Ceva Logistics made a quick decision to outsource IT to India in 2008, and had its first offshore IT staff up and running within weeks.
The company, which has revenues of around $10bn, was formed following mergers and acquisitions, and as a result had a plethora of systems. It was disjointed and lacked a true global IT operation.
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In 2008, Ceva Logistics decided to reduce its IT costs through labour arbitrage, following the appointment of Peter Dew as CIO. Most of its IT operations and 1,500 IT staff were based in high-cost countries across Europe and the US, so it decided to cut the wage bill.
Although achieving lower labour costs was the main reason for the decision to look offshore, Ceva also wanted new skills.
“We wanted to access lower-cost and more modern skills than the people we had. We wanted skills in specific areas and not staff tied to legacy technology,” said Dew.
The company has 50,000 employees and 25,000 network-connected devices. It operates in 160 countries in 700 locations. Its back office runs on JD Edwards, while its seven datacentres use Microsoft technology.
Time and materials approach to outsourcing
Dew said because Ceva had not outsourced much in the past, it had to start from scratch when it decided to take that route.
He said traditionally a firm will set out what it wants and put out a request for proposals (RFP). In contrast, Ceva outlined 17 job roles and went to a group of Indian suppliers to get the best price. Using this time and materials approach, the company had decided on HCL within six weeks of deciding to take the offshore route. It had the first offshore staff up and running within 10 weeks.
Ceva then started to transfer IT operations to HCL. In November 2008, it moved to a global helpdesk from HCL. The following year saw the global infrastructure move to HCL, and then it moved application management and development.
Ceva Logistics now has 600 HCL staff working for its IT department and 750 in-house workers. It will soon add another 600 HCL staff when it completes a business process outsourcing (BPO) contract with HCL, which will move business processes from the US to India.
Growing the outsourcing relationship
Dew said that since the first engagement, which was based around providing a rate card for workers who were then managed by the Ceva team, the relationship has grown.
HCL provides more than just bodies, with management services covering infrastructure and applications. Dew said Ceva carries out benchmarking to ensure it continues to get value for money.
Ceva has also standardised its applications and infrastructure, and moved from a time and materials outsourcing model to a managed service with HCL. It is also planning to reduce its seven datacentres to two in Holland.
Ceva is currently moving businesses processes around invoicing, billing and customer services to a BPO model with HCL, which will see 600 more staff in India added by HCL on the account.
Dew said in today’s business climate IT service providers are more open to negotiations: “The IT service providers are much hungrier. They are more commercially flexible and willing to take smaller deals.”