CIOs from Britain's Highways Agency and Tube Lines talk candidly about how to make outsourcing deals work better and yield greater savings
Outsourcing deals typically promise to deliver cost savings and increased efficiency—but all too often the promises fail to match the reality.
At the National Outsourcing Association's Sourcing Summit last week, two heads of IT shared their experiences of how to get the best out of outsourcing agreements and make sure they're delivering long-term value.
Four years ago the Highways Agency—which is responsible for maintaining the UK's motorways and some A-roads—relied on more than 100 contracts with external companies to deliver a wide range of its IT services.
On joining the organisation in 2005, Highways Agency director of information Denise Plumpton inherited the whole portfolio of outsourcing deals—different contracts for helpdesk, different contracts for application support and different contracts for telecoms—along with a number of in-house staff.
"It was like looking at a bowl of spaghetti—it did not seem to have any coherence and it was not clear who was doing what," she told the conference.
Plumpton decided the best approach was to end its existing outsourcing deals, bring infrastructure management and business analysis roles back in house and to sign a deal with a single outsourcer Atos Origin (ATOS.PA) to handle the rest.
The contract, struck in 2007, sees Atos Origin managing the Highways Agency's IT infrastructure, datacentres, telecoms, desktop and providing application support.
The deal costs the Highways Agency about £20m per year but has cut its annual IT spend by about 10 per cent, delivered a fast return on investment and "continues to deliver further savings year-on-year", according to Plumpton.
"I wanted to get simplicity, clear accountability for delivery and get efficiencies out of cost as well.
"It produced significant savings without reducing the quality of service," Plumpton said.
A large part of the savings is derived from the economies of scale that Atos Origin's operations can provide.
"For example, for the service desk, if we have a lot of calls then Atos Origin are able to roll out a bigger team to handle them without us having to pay for that larger team each time we need it," she said.
As a result of this flexibility, satisfaction levels with service desk support among the agency's 2,500 desktop and laptop users have also been rising, she said.
By the end of this year Tube Lines—the company responsible for maintaining a large part of London Underground's rail network—is on course to have fewer than 24,000 calls to its service desk and a 95 per cent reduction in the number of severity one and two system faults.
It's a far cry from 2005, when Tube Lines racked up 75,000 calls to the IT helpdesk, with much of the blame being laid—unfairly—on outsourcers that were providing services to the company, and IT opex was 40 per cent higher.
According to head of IT at Tube Lines Adrian Davey, the problem lay with the way Tube Lines handled the outsourcing contract. "We were not committed to making it work," he said.
The turnaround began with Davey holding meetings with Tube Lines' internal IT team every morning to discuss 'severity one' computer faults to discover what was going wrong with the organisation's systems.
He then set about improving Tube Lines' relations with its outsourcers and reviewed the outsourcing contract line by line, replacing technical goals with business service targets.
"It was about ensuring the quantity and quality of the information reaching the end user and not the server uptime," he said.
Davey found that as the efficiency improved he needed less and less people to manage Tube Lines' wholly outsourced IT infrastructure and was able to reduce the internal IT team, from 50 people in 2005 to just six today.