Oil and gas giant BP spent 65% of its $3bn annual IT budget with 3,000 suppliers in 2008, but now it outsources to only seven and has reduced its annual IT budget by $800m as a result.
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Vital to the success of the new multi-supplier ecosystem was retaining supplier performance levels and getting them to work together in the light of reduced competition.
BP is a massive consumer of outsourced services across its business and as a result the overheads associated with working with partners are massive. Taking IT in-house was not an option due to the company's size, global presence and confluence of diverse business functions.
Reducing multi-sourcing cost and complexity
BP Group CIO Dana Deasy told an audience at Gartner's annual outsourcing summit in London how the company managed to cut hundreds of millions in costs in a couple of years while retaining a multi-supplier IT outsourcing environment. Most of the $800m savings on IT is the result of the company's sourcing transformation.
Deasy said the company wanted to reduce the cost and complexity of working with thousands of IT suppliers. It now has seven IT service providers in its multi-supplier environment and has shaken up its supplier management capabilities to ensure it gets the most from them.
The seven suppliers in the ecosystem are: IBM; Tata Consultancy Services (TCS); Infosys; Accenture; Wipro; HP; and T-Systems.
Deasy said the challenges for BP were to ensure that the suppliers give their all and work together in a collaborative ecosystem. "We had to keep all the vendors on edge to get the best out of them. But we also have to create a collaborative environment," he said.
As well as boosting its internal supplier management resources with a dedicated team and taking up supplier management standard BS11000, BP has focused on getting its suppliers to perform in the face of less competition.
The seven suppliers each have a core role, which BP expects them to stick to. At the same time the suppliers must collaborate as if they were one.
BP introduced what it calls "The Captain's Table". This is a mandatory week-long event where the CEOs of its seven IT suppliers are expected to get together for group meetings and one-on-ones with BP. "You need to get the top of the house [supplier CEOs] aligned," said Deasy. "You need to get them together and set them joint targets."
Deasy said it is important to make sure that the suppliers know that there is something in it for them when they attend these meeting, which are aimed at improving ecosystem collaboration. And with more and more businesses multi-sourcing their IT services, collaboration between suppliers will become increasingly important.
"We need to tell the suppliers that there is a marketing opportunity for them. If they can demonstrate that they are able to work in a collaborative ecosystem they can use our relationship as a reference for new business," he said.
Deasy said it is surprising how little the senior executives at IT suppliers in the same ecosystems interact so there are huge behavioural changes to be instigated.
BP also had the challenge of getting its own large internal supplier management teams as well as its CIOs to move in the same direction. Deasy said getting internal supplier relationship management to change how they work was perhaps the biggest challenge and it had "underestimated the time it would take to explain".
The company also recognised the business continuity risks associated with reducing its supplier portfolio. It carried out a hypothetical incident of losing an entire city in India where a lot of its IT and BPO services are delivered from. Known as "City Down", the test helped BP understand how suppliers could work together in a crisis.
Photo: copyright BP plc