Agri-business giant Syngenta has put multi-sourced IT at the heart of its ambitious plan to double its revenues...
in the next eight years.
It has moved from having thousands of suppliers across the world to a selected few who it has close relationships with, which includes continuous engagement and the sharing of business plans.
Syngenta was formed in 2000 following the merger of Novartis Agribusiness and Zeneca Agrochemicals. Its business is seeds, seed care, crop protection as well as lawn and garden products. Its customers are farmers in rural areas in 90 countries.
Neither of the merged companies had dedicated global IT services, but rather separate IT in different countries. As a result, the company had two versions of IT in all the different regions it operates in. For example, in each country it operated, it had two different versions of telephony systems and desktops.
Syngenta had over 3,000 independent suppliers, including IT suppliers and contractors as a result of regional businesses buying locally. Due to legacy relationships, some of the contractors had better conditions than in-house staff. There was an opportunity to rationalise IT and a need to improve IT’s scalability to support ambitious growth plans
The company has set a target of growing its annual revenue to $25bn from $13.3bn in its latest financial year.
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Jonathan Apted, global IS strategic relationship manager, says the ambitious growth targets mean the IT department had to ensure it was scalable.
He says the company is almost entirely outsourced so to get more out of IT it requires a sourcing strategy that motivates suppliers and drives efficiencies.
The company wanted to move away from using thousands of suppliers in different regions and have selected global suppliers that all regional procurement teams would buy from. The first challenge was not breaking the news to the suppliers but ensuring that staff understood why things were changing.
“If people did not understand what we were trying to do, they would not move away from using local suppliers to having centralised suppliers,” says Apted.
The company then collected all the information about the services it uses from all its locations and took this to a few selected suppliers.
“We needed to create separate groups of services and suppliers for them,” says Apted. Services were split into five groups: BPO; projects; application support; helpdesk and infrastructure; and mobile; as well as LAN, WAN, IP Telephony and voice.
He says it was a challenge to find suppliers with genuinely seamless global delivery because most suppliers have a different operation covering different regions.
“It was difficult to get a single global service from one supplier,” says Apted.
Suppliers were chosen for particular roles and were given the opportunity to expand that role in the future.
The company wanted cooperation between suppliers and drove this home to partners with a year of talks regarding what Syngenta describes as its “partnership principles.”
The company kept penalties if suppliers failed to deliver, but made it clear that it did not want the penalty money but the service they paid for. The penalties were progressive to ensure that suppliers don’t just give up once a penalty is hit.
As a means of preventing problems escalating, Syngenta introduced a process where suppliers could get penalty money back. “We allow suppliers to earn back for quick fixes that are sustainable,” Apted says.
The environment of cooperation means problems are sorted out quickly and without the need for lawyers and new contracts. “Work gets done on important issues and compensation is sorted out afterwards without the need for contracts."
The CEOs of Syngenta and individual suppliers meet each other regularly and have joint planning sessions. In these sessions Syngenta might tell a supplier of some of its plans and recommend what kind of IT skills it might require. “We will warn them that if they do not have certain skills sets we will go to the market and find them.”
Apted says communication is critical to make the multi-sourced IT model work. “It’s about continuous engagement with all the suppliers.”
In 2006, Syngenta spent 56% of its IT budget with strategic suppliers; now it spends 83% with its strategic global suppliers.