Value in Outsourcing – It’s Not About a Black and White Contract | Article

infrastucture outsourcingIn his initial assessment of the technology state of affairs at St. Michael’s Hospital in Toronto, Canada, the inaugural CIO, John Wegener, found systems that were far behind and processes that were scattered and frayed. The systems had been built a decade earlier, and the LAN had capacity for 750 users instead of its current 1,300 users. They had constant problems. In just a few months after his assessment, the hospital developed a five-year strategic plan. The first step was to obtain a reliable infrastructure.

The hospital achieved that objective – of getting new systems up and running — by outsourcing to Getronics Canada. But, in the process, St. Michael’s Hospital came to realize that its outsourcing partner had the resources and expertise to take the hospital far beyond its original hopes.

Outsourcing alliances, when used strategically, can create value that impacts the buyer’s entire organization. In just a few months, CIO Wegener (who also is vice president, Corporation Resources) says they were talking with Getronics about new initiatives that they hadn’t even considered at the time they signed a contract to outsource the infrastructure.

Getronics provided real insight and experience, Wegener says. “In a good partnership, not everything is black and white, and not everything is documented in a contract. Often it’s the gray that really makes up the partnership, and I can say that I am more impressed with Getronics than anyone else. They are a top-notch company,” he exclaims.

How Getronics has used its insight and resources for St. Michael’s above and beyond original plans has created a wealth of value for the hospital. It has vastly increased the hospital’s competitive advantages in a time when that’s a crucial objective – yet expensive and difficult for many organizations to achieve on their own.

Two Going-Forward Options

The hospital had two choices: it could purchase and build the infrastructure or it could outsource its ownership and management. There were capital constraints at the time, so Wegener’s Request for Proposal (RFP) asked potential service providers to respond to the RFP with business solutions that included a utility model. (In a utility model, the service provider assumes all risk of technology and scalability in return for a long-term, steady stream of revenue.)

Wegener recalls that only four of the seven service providers invited to bid clearly understood the utility model. Of those, one didn’t have a solution that would work technically with the service level requirements the hospital identified in its RFP. And service providers offering a utility model incur huge costs; so it ended up that two of the four could not afford to provide the solution that Getronics offers through its world-class Enterprise Service Center (ECC) [see Integrated People+Processes+Tools = Best-of-Breed Service Delivery].

Getronics was awarded the network infrastructure work, and the four-year contract was signed in 2000.

The 600-bed hospital is divided into five wings, and the implementation was handled on a rolling basis, one wing at a time. The old system was switched to the new at completion of each wing.

Awakening

Creating new value by leveraging Getronics’ capabilities and resources began four or five months after the infrastructure implementation was started. St. Michael’s was merging two hospital organizations. Only acute care units were consolidated; eight remote ambulatory facilities were left intact. That left the hospital with a number of remote sites to support.

“The connection base for those remote sites was from the organization that we were closing down,” recalls Wegener. “So we had to rebuild our WAN to accommodate those remote sites. The sites would be fed with both voice and data, so we needed a telephony piece. We went to Getronics and said, We need a WAN with voice-over-IP – will you work with us on this?’ And they did.”

Next came a server management agreement. With a utility model and Getronics’ ECC, the hospital would achieve further cost and efficiency synergies for the organization.

The voice-over-IP capability was just the starting point for what has evolved into innovative uses of technology to streamline the hospital’s business processes and increase its competitive advantages.

Not Your Everyday, Garden-Variety Projects

Wegener says the hospital and Getronics have a “very easygoing partnership.” Two hours of their weekly meetings are set aside for management brainstorming, where they talk about potentially doing things differently. One initiative they’re working on together is IP Television. “It’s bleeding-edge technology,” says Wegener, and the hospital and Getronics are able to pioneer it through their mutual trust.

The IP TV technology would reduce operational costs and management complexity. In addition to having access to entertainment such as cable TV and video-on-demand, patients would have access to value-added tools such as email and access to the Internet. “In addition, our staff will be able to use the same device either to review patient-specific data or to enter specific request for services, such as online menu selection and online educational healthcare videos,” he explains.

Their brainstorming sessions also include discussions about new concepts for technology already in existence. “We found out that we might be able to change some business processes by using cellular IP technology,” Wegener states. “We would assign regular cell phones to nurses and set up the phone systems so that when a patient hits a “hot key” it dials the nurse or doctor on that phone using the hospital phone system.” If they are offsite, the call would be automatically transmitted to the cell phone company to move the call to where it needs to go. The system is hands free and voice activated. So a nurse need only say the patient’s name, and it automatically would dial the number for that patient’s room.

We’ll Take That One

Wegener says he appreciates Getronics’ vendor-neutral approach. “That’s helpful to a CIO. You don’t want somebody to come in and sell you a particular product because they are a ‘gold partner’ with another vendor,” he explains. “Getronics looks for the best solution, even if they go outside their organization to a competitor to find it.” The hospital’s desire to implement an on-call system, for instance, led to Getronics and St. Michael’s having discussions with the developer of the cellular IP technology and with another infrastructure service provider on the IP television concept.

While both of the finalists in the RFP evaluation had similar pricing, Wegener says Getronics was more upfront in indicating what it could or could not do and that implementation was not going to be all roses. “They were so realistic, and we had a good feeling about them,” he recalls. “And that was the deciding factor. We based our decision on loyalty, trust, and potential for a working partnership.”

Obviously, it was a decision that has increased in value and will carry St. Michael’s far beyond its competitors and in the most efficient, cost-effective manner.

Lessons from the Outsourcing Journal:

  • A utility model shifts the costs of both infrastructure and IT staff to the service provider, providing more flexibility and asset leverage.
  • Buyers should select a service provider they can trust to be an innovative partner in creating new sources of value for the buyer’s organization, even if it involves going to the “gray” areas outside the scope of the contract.


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