Rapid return and improved service levels vindicate decision to insource

IT director Jane Kimberlin shares what she considers to be her best and worst IT decisions.

In this fortnightly series, leading IT directors and COIs share what they consider to be their best and worst IT management decisions, and draw out the underlying principles which can be used to generate positive outcomes

BEST DECISION

My best decision as a CIO was insourcing the IT of pub chain the Spirit Group.

At a time when the trend was towards outsourcing, and there was a general nervousness around insourcing – reflecting concerns about assets, profitability, flexibility and staffing – we bucked the trend at Spirit. The fateful decision generated annual IT savings of 30% and improved service levels.

The choice to insource was made after Spirit acquired Scottish & Newcastle Retail in November 2003. As well as the pubs that were acquired, the deal gave the group Scottish & Newcastle’s retail system, which was a platform we were keen to adopt in place of our existing mainframe systems.

Of course, the move to insourcing was only made possible by an extraordinary amount of hard work. Once you give notice of termination on an outsourcing contract – and Spirit had a major deal in place – what is needed is the total commitment of everyone involved.

Having made the choice, the clock starts ticking, and things have to happen quickly. To ensure a smooth handover, the work of the outsourcing supplier has to be properly wound down. Costs have to be monitored, assets moved – and you have to create a new department from scratch, with all the policies, procedures and systems that are inherent in that. In my case, that meant building a team of 90 staff nationally, across several sites.

It is a long-term project, too. The initial effort to transition the work is only the beginning. For Spirit, that took about six months, but it took another three months to bed in a lot of the services and at least another year to build up capabilities and experience across the team.

There were three key strands to the decision to insource:

  • Having an in-house team ensures that high-quality, targeted development work can happen quickly
  • It allows the group to introduce customer offers quickly through fast analysis of trading patterns
  • It makes it possible to address the continual demands of flexible system enhancements more speedily and more cheaply.

That is not to imply that I am against outsourcing. It can make sense to outsource to bring down costs if you have a stable IT environment with no change planned.

You insource for different reasons. If you have an environment that is changing a lot, you are best off managing things in-house. Likewise, if you are running at high cost, you need to get your house in order before you consider outsourcing.

For Spirit, however, there were compelling strategic and financial reasons for insourcing: return on investment was projected to be achieved within 12 months, and that proved to be the case. What’s more, the customers said it led to a better service. At the last count, 98% said they thought the service was the same or better than before insourcing.

WORST DECISION

As a CIO, I have learnt a lot over the years from my mistakes, but one issue that stands out is the need to pick the right software implementation partner.

Since many software houses have implementation partners to help install and integrate a product, it has become clear to me that choosing a great product is only half the battle. Next to that, you need a decent implementation partner to carry the programme through.

The problem is that firms generally overbid when they are trying to win these contracts, and frequently end up delivering late, over budget, and not to scope.

My worst experience – and consequently my worst decision – in this tricky area came several years ago, when I picked a small software company to deliver a critical software upgrade project.

The firm had come up with a good-looking proposal and I felt I could trust the key participants, but the timeline they pledged turned out to be unrealistic in the extreme.

The problem became worse as the success of the project became increasingly reliant on one person in the software house, who gradually fell further and further behind with meeting the delivery targets specified, to the point where I had to abandon the project, having already delayed it several times.

The abandonment of the project had a knock-on effect elsewhere in the business from which it took a while to recover.

The main lesson I have taken from this regrettable episode is that becoming too reliant on one or two critical individuals to implement a project is not sensible.

In the circumstances – and particularly when working on a business-critical implementation where there is a lot at stake – it would have been far shrewder to choose a bigger, more expensive firm. For some projects, you simply need the assurance of working with established, well-resourced firms that, whether or not they manage to deliver, will at least be there for you should things go wrong.

Don’t get me wrong, I think smaller firms are worth using for less crucial, niche projects. But some implementations are too important to take a risk on.

So, drawing on occasionally bitter experience, here are my golden rules:

  • Only start a business project when you have proper business engagement and board sponsorship
  • Choose suppliers and business partners with extreme care. See they have a track record of delivery
  • Be suspicious – in particular, be prepared to walk away from an arrangement if it does not appear to be working
  • Negotiate the contract carefully, so that if it does go wrong, your partner is accountable. After all, it is rare that you can write off big spends on a project if it fails to deliver
  • Build break points into a project to give you breathing space to review how things are going.

CV: JANE KIMBERLIN

Jane Kimberlin, who has recently taken over as IT director at Domino’s Pizza, has more than 15 years’ experience in IT and business management. She has worked for much of that time in the pub and brewery trade.

Her latest appointment comes after a successful period working as IT director of pub chain the Spirit Group, leading up to its merger with Punch Taverns at the end of 2005.

From 2003, when Spirit acquired Scottish & Newcastle Retail, Kimberlin concentrated on designing and implementing a three-year information systems strategy, including a move to web-based systems. Her role involved the management of IT for Spirit’s 2,000-strong chain.

Kimberlin has also been IS director of Powergen, where she was involved in developing and implementing strategy, and supporting the systems for the £2bn retail electricity and gas business.

Earlier in her career, Kimberlin spent four years as director of IT and packaging at Wolverhampton and Dudley Breweries.

 

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