From Provider to Partner: A Collaborative Approach to Outsourcing at Sun Microsystems
By Jim Battey
Sun Microsystems has been a major technology innovator since it was founded in 1982, delivering industry-leading server, workstation, storage and software solutions. The company continued its spirit of innovation when it signed a comprehensive application outsourcing agreement with CSC in 2005.
Sun selected CSC to manage their full portfolio of internal business systems. The main selection criteria used were confidence in a partner’s ability to accomplish outsourcing goals and to step up with creative solutions that both companies could deliver to an evolving marketplace.
The agreement itself wasn’t a breakthrough achievement as it included the common objectives of reducing IT costs, turning fixed costs into variable ones and being able to scale services up and down quickly. However, the aspects of Sun’s approach that set it apart included an extremely aggressive timeline for offshoring the application work and an opportunity to increase Sun’s revenue potential. The result was a partnership in which Sun and CSC became customers for each other’s products and services, as well as partners in go-to-market initiatives.
Working to an aggressive timeline
To help realize a rapid reduction in its costs, Sun wanted to move 60 percent of their application development and support work offshore in just eight months. Sun also wanted the outsourcing and offshoring to be done in one step, i.e., both starting on the same date. So on May 1, 2005, when Sun employees transitioned to CSC, CSC India employees also arrived in the United States to start the knowledge transfer process.
The eight-month schedule originally applied only to Sun’s U.S. employees. But one week before the contract was scheduled to commence, Sun requested that CSC cut costs even more quickly by compressing the European rollout schedule from 12 months to eight. CSC agreed.
While there are benefits to doing so much offshoring in such a short time, it is also somewhat risky. Sun realized a quicker financial return — the shorter European schedule saved an additional $2 million — the knowledge transfer took less time, and there was less emotional turmoil among the transitioned staff. In addition, CSC also had to deliver immediate productivity gains — supporting the same amount of work with 41 fewer employees than Sun had previously doing the same work. CSC and Sun collaborated to successfully manage the risks while completing the transformation.
The offshoring was made possible by building out new capabilities in India. People were hired, facilities were expanded, networks were implemented and data centers were built out. As the transition got underway, CSC landed a team to inventory and document the existing applications and processes. A comprehensive training program was developed and delivered to the new employees. Thorough skills assessments were used to ensure that the level of learning was adequate to support Sun.
Service level agreements are used to monitor the level of support on an ongoing basis. Leadership in CSC India concentrated on delivering outstanding service by hiring the right people. This has been accomplished with such success that CSC India has received a number of awards as a leading employer of choice in India.
Building a partnership
Sun and CSC soon realized that the offshoring part of the contract presented organizational and technical challenges that could not be overcome with a typical IT outsourcing governance model. The two parties adopted a partnership model, which was particularly important
during the aggressive transformation effort.
They established a Transformation Program Office that better aligned the two companies by providing a Sun counterpart for every CSC member. The office set up a knowledge transfer database that showed every member the status of each knowledge-transfer effort — both
sender and receiver — so that Sun and CSC could work on issues together.
Customer satisfaction surveys not only measured CSC’s performance, but also that of SunIT (Sun’s name for its IT department). Where corrective action was called for, both jointly defined a plan. Sun was firm in the belief that both parties owned the resolution of critical issues. Sun SMEs helped resolve issues — including jumping in to help with system outages — and they were also involved in CSC projects. Sun and CSC teams worked together to share and select best practices to continually improve the way the IT services were delivered.
Going to market together
Important as the partnership model was for smoothing the transition and overcoming the organizational and technical hurdles to offshoring, this model was crucial to the success of Sun’s additional outsourcing objective: increasing its revenue by designing and implementing joint go-to-market initiatives.
These initiatives have been successful because the Sun-CSC partnership was based on compatible cultures and complementary core competencies. Both companies come from technology and engineering roots, and their cultures are similar in many respects. They do have different business models: Sun had focused more on market-leading technology and products than on services and integration aspects, while CSC had focused more on program
management, system integration and business results. But their respective core competencies are complementary, and CSC and Sun work to leverage them to enhance the cooperative and collaborative nature of the relationship.
The partners came together to build a flexible evaluation approach to constantly assess and test ideas for new go-to-market initiatives. Open discussion required an evaluation of each
other’s capabilities, commitment to success and the limitations of time and other resources. Together the teams have developed a framework allowing them to rapidly move initiatives from idea generation through exploration to market launch. To date, these efforts have identified tens of millions of dollars in opportunities for Sun through CSC contracts with commercial clients and government agencies.
Making it all work
Within 18 months of contract start, CSC had delivered savings to Sun of 22 percent and is on track to deliver even more savings over the life of the agreement. CSC IT staff maintained service levels during the transition and offshoring period despite the highly compressed schedule. They have also delivered service level improvements, such as a substantial reduction in tickets submitted and an even more substantial reduction in the ticket backlog. These financial and service delivery successes were made possible by the commitment of SunIT and CSC IT staff to help each other in every kind of situation.
The relationship between Sun and CSC has evolved from CSC being a service provider to being a product consumer to Sun and CSC jointly developing new market opportunities. The evolution from merely being consumers of each other’s technology to one where the companies jointly define and pursue new market opportunities has strengthened the ties between the firms on multiple levels. Sun has gained valuable insight into how best to leverage a global systems integrator as a market maker, and CSC has gained valuable insight into the application of technologies still in development to solve real client problems.
Being able to influence product development has provided a unique opportunity for both companies. Sun can focus its resources on filling known market needs, and CSC can advise its clients on technology initiatives, providing Sun early market feedback into direction and strategy while the development process is still in play. This reduces the time to market and increases the probability of market success with “customer” feedback before the product even reaches the market.
Innovation creates new opportunities
Examples of initiatives that Sun and CSC are currently developing include advanced identity management solutions that are being marketed to potential customers such as U.S. federal agencies and healthcare providers. The partners are also exploring new opportunities in virtualization, rapid application upgrade capabilities and other ventures that leverage each other’s unique competencies. Building upon each other’s specialized industry focus, Sun and CSC have also launched a number of financial services initiatives.
This year, Sun has extended the relationship by awarding CSC a multi-year contract for support of its Integrated Business Information Solution initiative. The new contract includes support of Sun’s internal financial, manufacturing and supply chain applications. As part of this agreement, CSC is supporting Sun’s largest ever systems development project, a deployment
of the company’s business applications to the Oracle 11i platform.
In addition, Sun and CSC are both working on various “Green IT” initiatives designed to help companies improve the environment and reduce energy costs. Sun recently introduced a new Eco Innovation Initiative that offers customers environmentally friendly solutions such as more energy-efficient data centers. CSC’s Leading Edge Forum included Sun’s headquarters in its annual Executive Program Study Tour to see firsthand how the company has saved money through environmentally sound measures.
Sun’s customers are getting more value out of their data centers by taking advantage of the virtualization capabilities of the Solaris 10 Operating System. In addition, Sun products such as the highly anticipated Project Blackbox virtual data center and the Java Composite Application Platform Suite ( JCAPS) are creating a renewed buzz in the marketplace. With CSC’s help,
Sun continues to solidify its reputation as one of the tech industry’s leading innovators.
Jim Battey is a senior writer for CSC’s corporate office.
Sidebar:
CSC Becomes Sun’s Product Test Bed
The “execution-oriented” application work was not the only work done by the employees who transitioned to CSC. SunIT had also been a “test bed” for Sun’s products. When CSC took on Sun’s application work, it also became Sun’s test bed, working with retained SunIT staffers to define opportunities for incorporating new products into the IT projects and infrastructure. CSC leveraged the broader CSC organization for some of the testing and worked with Sun product groups, giving feedback on the alpha and beta versions of products and participating in the “sign-off ” for release of products. CSC incorporated Sun products and services into the outsourcing offering in all regions, including India. This included using thin client devices, SunRays on desktops and Sun products in the application delivery process.
