Dupont: Good Chemistry, The DuPont-CSC Alliance

The 1990s were when IT outsourcing became strategic, and DuPont's $4 billion, 10-year agreement with CSC in 1997 was one of the deals that defined the decade.

The chemical giant was about to embark on a global business transformation. It turned over operation of its global information systems and technology infrastructure to make sure it had the agile IT support needed to carry out that strategy.

By 2005, the IT outsourcing market had changed a lot. Multiyear megadeals with single vendors were thought to be a thing of the past. But in July, just after the eighth anniversary of the landmark agreement, CSC and DuPont announced an interim agreement to extend the original contract for another seven years.

The global science company, headquartered in Wilmington, Delaware, is clearly pleased with the results of the agreement so far. As DuPont CIO Robert Ridout says, outsourcing the company’s IT support helps the company by "streamlining our global business operations." CSC provides consulting, systems integration, and applications and infrastructure outsourcing services to DuPont in 44 countries.

Supporting a global transformation

Streamlining global operations was essential to DuPont’s strategic goal of transforming itself into a 21st-century science company. The divestitures and acquisitions needed to make that transformation meant significant IT portfolio shifts. DuPont needed speedy and reliable IT support to smooth the way for those shifts, which is why flexibility was DuPont’s No. 1 objective in 1997.

One divestiture that was already in the works when the outsourcing agreement was signed was the oil company, Conoco. Conoco’s IT was tightly integrated with DuPont’s. The Conoco data center in Oklahoma was a key part of DuPont’s IT support structure and the oil company wanted to keep it.

A much trickier divestiture came in 2003-2004, when DuPont spun off its synthetic fiber business — the very business it had created in the 1930s with the invention of nylon. It had become a $6.5 billion dollar global business, operating in over 50 countries. Spinning the business off meant that it first had to be separated from the rest of the company. This was a daunting task that included separating financial and operating data, thousands of applications running on multiple mainframes and over 1,000 servers, as well as voice and data communications, not to mention implementing a new SAP ERP system.

All of this change had to take place without any business disruptions. It took the DuPont-CSC team just 18 months to complete the challenging IT tasks. DuPont was able to separate the fibers business, create a wholly owned subsidiary, now called INVISTA, and sell it to Koch Industries in 2004.

DuPont also needed to integrate the global businesses it kept and the ones it acquired. They decided on a global SAP implementation.

IT could have been a major obstacle to these and other divestitures, but the flexibility CSC provided ensured that IT was just another factor in the timetable. Outsourcing also lowers the financial barriers to such portfolio shifts. Once a company outsources its IT, most of its costs become variable, which meant that once DuPont shed Conoco and INVISTA it also shed their IT costs.

The outsourcing contract itself also presented a challenge: how do you keep the contract in force when one of the parties splits in two? This challenge was less familiar than the technical and financial ones, but both sides rose to the occasion and managed to separate the contract as they had separated applications and data stores. CSC continued to provide IT support to Conoco and INVISTA after they were divested.

Integrating global businesses

DuPont also needed to integrate the global businesses it kept and the ones it acquired. In 2000, a review of DuPont’s IT strategy looked at the company’s legacy systems, which were aligned geographically. Engineering Polymers had separate, local, independent IT operating systems in countries such as Brazil, Canada, and Germany. This dispersed management system was slowing things, so a decision was made to begin a global SAP implementation.

CSC and DuPont knew this would be a major organizational change. In addition to being expensive — costing hundreds of millions of dollars — and technically challenging, it would change the jobs of 25,000 people. To handle this enormous project, CSC and DuPont created joint SAP teams for each global business unit. The result was a global IT workforce that successfully completed 10 major and five minor projects in 2004 alone.

These SAP projects were complex in scope and business impact and required an infrastructure that was both reliable and scalable. The partners learned several lessons from these global implementations: effective planning and teamwork are essential and will have a direct impact on the cost of future implementations; you need a global organization to implement global solutions; an implementation can still fail if there aren’t good people looking at all system requirements.

DuPont took these lessons to heart. The result is that the company’s investment in SAP is now around $20 million per $1 billion of revenue processed, 40 percent lower than the industry average.

While the SAP implementation was underway, CSC also upgraded DuPont’s Lotus Notes system, which had 68,000 users around the world. The upgrade project was completed flawlessly — on time and within budget — demonstrating just how flexible DuPont’s IT support had become and how well both companies work together.

Making it work

It takes two to make an arrangement work, and both sides deserve a great deal of credit for making this large, complicated relationship work so well. Even so, DuPont’s role in this arrangement stands out.

Companies that outsource their IT say they do it because they want to focus more on the business than on day-to-day operations. But few of those companies realize that focusing on the business means retraining their retained IT people. DuPont did realize that and implemented a new career development program based on the recommendations of a Massachusetts Institute of Technology study. IT departments already know a lot about manufacturing and supply chains. The goal of the new training program is to change the focus of IT leaders from managing technology to applying it in ways that help to increase business revenue.

One result of DuPont’s evolving business orientation is that in 2004 the company moved IT from the operations side of the company, where it had been from the start, to the sales and marketing side. CIOs in other companies may still worry about data storage, but DuPont’s IT leaders are thinking about how to sell more product.

Working together, DuPont and CSC are using IT to fuel business growth. The megadeal that raised eyebrows in 1997 has worked so well because neither side has allowed it to remain static. The focus has been on business results, and where changes were needed to maintain that focus, changes were made. Large outsourcing agreements do work — but only if both parties have creative and capable teams managing their interdependent roles.

Related Documents

PDF version of this story

Download the file