Shell Outsourcing Deal Shows Emerging Importance of Service Integrator Role

Ann All

Back in August, I wondered if single-supplier deals were becoming an outsourcing anachronism. I cited a Computerworld Australia article in which an executive who had forged a lengthy, multi-million dollar services deal with IBM for Washington Mutual said he would never again consider such an arrangement, due to the difficulty of maintaining accountability and passion for the deal.


Multiple-supplier deals are becoming more common as the outsourcing market matures and companies begin seeking more specialized skills from their providers. The approach works best for companies whose IT sourcing strategies and governance structures are mature and aligned with broader business goals, said Gartner Research Director Kurt Potter in a vnunet.com article from earlier this year.


As I blogged in January, Gartner predicts that some early adopters of multi-sourcing may consolidate some of their multiple outsourcing relationships in an effort to reduce management costs and complexities.


Due to the growing popularity of multi-sourcing, many companies are becoming "more of an orchestrator," Charles Aird of PricewaterhouseCoopers told me when I interviewed him last June. He said:

You see a lot of organizations putting together centers of excellence now to manage the sourcing function, training their internal people how to manage the day-to-day interaction with service providers. Essentially they are making themselves small outsourcing advisory firms within the client environment.

An emerging alternative to creating an internal function to address these issues is hiring a service provider to do it for you. That's the approach taken by Shell, which contracted with EDS not only to provide computing services but also to manage two of its other key suppliers, AT&T and T-Systems. As this ComputerWeekly.com article points out, Shell hopes that by offloading these management functions, it can focus on more strategic projects. All of the suppliers have service-level agreements with Shell and with each other, notes the article, to ensure that they will cooperate when necessary to deliver services.


The deal is a potentially groundbreaking one, said Ovum Research Director John Madden in our recent interview


Certainly for EDS, and for some other outsourcers out there, they'd like to see more deals like this. It allows them to show their expertise in managing complex contracts, and it's another source of revenue for them. I think the success of a global vendor like Shell is going to be important to the overall service integrator trend and help determine whether it's going to get some traction with some other large global clients.

Referencing the clever "herding cats" ad that EDS ran during the Super Bowl a few years ago, Madden said that service integrators such as EDS must master a tricky blend of partnership, communication and project management skills. He said:

If you are a service integrator, you'll get all the credit if things are going great, but you'll have to respond quickly if things aren't being delivered. Is it something you are doing, or another vendor is doing? You need an ability to identify the problem and where it originates.

Ultimately, said Madden, service integrators will likely offer more business transformation capabilities than traditional outsourcing providers.

One of the overall goals for Shell, I think, is to shift IT to be a strategic priority. It wants IT to be a business enabler rather than a drag on the business. That's one of the primary goals for the service integrator. So it needs to be able to show the value of IT and how it can improve your supply chain or get you into new markets, help you accomplish your business goals.

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Add Comment      Leave a comment on this blog post
Apr 11, 2008 6:26 PM Peter Gailey Peter Gailey  says:
Ann,Interesting topic. As a person that has extensive experience in the Global Systems Integration business, the Systems business, and the Services business it is my observation that in order for this to work as a fine tuned set of deliverables, the sum of the whole, must be more than the individual parts.All of the individual offerings will need to take, and follow the lead of the lead Systems Services Integrator. It is my experience that each individual provider will have issues and conflicts as this model unfolds. Particularly the end user sales teams of each entity. For example, in the EDS Shell case, the Cisco, AT&T, Sun, EMC etc... direct end user sales teams all have different priorities, different fiscal years, quarter ends etc.... Account control issues abound. Service providers will earn their stripes herding these cats (To leverage the EDS add message.).It is interesting to see this kind of aggregation of services as it relates to the trend of the Outsourcing business. The trend has been to break up the mega deals and to multiple source. This seems to me to be a "back to the future" example. (Good for EDS!!! It confirms their investments in their Agility Alliance investments.) Regards,Peter Reply
Apr 14, 2008 12:28 PM Robin Goldsmith, JD Robin Goldsmith, JD  says:
I've used a similar technique in my Beyond the Textbook(tm) acquisition methodology for more than 30 years, since multiple vendor sources always have been common within a given outsourcing arrangement. In such situations, rather than involving an extraneous additional vendor to serve as integrator, we make it the duty of the primary vendor in each proposal to take legal and technical responsibility for assuring that the proposals of all included vendors are responsive and coordinated. This is not the same as these secondary vendors being subcontractors, which is a different and often unacceptable model for major vendors.robin@gopromanagement.com Reply
Apr 14, 2008 7:11 PM tom tom  says:
I wonder what the legal contracts look like for this type of arrangement? As a coordinator you must be able to somehow get and keep both sides to put some "skin in the game" otherwise do you as the coordinator company keep virtaul experienced staff on the bench in case things go poorly? Reply

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