Information Age(IA): Negotiating an outsourcing deal is a major undertaking, especially one of this scale and complexity. What have the last few weeks been like for you?
John Varney (JV): Intense. Very, very intense. It’s a complicated deal, because it’s mostly about procurement of a 10-year contract for services. But wrapped up in that is the complexity of a corporate sale. We did 1,000 man-hours of negotiations in four weeks during May and June with three bidders [Accenture, Computer Sciences Corp and the eventual winner Siemens Business Services], which was around the clock. We then went straight into evaluation of the bids – also around the clock.
IA: What was behind the original decision to outsource BBC Technology?
JV: The BBC is in a complicated place. BBC Technology was set up in 2001 to operate independently of the BBC and also to operate as a commercial entity, in that a proportion of its revenues would come from the third-party market as well as from the BBC itself. [At present, BBC Technology makes around a third of its £230 million annual revenues from contracts with third-party broadcasters including ESPN, DirecTV and National Public Radio in the US].
Then a number of things happened. On the one hand, BBC Technology delivered what it was mandated to deliver and started to develop some interesting technologies which were definitely going to take us into the future. At the same time, changes in the technology marketplace meant that BBC Technology had fewer customers and made fewer in-roads into the broadcast market than we had hoped.
As the world started to climb out of the technology downturn, we started to see that outsourcing might be more cost effective. It had increasingly become very obvious to us that, in terms of cost of service, we could do much better. The challenge was: How we could retain those skills and experience that made BBC Technology an ideal partner for the BBC – but at the same time lift programme-making out of a very craft-based approach to one based on commodity technology and networks that can deliver content in many different formats?
We hit on this notion of the sale and procurement. The procurement gives BBC Technology the benefits of being part of a global technology company and brings it the economies of scale and critical mass it needs to bring new applications through very quickly. The sale allows us to say to the buyer: “Take these technologies and go and build a market out of them.” BBC Technology was too small to do that.
The BBC is not here to invest speculatively in technology; it’s here to invest in programmes and content – and money raised from the sale of BBC Technology will be injected back into programming.
IA: Can you explain the reasons why Siemens won out over the other bidders? Were the reasons financial, political or cultural?
JV: Financially, there wasn’t much of a gap between Accenture and Siemens. Where Siemens fitted best was the way that, when we were negotiating with them, they listened, they understood and then they modified their approach. They were clearly hungry for this deal: they understand the developing market [for broadcast technology services] and they demonstrated very well that they understood our business.
Also, there was an attitude in Siemens that came across very strongly – that they would be privileged to deliver a service to the BBC.
IA: One of the most common downfalls in outsourcing contracts is that the bidding team from the service provider is often not made up of the employees that will actually deliver the service. What steps did you take to avoid that?
JV: One of the strengths of our procurement process was that we brought lots of people together from both organisations. What we did was define a set of service areas within the BBC, each of which had an ‘owner’ who will be responsible for the services Siemens provides for their area.
At the final stage of negotiations, each bidder had to match these service area owners one-for-one [with their own employees]. On one day in particular, we had 140 people negotiating because all of the service area owners and their teams were meeting the service providers and their teams. So all the way through this process, we’ve made sure that we’ve been dealing with people that will actually deliver the service. There should be no strange faces and no surprises.
IA: Are there any offshore outsourcing components to the deal?
JV: For a public service organisation like the BBC, I think offshoring would be culturally unacceptable. The only things we’ve said that we’ll allow to happen offshore are some elements of application development.
IA: It’s no secret that the trade union BECTU stands in firm opposition to the deal – and its members make up a quarter of BBC Technology’s workforce. What repercussions do you expect?
JV: BECTU said at an early stage that it was opposed to the notion of the sell-off and that’s a position it continues to hold. We’ve recently had a couple of industrial action ballots based on whether the BBC had actually secured good terms and conditions and pension benefits.
Now, I’m happy to say that we have [secured] those, and my view is that the ballots are no longer valid. We’ve achieved a pension scheme that is comparable with the BBC scheme and we’ve negotiated protection of employment terms and conditions.
It’s a disappointment to me that BECTU has taken this approach and I believe its position is entirely unnecessary. Yes, I can understand it’s difficult for people to accept that they’re no longer directly employed by the BBC. But the BBC’s future does not depend on it having complete vertical ownership of every part of the chain. This deal serves the BBC well and I believe it serves the people in BBC Technology well by making them part of a global technology organisation rather than a content maker.
The world has changed. It’s unfortunate, but I’m afraid BECTU has to wake up to that.
IA: The BBC has a fairly unique set of technology requirements. How do you think the role of technology in broadcasting is changing?
JV: Programme-making has gone digital but so far nothing much has changed in many broadcast organisations – the processes, the workflows haven’t changed. OK, the equipment has changed a bit, but actually it’s still built in custom environments, generally very expensively.
Commodity technology is changing that. We can now do things with straightforward IT. In what I call an ‘enterprise-wide production environ-ment’, we can make content available all the time through digital processes which give us the opportunity to make more efficient use of our raw material.
IA: What will be your own role once the deal is in place?
JV: Well, the BBC employs me so I’m a user of BBC Technology’s services and will continue to be so. In essence, I guess I’ll be doing two things. First, I will be working to see how the BBC can best apply technology to programme-making. Second, I will be responsible for building on the relationship with Siemens. It’s going to take an awful lot of work over the next year to 18 months, building up levels of trust and formal mechanisms for sharing ideas.