure Management
• Leverage Worldwide IM Resources
• Business Process Driven Solutions
IM 2000Internal Obstacles Remain
• Little discipline of both time and money
• Internal costs of $55 million for hardware
• Viewed as an “expense center’ by top executives
IM 2000External Forces Create
Final Pressures
• Increasingly competitive environment
• Forced to adapt quickly
Outsourcing & Xerox:What?Why?How?
What was and What is Outsourcing
• Outsourcing was looked upon as the business strategy associated with downsizing
• Outsourcing now is looked upon as utilizing the best expertise in local laws and business customs.
What is Outsourcing?
• Is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources.
• Mgmt strategy by which and organization outsources major, non-core functions to specialized, efficient services providers.
• Wholesale restructuring of the corporation around core competencies and outside relationships.
Strategic Grid
Outsourcing at Xerox
• Outsourcing versus integration.
• Create win:win relationship.
• Share values to create a true partnership.
• Develop “spirit of the contract” for senior management to and understand.
• Create infrastructure to support companies strategic direction in the 90’s.
Outsourcing Process
Phase I - Fact Gathering
Phase II - Request for Proposal and Data Gathering
Phase IV - Baseline Building and Evaluation
Phase III - Feasibility and Management Approval
Phase V - Due Diligence and Contract Awarded
Phase I - Fact Gathering
Vendor Selection
Benchmarking
OutsourcingObjectives
ITPartner
Phase I - Fact Gathering
• Vendor selection team– Cross-functional representatives– Establish outsourcing requirements, objectives,
goals, and timeline– Conduct industry benchmarking
Outsourcing Objectives
• Drive down spending on “legacy” system
• Improve quality and cost of IM services
• Focus company’s resources on the primary mission.
Xerox Benchmarking
• Outsourcing Strategies
• Outsourcing Processes
• Vendor references
• Human resource impact
Companies• Salomon Brothers• General Motors• Equifax• First Boston
• AT&T• Kodak• Sun Microsystems• McDonnell Douglas
Vendor SelectionQualifications• Global Presence• Capability to manage “globally”• Experienced in large scale outsourcing•“Core” strengths in various frameworks•Mgmt processes and strengths
Human Resources• Treatment of Xerox employees•Human resource values
Financial• Translation of productivity savings to Xerox•Flexibility in meeting Xerox financial requirements•Experience in “engineering” financial environment
Technical Solutions• Productivity Commitment• Support for existing Xerox diverse environment•Capability to “migrate”
“Soft” Criteria• “Congruence” with positive Xerox environment• Provide benchmark for desired Xerox cultural traits
Outsourcing Process
Phase I - Fact Gathering
Phase II - Request for Proposal and Data Gathering
Phase II -Data Gathering and Request for Proposal
Prepare a Request for a Proposal Be structured in a way that will allow assessments and
comparisons to be done in meaningful way Define requirements in complete and measurable terms Describe the type of relationship you are looking for Explain the problems that you are trying to solve Ask specific questions about corporate culture Present the current costs to the organization Specify a service level
Phase II -Data Gathering and Request for Proposal
Data Gathering
• Research the Vendors– Financial Stability, potential mergers, takeovers
• Questions and Answers
Outsourcing Process
Phase I - Fact Gathering
Phase II - Request for Proposal and Data Gathering
Phase III - Feasibility and Management Approval
Phase III - Feasibility and Management Approval
• Outsourcing feasibility
• Recommendation to Management for approval to proceed
Outsourcing Process
Phase I - Fact Gathering
Phase II - Request for Proposal and Data Gathering
Phase IV - Baseline Building and Evaluation
Phase III - Feasibility and Management Approval
Phase IV - Baseline Building and Evaluation
• Evaluate the vendor responses– Systematic– Measurable– Meets objectives
• Select the vendor for contract negotiation
Lessons Learned - Xerox
• “What you want” is essential
• Clear objectives are key
• Cross functional team is a necessity
• A good contract requires a lot of data
Outsourcing Process
Phase I - Fact Gathering
Phase II - Request for Proposal and Data Gathering
Phase IV - Baseline Building and Evaluation
Phase III - Feasibility and Management Approval
Phase V - Due Diligence and Contract Awarded
Phase V -Due Diligence & Contract Awarded
Outsourcing deals that go bad frequently suffer from poorly designed contracts - “Outsource Sense,” InfoWorld, September 1996
Managing the Outsourcing Relationship
• Create a Shared Vision• Include Effective Performance Measures• Use Performance Incentives and Penalties• Establish Clear Communication Mechanisms• Develop a Clear Contingency Plan and Exit
Strategy• Manage People Issues
Negotiate a Sound Contract
• Terms of the Agreement
• Minimum Service Levels
• Ownership & Confidentiality of Data
• Warranty• Incentives
• Disclaimers• Bankruptcy
Contingency• Force Majeure• Performance Measures• Anticipate Change
Global Complications
• Various Human Resource / Employee Laws
• Degree of Risk
• Political Instability
• Various Asset Transfer Laws
Xerox: Status in June 1994
• Xerox/EDS Core Teams Created • Massive Internal PR Campaign Initiated• Switch Incentives Offered• Assured Confidentiality• Divorce Issues Addressed• Annual Price Benchmarking• Single Global Contract• Key Global Players Added to Team
Xerox: Status 1996/1997
• Xerox “Satisfaction at the Low End and Dropping”• 2000 Employees Transferred to EDS / 700 Remain• After 2.5 Years 15% of Proprietary System Replaced
(Global View)• 600 Novell LANs installed• 1000’s Desktops and Printers Replaced• 12 Person Xerox Team Established to Manage• Contract Amended in Sept 1996
Contract Addendum
• Clarified Terms for Desktop and LAN Support
• Established Formalized Response Metrics
• Established ‘Managed Rate Change”
• Eliminated Billing Inconsistencies
Xerox: Status 1999
EDS Files Suit Against Xerox February 1999
Recommendations
• Outsource Non-Core Competency Functions
• Write Air-Tight Service Level Agreements for Every Strategic Business Unit & Every Platform
• Define Graduated Levels of Performance and Penalties Based on Customer Satisfaction
• Don’t Compromise Service Levels with Price Negotiation