Desperate measures
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Offshore outsourcing was taboo at Hitachi Europe, but a forced rethink had positive results.
After a short-lived pilot in 2004, electronics manufacturer Hitachi Europe decided offshore outsourcing of IT was not appropriate - until it lost its biggest customer.
Hitachi Europe had run its highly skilled in-house IT team on a shared services basis, serving its various business units. So when the Electronics Components Group was spun off in 2003, suddenly its biggest 'customer' was gone.
"On Christmas Eve we got the news they were going elsewhere," explains Paul Moroney, European IT manager at Hitachi Europe. "That meant that 40% of our revenue income would virtually disappear overnight. We had to come up with a business plan that made us financially viable to our other customers."
Such pressures forced Moroney to reconsider the stance on offshoring, even though it would result in redundancies - contrary to the corporate culture. "As a Japanese company we're about family and service; we were aware we were taking people's livelihoods away," he concedes. Moroney decided to outsource the support and maintenance of the corporate SAP implementation to Indian services company Intelligroup.
At the same time, data centre operations were centralised in London, closing down Hitachi Europe's Munich data centre. While there were operational efficiencies to be gained from this consolidation, it required a total rethink of the disaster recovery provisions, adding to the complexity of changes.
Slowly but surely Hitachi's IT department is making up the financial shortfall. The offshore move brought cost savings of 54% in application support; centralising the data centre was 40% cheaper. The combined savings amount to 26% of the total IT budget. Further savings will come from long term efficiencies, renegotiated contracts and optimising service provision to meet revised demands. By 2006, Moroney expects the IT function to be budget-neutral again.
The upheaval had a silver lining: first, applications consultants have fewer maintenance duties and so have more time to work with the business; and secondly, other customers have become more demanding. "We've freed up people to concentrate on these businesses, whose appetite has been whetted as they've had more attention," says Moroney.
