1998 Editor’s Choice Award
From the editor:
The Most Effective Award is one we reserve for buyers and suppliers that have long and enduring relationships in which value has been provided throughout the entire period. This particular relationship between CSC and General Dynamics has survived tremendous changes, as General Dynamics has shed many of its subsidiaries and transformed the very nature of the company. Throughout this time, CSC has provided flexibility and high levels of service and customer satisfaction. It is this enduring quality, with its obviously successful results, that we acknowledge and hold up as an example to others.
At the end of the 1980s, defense contractor General Dynamics was a $10 billion company. Their Data Systems Division had roughly 2,500 employees supporting the company’s data systems. Then the Berlin Wall tumbled, the Cold War ended, the government’s defense budget shrank, and General Dynamics faced the need to focus on the businesses at which they were best.
“We realized that we were going to be divesting some of the units we had,” says Ken Hill, vice president, information technology. “The biggest entanglement that we had during that time was IT, because all of the operating groups were supported by the Data Systems Division.”
The company decided to try to sell off the division with the provision that the new owner take over all of the employees and have those people continue to support IT for General Dynamics. In November 1991, such a deal was struck with Computer Science Corporation (CSC).
“That was the beginning of the TMG Group at CSC,” says Hill. “On a Friday, people were basically General Dynamics employees sitting at their desks. Then, on the next Monday, they were sitting at the same desk, but they were CSC employees.”
At the same time, General Dynamics and CSC signed a 10-year contract for the vendor to provide IT outsourcing support. The deal has since been extended by three years, through the end of 2004. The original deal gave CSC an assured business base over a 10-year period and also provided entree into companies that were acquiring other business units from General Dynamics.
CSC does all of General Dynamics’ information systems work, including mainframe, distributed computing, applications development and networking.
“If you were to count the number of IT people at General Dynamics today, I would say we probably have somewhere between 125 and 150 total that are General Dynamics employees,” says Hill.
The Spokes of the Umbrella
The deal is structured with an umbrella agreement that states the terms and conditions of the relationship at ‘a high level,’ according to Hill. The specifics are set forth in separate agreements with each of General Dynamics’ operating units.
“They go in and set the service levels they want,” says Hill. “Different operating units may want different levels of service. Maybe they can’t afford the same level that someone else has.”
The electric boat division, for example, may want half of their budget spent on mainframe and the other half on distributed services, while the land systems division spends 60 to 70 percent of their IT budget on distributed services. The units also negotiate local pricing, which can vary by location, and estimate their own staffing requirements.
“CSC can staff to those requirements. Plus, they can also look at the requirements from all of our other operating units and put together a better plan for manpower staffing,” says Hill.
The umbrella agreement combined with the individual business unit agreements creates an opportunity for flexibility that CSC delivers. As an example, Hill points to the way the vendor has responded to a change in direction on the part of General Dynamics. After shrinking from $10 billion to $3 billion, the company began acquiring companies again in 1995.
“At that point, our original agreement with CSC did not provide that if we bought new businesses, CSC would have the exclusive right to go in and take over their IT,” says Hill. “We came back to CSC and said we’d like to open up negotiations on this contract.”
As a result of the negotiations, CSC gained the right to take over IT support for acquired companies, as long as it was cost effective, and General Dynamics received more favorable terms and conditions, including lower profit and fee rates on distributed services. That concession, says Hill, gives the operating units an incentive to move from the mainframe to the ‘better technology’ of distributed computing.
Hill also lauds CSC’s responsiveness, especially in situations where the contractor needs innovative solutions for customers. “Customers are always coming to us and wanting us to use new technology in the IT area,” he said. “We rely on CSC to help us in those areas and also in the support areas. As our businesses have grown again, there’s been an increase in the amount of work we’ve given them.”
Part of that new work is a PeopleSoft implementation currently being done across the corporation. At the beginning of the project, CSC had only limited PeopleSoft experience. They responded to the need by hiring and training people in a timely manner to meet General Dynamics’ schedule and requirements.
Mirroring the Contract Structure
The relationship is structured along the lines of the contract. An information technology council, made up of CIOs of each of the operating units, serves as an overall steering council for strategic issues, and CSC senior executives participate in their quarterly meetings. Each of the operating units also has an IT council, comprised of representatives from each of the functional areas. Those councils deal with operational parameters and service levels, and CSC account executives attend their meetings. Strategic goals are updated every two to three years, and service levels are set on an annual basis.
Hill says CSC also is helping General Dynamics prepare for the future. The vendor is helping the company deal with all of the Y2K issues, including remediation, assessment, inventory and other elements. One of the things CSC has done is establish what they call a destructive testing center. Critical systems are taken to the center in Ponca City, Oklahoma, and run under simulated Y2K conditions to see if they fail.
“To me, that’s very innovative,” says Hill. “It’s helpful in the strategic issues that we need to do.”
ERP is another area where the vendor has been of assistance. Hill says he had been trying to get operating units to look at ERP for a long time, but they were concentrating on Y2K and other operational issues. He approached CSC about putting together a two-day symposium on ERP. CSC complied by bringing in vendors in the ERP area, as well as analysts and CSC’s own ERP support and implementation group. Approximately 50 people from General Dynamics’ operating groups, plus CSC’s service people, attended.
“They helped me get the interest I needed drummed up at the operating units,” says Hill. “The operating unit people came out of that meeting saying ‘This was great. This was wonderful.’ It kind of rallied the troops and helped me give these guys an introduction to this technology change.”
Hill plans to hold other seminars to get General Dynamics people to realize the significant amount of technology in the marketplace today. He’ll go back to the vendor that made the first effort successful.
“CSC can help us get there,” he says.