How to Build Long-term Outsourcing Success

long-term business relationship, success, collaboration.2014 Outsourcing Excellence Awards

Best Long-term Relationship
Cummins and HCL Technologies

 

 

 

“Cummins is in a better place today because of HCL’s guidance and support.”

Curt Brown, Director, Service Excellence, Cummins Inc.

Outsourcing relationships, like marriages, can be trying, hence the significant failure rate. Dun and Bradstreet reports that 25 percent of outsourcing buyers say their outsourcing venture did not deliver as expected and 50 percent said the venture was a complete failure.

So finding an outsourcing relationship that not only survived but actually is thriving for more than a decade is a rarity. But that’s the storyline behind the Cummins Inc. and HCL Technologies relationship. Their history provides a paradigm of how to create a meaningful, prosperous outsourcing relationship over the long term.

How it started: laying the foundation for long-term success

Cummins is a corporation of complementary business units that design, manufacture, distribute and service engines; it has customers in 190 countries. The Columbus, Indiana corporation had outsourced some of its manufacturing for many years. “It was natural for us to extend that practice to IT,” recalls Curt Brown, director, Service Excellence.

Cummins outsourced both its application development and maintenance (ADM) and IT infrastructure to an American service provider in the 1980s. When India came on the scene and labor arbitrage became the buzzword in the late 1990s, Cummins sent its ADM work to India.

However, the incumbent infrastructure onshore supplier was not interested in opening an office in India. So Cummins issued an RFP. “We wanted to standardize processes across the enterprise. We believed this would produce economies of scale,” says Brown.

In 2004 Cummins selected HCL, headquartered in Noida, India, to become its global outsourcing partner for remote, end-to-end infrastructure operations for many reasons. These initial criteria built the foundation for its long-term success.

First, HCL was “the most competitively priced bidder.” Today Cummins still believes HCL is saving the company money based on its pricing. Second, the Cummins procurement team was impressed with both “the dynamics of the company and its business strategy,” continues Brown. Finally, Cummins felt HCL could accommodate its future growth. At the time of the original contract, Cummins’ revenues were “at rock bottom. But we projected a growth spurt. We felt they could grow with us,” he adds.

Why this relationship works

From the outset, executives at the top of both the buyer and provider publicly backed the relationship. “We had strong executive leadership touting that this was a strategic partnership. This view then trickled down to the employees,” recalls Brown.

Top support was crucial because in the beginning. Brown says some of Cummins’ 48,000 employees did not like talking to a non-local company when they called the help desk. “Not being local was a big problem,” recalls Brown. Senior leaders stepped up and announced “a centralized help desk is good for the company.” he continues.

Today, 10 years later, Brown says resistance to an offshore help desk is low. “Today people are glad a central help desk takes care of their problems.” For the record, customer satisfaction [C-Sat] from the IT help desk increased from 75 percent to 91 percent in the first 18 months.

The Cummins leader says another reason this relationship works is that “they add spice at each contract refresh.” Outsourcing changes at mach speed, and Cummins gained experience. Brown recalls Cummins’ IT managers “weren’t sure how to manage the relationship or HCL employees during the first contract. At the first refresh we now had higher expectations of HCL. And with the changes in the industry, we altered the contract fundamentals.”

This is an important lesson for long-term survival. “The new goals rejuvenated everyone. Now we had bigger targets to meet! This brings new life to the relationship,” Brown explains.

The 2007 refresh instituted a seismic shift: a move from FTE-based outsourcing to a managed services program. Now Cummins gave HCL the requirements and outlined its expectations. Then it measured and monitored the results. “This was a big shift because now HCL had to own its managed services results,” points out Brown.

Another building block is solving problems together. For example, in the early days HCL had difficulty retaining skilled labor. The two wrote a new clause in the contract that certain employees had to stay on the Cummins account for a set period of time. They could not leave unless they left HCL. Voila! Problem solved.

Things have been different on the executive level. Stability reigns. Brown says fewer than 50 percent of managers on either side have left since Cummins and HCL signed the original contract.

HCL executives understand Cummins’ business model and react accordingly. For example, during the financial meltdown, Cummins leadership asked the IT department to cut the budget immediately. HCL came up with an elegant solution: It sent its onshore resources back to India to work remotely. This instantly achieved the cost-cutting mandate.

Business successes

The numbers tell the story. Brown says the entire SLA dashboard has turned green. HCL has turned in a record performance scoring 4.6 out of five for the past 12 quarters. “We never expected the extent to which our SLAs—particularly customer satisfaction—would increase to totally green,” notes the Cummins executive.

The bottom line: Brown says, “Cummins is in a better place today because of HCL’s guidance and support.” And that’s how you build a long-term outsourcing relationship.

2014 Outsourcing Excellence Awards Winners

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