Electronics manufacturing services company Celestica managed to slash the total cost of ownership of its IT system by outsourcing some elements of its IT function to ICL. The outsourcing strategy has also led to a reorganisation of the way Celestica runs its desktops, which in turn has led to further cost savings.
IT manager Nelson Cole says, "A year ago the way we operated and ran our desktop model was distinctly second division. Like many other companies, total cost of ownership was not something that we thought about and consequently it was high."
There was a huge variety of hardware platforms, software and network protocols at Celestica's 28 design and manufacturing facilities worldwide, and in particular at the four sites in the UK, which linked to others in the US, Canada, Mexico, Ireland, Thailand, the Czech Republic, Hong Kong and China. "Departmental and shopfloor desktop provision used to be so disorganised that it was disabling to our business efficiency," says Cole.
A census of the UK sites found that of the 1,300 machines in use, 10% had 8088 processors, 13% were 286s, 24% had 386 chips, 42% were 486 PCs, 11% had Pentium chips and there were two that were home-made.
Most of the desktops were configured differently, with more than 4,300 software applications installed. "Communications were a nightmare and operating costs were unacceptably high," adds Cole.
Cole attributed the situation to a lack of investment and to a culture of merely responding to demand, which he says, "is a common scenario in the manufacturing industry where most attention is focused on factory and business systems". In addition, Celestica was undergoing massive structural and directional reassessments in response to changing market demands.
The UK audit confirmed that lack of investment and an uncoordinated strategy had created unacceptable costs and inflexibility. Cole says, "Apart from the costs, we found it very hard to be as flexible as we needed to be, and adapting to short notice customer demand was very difficult, if not impossible."
Cole and his team applied the Intel and GartnerGroup total cost of ownership model, and, with the project outsourcing team from ICL, they worked out the best route forward for the UK sites and the 2,800 staff employed there. Marc Sylvester, who led the team from ICL, says, "We quickly identified that Celestica fell into the typical model of desktop costs, in which 22% of the IT budget was spent on the capital cost of purchasing the systems, but 22% was spent on technical support and 43% on end user support. A further 13% was spent on administration."
This meant that 78% of Celestica's IT budget was spent on non-capital IT costs. Sylvester continues, "It quickly became apparent that even a small percentage reduction in the amount spent on post-purchase support would make a significant contribution to the firm's bottom-line." It would also have an even greater effect on manufacturing and business performance.
On ICL's advice, Cole replaced the existing complex, highly variable infrastructure and hotchpotch of systems with a more modern, modular, scalable infrastructure where automated tools could be used. "The new desktop model met all strategic goals and delivered all the internal and external process flexibility required, plus the ability for staff to achieve personal productivity," says Sylvester.
The desktop systems and the links to the enterprise resource planning systems were made through 26 high performance Windows NT servers and Dell desktop PCs. Software was standardised with TCP/IP network protocol providing the platform for Lotus Notes, Computer Associates' Unicenter and Microsoft applications. "By combining standards we have made a radical difference," says Sylvester. "We have been able to dramatically reduce the number of support staff required to look after the business units."
Now all software, upgrades and enhancements are automatically downloaded. "It means that the PC technician can be centrally located and not have to visit each desktop," says Cole. Problems are diagnosed centrally and are often corrected before the end-users are aware of them.
"By conforming to standards in hardware, software and communications our support costs have been slashed," says Cole. "We have improved communications internally and externally, and we are now able to better control the virus threat. We can manage our assets more effectively, and guarantee flexibility to users and managers."
Celestica's staff can log into the system from any PC and get straight into their files and shared databases. "It means that teams can move about and restructure as necessary to meet customer and business demands," says Cole, "without worrying about personal configurations at their own desktops."
Cole does not underestimate the role, motivation and management of Celestica people in the shift from in-house to outsourced resources. "Outsourcing can be a risk if the in-house people are not managed with care and thought," says Cole. "The same applies to the incoming staff from the outsourcing agency." Some of the staffing issues were specific, as about 60 Celestica staff transferred to the ICL payroll as part of the agreement. "ICL is excellent when it comes to human relations," he adds.
Cole found that it paid to be open and frank with ICL about all Celestica's plans and expectations. "They were able to proactively contribute their experiences gained with other outsourcing clients," he says.