Enterprise Software

Don't dismiss the outsourcing megadeal: P&G on how to make them win-win

Interview: Filippo Passerini, CIO and global services officer, P&G

...companies most associated with outsourcing megadeals - its HP contract remains one of the largest ever signed. But for some in the outsourcing industry, such megadeals are becoming things of the past - indicative of an earlier style of outsourcing that is being replaced by a more modular approach. By breaking down larger contracts into smaller deals, enterprises can open up the possibility of using smaller suppliers, and altering systems when business change demands it.

HP is not the only substantial megadeal that P&G has signed either - it also has Jones Lang LaSalle looking after its facilities management, and IBM for its human resources BPO. Both agreements were originally struck in 2003 and were worth several hundred million dollars.

In both these deals too, Passerini contends that their size and scope continues to pay off for P&G - with such large contracts, both buyer and supplier know their future is tied together for better or worse.

"What makes the [P&G] model strategically is the interdependence between us and these companies... the interdependence is different by supplier but is the common denominator and common theme across all the outsourcing deals," Passerini said.

P&G CIO Filippo Passerini

P&G CIO Filippo Passerini
(Photo credit: P&G)

"The way I put it is we need to grow the pie together. It's not about squeezing one more dollar for you or for us, who negotiates better, we are smarter or you are smarter, we win, you lose - it's about win-win... The model we've created, which is effective, it's a very rigorous model. When we decide one of the partners could be a strategic ally, we invite in the CEO, we spend time with CEO, we have quarterly meetings, we meet with the CEO a couple of times a year, we have joint business plans, we have scorecards, we review everything, we track everything," he added.

According to the CIO, the megadeal also brings flexibility to P&G.

"The way people think about outsourcing normally is cost - cost reduction - and it is pretty obvious... normally that leads to a win-lose in some areas, but this is [the] simplest way to think about it and I would consider that step one.

"Step two which some people get to is improving service levels - people think 'well, you know outsourcing better, they do it for a living, it is not our core business to run operations, to run some of the work processes - an outsourcer might be better at doing that'.

"The third level which is strategic - the first two are more tactical - the third level is one of flexibility and innovation so this [means] companies can bring in a lot of innovative ideas to the extent that they become strategic partners and importantly can give a lot of flexibility."

Flexibility that came in useful when...

About Jo Best

Jo Best has been covering IT for the best part of a decade for publications including silicon.com, Guardian Government Computing and ZDNet in both London and Sydney.

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