IT Strategy Assignment

IT Outsourcing British Petroleum's Competitive Approach

Group No.7- Div:A Anish Arvind Bane 12030241008 Pratyush Mittal Richa Rajput Shalin Mishra Shrey Taneja 12030241029 12030241036 12030241044 12030241046

Question: Discuss the steps taken for outsourcing IT related activities by BP in the sequence given in the case and reason that why that step was taken? Answer: In 1993 British Petroleum (BP) took the decision to outsource its IT which can help them to cut costs, gain more flexibility and get high quality IT resources and above all allowing the IT department to focus on activities that directly improve the business As per the case study the steps taken for outsourcing IT related activities by BP in the sequence with reasons are as follows Step 1.Selective Outsorcing Reason : BP realized that by giving the control of the IT services to a single provider will make them dependent on that supplier, so to minimize the dependency on single supplier and avoid the situation of vendor lock-in they took this step of selective outsourcing. Step 2.Put own house in order Reason: To improve service and reduce the cost of duplicated system incurred through their acquisitions, BP consolidated 7 IT departments into a single global IT department with centralized control. BP didnt want to pay their suppliers for the work that they can perform by themselves. By consolidating systems and data centre they reduced the size of staff by half and cost by 25%. Step 3.Creating an atmosphere of understanding throughout the organization Reason: They encouraged managers to debate the merits of outsourcing and intrigued them by the opportunities. This step helped them to set a supportive tone within the organization for efficient decision making. Step 4.Mailing 100 request for information packets to large and small providers Reason: BP mailed 100 Requests for Information packet to large and small providers in US & Europe. This RFI summarized the scope of the work and helpe d BP understand the providers experience, approach to outsourcing, geographical reach, technical capabilities and policies for cost management. Also they wanted to know from the responses how flexible they were and about service partnerships they had with other suppliers. Sixty five companies responded to queries to assess which a team of IT department along with specialists from BP was assigned. Rather than having all 20 people assess all 65 responses, each person was assigned 3-4 responses .This exercise forced their people to concentrate on the strengths and weaknesses of the companies and consider each as a serious candidate. Step 5.Senior IT manager visiting 16 shortlisted companies Reason: The reason for visiting all 16 companies was to understand the management staff and culture of the interested companies and their depth of understanding about outsourcing industry and strategic vision. Step 6.Assessing the short list Reason: After interviewing the 16 companies they further shortlisted it to 6 companies. Their major concern was to assess how these companies will work together. To solve this problem they gathered all the 6 suppliers for a weeklong workshop. The purpose of this workshop was to see how these

companies work in collaboration with one another to fulfil a single goal. After this process BP shortlisted 3 companies who met all their expectations. The 3 companies which were shortlisted were Sema Group - Managing traditional data centers and commercial engineering applications SAIC - Implementing modern distributed computer system Syncordia - Manage telecommunication services

Step 7: Allocating supplier to business sites Reason: For each of the eight major business sites, one of the three suppliers served as the primary contractor and coordinated the services the trio provided. The BP Exploration business managers at each eight major sites negotiated with the IT suppliers. The reason for this set up was to better manage the supplier relationship and allow for seamless service. Step 8: Introducing the balance scorecard approach Reason: BP started measuring the performance of their suppliers with the help of balanced scorecards where suppliers will receive points for innovations, business process improvements, customer focus and so on. The reason for scorecard approach was to measure the various key performance parameters related to business and align them to business strategy, encourage the best practices to be followed and increase creativity. Step 9: Introducing Bench marking Scheme Reason: BP scrutinized the costs closely and negotiated new performance contracts with suppliers. From time to time they benchmarked the suppliers against services of other suppliers .This was to ensure that the suppliers delivered the best in the given area and BP achieved the efficiency and effectives it desired from the outsourcing arrangement. Step 10: Improve relationship with supplier: Confronting Challenges Reason: BP explored ways to encourage suppliers to share information more readily. Also, BP tried working out a solution agreeable to all parties. This was because managing change among competing suppliers was challenging and also the suppliers refused to share information related to best practices.