EDS' Jeff Kelly Stresses the Need For Expert Oversight and Governance
EDS' Jeff Kelly has seen a lot of change in his 30 years in information technology (IT), but there's always been at least one constant: Clients expect technology service providers to know their industries and businesses “cold.”
The better an IT provider knows a client, the more business value it can bring to the table.
When Kelly talks about this kind of relationship, he emphasizes the ability to deliver total client value up and down the IT supply chain. Kelly's long career in operations and on the front line with clients bears this fact out.
As the senior executive over seven of EDS' verticals, Kelly's perspective spans the Communications, Media & Entertainment, Consumer Industries & Retail, Energy, Financial Services, Healthcare, Manufacturing and Transportation industries.
In this interview, Kelly, senior vice president of EDS' Americas region, shares his thoughts on what it takes to deliver total client value – either as a client's sole technology partner or as the prime IT integrator on a multisupplier account.
Q. How Has Information Technology Evolved Since Your Early Career? What Are the Expectations of CIOs Today?
A. When I started in this business, the main goal was to keep the MIS department running. Back then, information management was still a fairly new profession compared to the well-established disciplines of accounting, engineering and manufacturing. In fact, there were no CIOs. We were doing well if we kept the computer system running with little change in the budget from year to year.
As technology advanced, the focus shifted to achieving greater functionality through increased computing power, storage capabilities and systems availability. The IT department increased in importance, as did the emerging role of CIOs.
Today's CIOs face even more complex issues. The CIO is challenged to be the business executive interface between where the company wants to go and the right technology to get there. Most of the ones I talk with are interested in driving down the cost of their sustained operations and reinvesting in new initiatives that add value to the business. The focus has moved from keeping the lights on and technology-based outcomes to constantly moving the business forward.
In line with this new focus, CIOs expect technology providers to know their business and industry cold before they even walk in the door. CIOs also are relying less on a single provider and dividing their outsourcing projects into contracts with multiple vendors.
Q. What Is the Thinking Behind the Multivendor Approach and How Well Is It Working?
A. The thinking behind multisupplier outsourcing is that no one technology provider is best-in-class across all technology platforms or categories. So, CIOs pick and choose providers they consider the best for hardware, software, infrastructure or networking, for example.
The idea is to extract as much value as possible from each commodity component. Third-party intermediaries have significantly influenced this unbundling of sales pursuits. The intended benefit is better technology across the board and savings through increased competition among providers.
The downside is the increased complexity that comes from having to manage a fragmented supply chain and integrate the efforts of many vendors. On global implementations, this could mean as many as 50 separate contracts being done by six or more main suppliers, with dozens of subcontractors also involved. Because of this added complexity, potential savings and other client benefits can slip between the cracks.
Q. How Do Clients Know When Multisourcing Is the Way To Go?
A. All the reasons for going multisupplier – better competition, lower costs and more efficiencies – are good ones.
Some clients, who have a firm handle on their IT and business operations, can do it well because they've thought things through. They've taken the time to identify and connect all of the dots to get an integrated view. This, in turn, gives them a clear line of sight across their enterprises.
Now, any client considering multisourcing has to assess some fundamental sourcing and delivery strategies. Questions clients need to answer include:
- Do we source by technology tower, regionally or globally?
- How will multisourcing help or complicate each scenario?
- Do we have the expertise and resources to oversee a multisourced project?
The answers determine how well a supplier will be able to work with – and bring value to – a client. They determine whether a supplier or group of suppliers will have only a fragmented view of the complete value chain or are able to manage total cost and value through well-integrated, end-to-end services.
If the sourcing strategy and delivery of services aren't thought through, then “disaggregation” of the IT supply chain can occur – along with missed opportunities.
Q. How Do You Execute Multisourcing In a Way That Achieves Its Full Potential?
A. While multisourcing might bring the best technology to the table, you still need extended governance and expert oversight to ensure integration across a project and the enterprise.
When I ran EDS' healthcare business, we took a comprehensive look at all the services we provided to ensure there were no gaps or seams for value to drop through. You can do this when you're the sole provider because you have a clear line of sight into how all the pieces and parts work together.
With multiple vendors and a disaggregated supply chain in play, clients should consider designating one of their providers to be the prime integrator. The prime or operational integrator has the responsibility for capitalizing on all of the client's IT investments across the business.
This means making sure each technology asset is used to its fullest and is harnessed collectively for the greatest business benefit. The prime integrator brings together the big picture of a client's operations and, as a result, is able to manage the total cost of ownership and deliver total client value.
I don't see this happening as a matter of practice. For the most part, the industry still uses a fragmented, asset-based model.
Q. What Exactly Is an Asset-Based Model and How Does It Affect the Delivery of IT Services?
A. An asset-based model is one where a client pays a set fee for each desktop, server or other technology asset – most of which are usually delivered by multiple providers. The value inherent in this model is that each component is competitively sourced.
In the last few years, we've been virtualizing assets, yet the asset-based pricing model persists – which makes things difficult. It's not about how many servers you have; it's about the application that rides on your infrastructure, about the complexity of what it's doing and how it serves the client's organization.
Asset-based models can get in the way of achieving the total value that aligns with the way a business actually runs. At the end of the day, how does an insurance or airline company measure the success of its operations?
If you're an insurer, one of your goals is to lower the cost of each claim processed. An airline is focused on lowering the cost per boarded passenger. Achieving these goals requires a business process view that has your technology assets working together toward the same end.
As I said earlier, achieving total client value begins with a provider that fully understands the client's business and industry issues. A provider immersed in a client's industry knows the business outcomes the client is looking for and tries to create a solution accordingly. Such a provider becomes a true partner.
To help clients achieve these business outcomes means providers will need the latitude to implement a more holistic approach – which means more say about what the architecture is going to look like, what technologies ride on it and when it gets refreshed.
Q. What Is EDS Doing To Build Total Client Value?
A. EDS employs IT to help businesses and government run better. We are experts at managing complexity on a global scale. We use our experience and expertise to drive business integration up and down the IT supply chain – helping clients to see new opportunities and achieve the results they expect.
It involves managing total cost on a client's IT investment. But, it also includes the ability to drive performance improvements, systems flexibility and innovation across all service towers. This encompasses IT outsourcing, applications services and business process outsourcing (BPO). When we do our jobs right, it should lead to better business outcomes for clients.
One way we're doing this in the U.S. is by combining our platforms in our healthcare business. And then going to market with a membership model, for example, that focuses services on a per-member/per-month basis.
Q. How Are Clients Responding To This Approach?
A. I think there will naturally be some cautiousness when moving to a different business model. But, to do this right doesn't mean a client has to put blind trust in an IT provider. Because a client can still benchmark the industry cost for boarding a passenger or processing a claim.
Instead of third-party intermediaries focusing on asset-based pricing, they would do their clients well by benchmarking the price per claim processed, per passenger boarded or per unit produced – with IT vendors managing to that cost.
Moving from an asset-based approach to a pricing model built around a client's value proposition will help clients get the business outcomes they want. It also will enable IT providers to extract more value based on their ability to innovate and deliver comprehensive, business-focused solutions.
About Jeff Kelly
Jeff Kelly is senior vice president of the Americas region of EDS, an HP company. This region consists of the United States, Canada, General Motors and Latin America.