Outsourcing: the benefits of a single global supplier

Over the past six months, a spate of multinational companies have signed global outsourcing contracts for voice and data services with a single supplier.

Over the past six months, a spate of multinational companies have signed global outsourcing contracts for voice and data services with a single supplier.

Shell, Tesco and Procter & Gamble, have signed multi-million pound outsourcing deals with AT&T, Cable & Wireless and BT to manage their respective voice and data networks.

The deals mark a turning point for multinationals that are redefining how they use IT to support doing business in a global market.

For example, outsourcing the management of a voice and data network will allow companies to redeploy their IT teams to develop applications to deliver business value, rather than spending time on maintenance.

Alan Matula, Shell's chief information officer, which has outsourced its telecoms and networking function to AT&T for £800m, says that a desire to focus on development rather than maintenance was one of Shell's motivations for outsourcing.

"The deal allows Shell IT to focus on information technology that drives competitive position in the oil and gas market, whilst suppliers focus on improving essential IT capability," he says.

The expansion of businesses into foreign markets is driving the need for a common voice and data network to support standard ways of working. Such networks mean that an office in India, for example, can run cost-saving technologies such as voice over IP in the same way as an office in the UK, making a group competitive at a global level.

"Our aim is to have a common technology platform in tandem with common business processes so that we remain competitive as a group as we continue our expansion abroad," says Nick Folkes, IT director of infrastructure and operations at Tesco, which signed a £100m deal for Cable and Wireless to become its exclusive supplier of data and telecom services.

Businesses can also negotiate lower call and data charges with one supplier or "mega supplier" by handing them over a chunk of their business rather than relying on multiple suppliers for different countries, says Partha Iyengar, vice-president analyst at Gartner.

Procter and Gamble expects that its £650m deal with BT to manage 1,100 locations in 82 countries will be cheaper than having multiple suppliers.

In light of these business benefits, Iyengar says that multinationals will continue to sign IT contracts with "mega suppliers" which deliver value at a global level and move away from signing siloed, regional contracts for voice and data.

"Chief information officers must understand the future growth plan of their organisation into many other parts of the world," he says.

However, moving to a single provider for global voice and data services means businesses will have to improve their ability to independently audit billing for items such as call and data charges at a local level, to verify that the supplier is delivering savings set out in agreements.

Michael Crouch, global business manager of telecoms outsourcing at ABN Amro, which outsourced management of its telecom and data networks, ensured the accuracy of invoices ABN received from outsource suppliers by installing a telecoms expense management system.

The company installed a web-based system using Invoice Insight software to allow IT managers across the world to check the company's global bill against country-by-country usage statistics.

"Building in a telecoms expense management capability helps us along the life of the contract to make sure we achieve savings," he says at a networking conference in April.

By 2015, Gartner predicts that organisations, including governments, will increasingly source their IT from around the globe without regard to the "country of origin" or "headquarters" of the supplier. This includes software, hardware, telecommunications, IT services, or people.

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