No matter how much it is dressed up as a long-term strategy for improving the efficiency and flexibility of business services, critics of IT outsourcing argue that it is just a tactic to dispose of problems the business can no longer be bothered with. For this reason, they say, any organisation that genuinely regards information as a strategic asset can never outsource IT.
This not an argument that receives much credence at Reuters.
As the world’s largest provider of premium news and business information services, Reuters is truly a business built out of information technology services. Whether those services are customer facing, like the real-time feeds that are the lifeblood of the world’s financial traders, or geared to the needs of the company’s 16,500-strong global workforce, they are all strategically important to Reuters’ success. Today, these services are also almost entirely outsourced.
Dave Lister, Reuter’s CIO, certainly sees no contradiction between the strategic importance of IT, and the company’s willingness to hand responsibility for them over to third-party service providers. “We have a long and successful track record of using outsourced services,” says Lister. “It is a natural part of our policy of always sourcing best-of-breed products and services.”
Using outsourced services might seem “natural” to Reuters’ today, but this has not always been the case. Since 1850, when Paul Julius Reuter set up business with a flock of 45 messenger pigeons, the company has seen itself as a pioneer. It was the first company to broadcast international news via radio in 1923, and launched the first computer-driven financial information service in 1964.
However, in 2001, Reuters was struggling to find the IT staff with the skills needed to maintain mission-critical mainframe applications. So, it made the decision to pioneer a new kind of IT service – the kind that involved going offshore to find skilled IT staff in India.
Since then, Reuters’ use of offshore and outsourced services has steadily expanded. As well as the application maintenance services that it originally placed with Satyam, Reuters now relies on the Hyderabad, India-based company for much of its application development coding work. It has awarded BT a $3 billion contract to provision and manage its global network. It has built a raft of similar, more specialised trusted relationships with a variety of IT vendors around the world, culminating this year with the award of a 10-year, $1 billion contract to Fujitsu Services for the creation and ongoing evolution and delivery of a global business platform.
To a sceptic, Reuters’ latest mega-deal with Fujitsu Services smacks of everything that naysayers believe is wrong with IT outsourcing. Having placed responsibility for its entire internal IT estate into the hands of a single service provider, they would say, Reuters can now only be as innovative as its service partner, which has little incentive to go beyond its service level agreements.
That, however, is far from being the case, says Lister. On the contrary, after seven years of developing trusted relationships with international service partners, Lister believes the new agreement is a logical evolution of Reuters outsourcing experience.
Although it might seem as if Reuters has mortgaged its ability to innovate, in reality, says Lister, Fujitsu is obliged by its contract not only to continue to evolve its own services, but also to co-ordinate the ongoing development of Reuters’ other service partners. “Both sides are encouraged and rewarded for finding ways of driving up the value of services,” Lister says.
Far from using IT outsourcing as a means of abdicating responsibility for its own future, Reuters believes it has created a situation where it can concentrate on developing the strategic direction of its IT service delivery, while ensuring that the day-to-day delivery of its IT needs is as state-of-the-art and as flexible as it can be.