Outsourcing Remains Ford’s Plan

If you watch the nonstop bustle on an automobile assembly line long enough, it’s easy to get a skewed idea of the process. Close up, each step appears discrete and disconnected–engines being lowered into frames, door assemblies being bolted onto bodies. Step back to where you can see all the bright, shiny new cars rolling off the end of the line, however, and the whole thing starts to make sense.

In much the same way, if you want to understand the rapidly changing IT strategy at automotive giant Ford Motor Co., it helps to step back.

asslineSince taking over as CIO and executive director at Ford two years ago, Bernard Mathaisel has engineered four major, high-profile outsourcing deals that have transferred significant chunks of Ford’s IT operations to IBM Global Services, Compuware Corp., Dell Computer Corp. and Hewlett-Packard Co. These deals, however, are anything but discrete, disconnected events. Together, they constitute Mathaisel’s plan to transform Ford’s 5,100-person IT organization from a group focused exclusively on operational excellence to one that can also help the company improve customer service through rapid delivery of Web-based systems and processes.

Ford’s IT group historically has been tasked by top management to keep the IT assembly line in order. That meant running first-class, efficient data centers and networks and delivering rock-bottom total- cost-of-ownership numbers. That emphasis, however, began to change a couple of years ago. The shift culminated in January when new President and CEO Jacques Nasser announced that Ford, based in Dearborn, Mich., would become the Nordstrom Inc. of the automotive world: a company focused on customer service.

“That meant we had to place a significant consumer emphasis on everything we do,” said Mathaisel, who joined Ford from Boston-based Ernst & Young LLP, where he was a partner and the national director of multimedia services consulting.

Not surprisingly, Ford decided to deliver many of its new customer- focused services via the Web. Although Ford, like other big automakers, has trailed nimble startups such as Autobytel.com in delivering Web- based automotive consumer services, the company in the last few months has kicked off major electronic commerce initiatives, including “The Connection,” a collection of e-commerce sites aimed at buyers, dealers, and current owners of Ford cars and trucks. Ford also plans to roll out new intranet-based systems that will let dealers help customers get custom-configured vehicles more quickly.

Ford’s new emphasis, however, meant IT itself had to change dramatically. For one thing, the organization would have to ramp up to Web time, delivering new applications much faster than before. In addition, IT would need to take on a leadership role at Ford to guide the process redesign. In fact, it is Mathaisel’s group that is in the driver’s seat when it comes to helping line-of-business managers re- engineer key business processes for delivery over the Web.

With its new direction, however, Mathaisel’s group no longer has the time or the manpower to deal with the nuts and bolts of IT by itself.

The outsourcing motorcade

The outsourcing deals are intended to help Ford’s IT organization concentrate on its new course. The company’s $300 million, five-year deal with IBM Global Services, for example, inked in January (see PC Week, Jan. 18, Page 15), is designed specifically to turbocharge Ford’s application development processes. Ford and IBM, of Somers, N.Y., are building three dedicated Accelerated Solutions Centers in Dearborn, Germany and England, where engineers from Ford, IBM and Compuware will apply new tools and collaborative rapid application development techniques. The goal: cut software development cycle times by 50 percent, which will speed up Web-based application rollouts.

Ford’s deals with Compuware, Dell and HP, meanwhile, are designed to free the automaker’s IT organization from some of its operational responsibilities so that it can focus on revamping customer service processes and developing Web-based systems. For example, Compuware, of Farmington Hills, Mich., will take over maintenance and enhancement of Ford’s legacy applications; through an expansion of its existing hardware contract, Dell, of Round Rock, Texas, will take on asset management responsibilities related to Ford’s 165,000 workstations; and HP, of Palo Alto, Calif., will take over support of Ford’s Web server infrastructure. Meanwhile, to ensure that RAID servers are maintained and repaired when recovery is needed a company will be there.

According to Mathaisel, a “very big part” of the outsourcing providers’ compensation will depend on whether they deliver agreed-to cycle times, customer satisfaction and cost improvements.

Besides allowing Ford to refocus its IT priorities, the outsourcing deals will help the company cope with the industrywide shortage of skilled IT professionals.

“We have less IT talent than we would like,” Mathaisel said. “The deal with IBM in particular will bring [Ford] hundreds of the best people and some of the best software development practices. And it will allow our people to focus on business process re-engineering and strategy.”

Ford’s Mathaisel may be a leader in using a series of targeted, strategic outsourcing deals to help refocus the role of IT, but he isn’t alone, analysts said.

“What Ford is doing is squarely in line with what we’re seeing from a number of our clients,” said Fred Joy, an analyst with Meta Group Inc., in Stamford, Conn. “The more savvy ones are moving away from the kind of panic outsourcing where they’re throwing everything into one deal. Instead, like Ford, they’re becoming more aware of the different services IT provides, and they’re concentrating on where [their in- house] IT can deliver the most value.” The rest, Joy said, they’re outsourcing.

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