I recently wrote about BP’s multi-sourcing strategy which has seen it reduce the number of IT service suppliers it works with from about 3,000 to seven.
The article described, in the words of the oil giant’s global CIO Dana Deasy, how the company managed it. Deasy was talking at the Gartner Outsourcing summit in London last month.
The case study is of interest to us all, not only because it reduced the number of suppliers so substantially, but because BP saved about $200m of its annual IT budget.
The article described some of the techniques used to keep the suppliers on their toes. During the talk however Deasy did not explain some of the finer detail. This is not a criticism because he was there to explain how he manages his smaller multi-sourcing environment.
But I will give a bit more detail. Computer Weekly was contacted by a small supplier after we wrote the article. The supplier said it has supplied BP for years and still does. What has changed said the source is that thousands of suppliers now work through another supplier. A combination of Computacenter in the UK and Compuware in the US manage thousands of sub-contractors, said the source.
So in actual fact BP still has thousands of suppliers but only manages seven strategically. Even the Computacenter and Compuware part of the deal was not mentioned.
It seems a sensible route to take. The small supplier did however say that smaller players are being squeezed very hard on price under the model.
I did speak to a source close to one of BP’s seven strategic suppliers. He told me the model used splits suppliers into three groups. There are: the seven strategic partners, who actually manage some other suppliers; then there is the Computacenter/Compuware tactical partner; and then there are lots of sub-contractors.
Nothing wrong with the model but I thought I should give more detail as I didn’t do it earlier. This is one of the challenges writing stories from a conference when you can’t expand with the person presenting.