Outsourcing Bears the Freight of Keeping Business Strategies on Track | Article

outsourcing distribution“Feeling comfortable with their flexibility and the future direction of the firm” was the foremost requirement Railinc sought in an outsourcing partner. That was the second wise step of many “first best steps” the network and applications provider for the North American freight rail industry took to ensure successful outcomes in its strategy for outsourced data center services. Vice president and CIO, Allen West, credits that flexibility and direction for why “it felt good” to go forward with ACS, a leading BPO and IT service provider based in Dallas, Texas. “They are focused on service and concerned about the relationship aspects that matched what we wanted,” he says.

The first step had been making sure a prior existing outsourcing arrangement was still providing the best services and best price in the marketplace. Realizing a lot of things had changed during the four years of the prior contract (the price of hardware had gone down and new providers had emerged), Railinc conducted a feasibility study and Request for Information process on current service providers’ offerings and capabilities. That led to a competitive re-bidding process through a Request for Proposal sent to five providers in 2001.

West says that ACS “fit the bill” in all requirements. In addition, the fact that Railinc was comfortable it would have “a chain of command that we walk up through if we had an issue” could not have been more important. Everyone knew that migrating the work to ACS would be a huge, complex effort requiring the utmost in expertise, as well as focused attention and resources.

Mission-Critical Expertise Required

The transition was a “big bang” approach, with success attributable to both companies working together up front through detailed planning and pre-testing efforts.

Railinc provides messaging services to the largest railroads in the U.S. and Canada. It also hosts some applications for the industry; shares databases and revenue-processing systems for them; and performs some reconciliation services for financial processing among the railroads. It must maintain connectivity with its freight rail customers “100 percent of the time,” explains West. “It’s a very critical network of systems and communications.”

If the connections were to go down, it would have major negative impacts for Railinc’s customers. West cites one example of the impact. “One of the messages we transfer is an electronic waybill. It communicates where a shipment is supposed to go — what route it should take and to whom it’s supposed to be delivered. Some of this information is near real-time information. If our communication infrastructure goes down and a receiving railroad doesn’t get the messages about an in-transit shipment in a timely manner, it won’t know what to do with the shipment. Then freight starts to back up; which displeases both the end customers and the railroads.”

The “Go-Live” Moments

Accordingly, Railinc required that ACS accomplish the transition with no more than three hours’ downtime for networks and systems — but it preferred that ACS restore system availability within 90 minutes.

“That was our requirement,” recalls West. “It was a tall order, with more than 100 different telecommunications connections that needed to be switched from our existing vendor to ACS, keeping real-time data current from one system to the other. Our objective was that our customers would not notice anything or be thrown a curve.”

They began planning for all the angles and options in January 2002 for the “go-live” cutover on Thursday, July 4th, allowing a long four-day holiday weekend as extra time to straighten things out, if necessary. Amazingly, after dry runs and rehearsals, plus thorough communication with Railinc’s customers about what was going to happen and what their roles were, ACS cut the systems over in one hour!

West says the two companies also had to work with various telecom vendors and with IBM on how to bring down the operating system and bring it back up successfully. “A lot of new ground was broken in doing this,” he’s proud to report. “And we got great reviews from our customers and from the partners that we had on the technical end for all the other systems that were connected to ours.”

The Real Moments of Truth

An outsourcing relationship is an enduring one where both parties must work together flexibly on an ongoing basis far beyond the transition phase. ACS and Railinc are now effectively walking through the steps of learning each other’s organizations and business priorities. West reports they’ve run up against differences in working procedures, but they’ve each been flexible in negotiating modifications to their standard practices in order to accommodate each other’s needs in meeting their mutual goals.

When measuring its outsourcing return on investment, Railinc looks at whether its provider adapts to the changing needs of Railinc’s customers “without trying to unduly profit from those changes;” whether it admits, corrects and learns from mistakes; and whether it continues to grow with Railinc’s business.

Together, the two companies established an Integrated Planning Team, a forum designed for senior executives from both companies to share information about their businesses and discuss new ideas. West says ACS believes this forum is a good means of obtaining direct customer feedback and giving the provider the ability to respond with good customer service — definitely among best steps in building a successful outsourcing relationship.

Their relationship is young, and they’re still establishing policies and procedures around how they will interact. But their first steps together have already resulted in discussions about potential business process outsourcing (BPO) services from ACS. “BPO was not envisioned at the outset of our relationship,” says Railinc’s CIO. “But we have begun to explore those opportunities as we’ve gotten to know ACS better. So that is additional value that wasn’t expected.”

Lessons from the Outsourcing Journal:

  • Establishing whether a service provider’s capabilities, flexibility and business direction matches the buyer’s needs is a high priority in first steps toward success in an outsourcing relationship.
  • Successfully transitioning the work to an outsourcing provider is a process that requires a great deal of time and effort in detailed up front planning between the two parties.
  • In the beginning stages of an outsourcing relationship, the parties often encounter differences in their working procedures. Both buyer and provider must be flexible in negotiating modifications to their standard practices in order to accommodate each other’s needs in meeting their mutual goals.


Post a Comment

Your email address will not be published.

( required )

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>