In 15 years, InBev, a Belgian beer manufacturer, went from No. 17 to the leading brewer in the world. After reaching the pinnacle, it wanted to stay there. "It's easy to become the biggest. We wanted to become the best. We'd been doing things the same way for 50 years. So, we needed to examine if this was still the right way. If not, we had to find out how we could achieve world-class efficiency," says Michael Teulings, IT/IS Global Contract and Quality Director.
In other words, InBev was searching for the IT equivalent of the best yeast to ferment its hops and barley in order to brew high-quality beer.
So InBev, which brews four global brands--Stella Artois, Beck's, Leffe, and Brahma, plus more than 200 local brands--hired a consultant to study its global IT infrastructure. During a nine-month study, a small core team built an internal and external case, then compared the two. "The team found that InBev could change a lot," reports Teulings. "We are not an IT company but a brewer. We felt we could best assist InBev on its journey from biggest to best by considering outsourcing."
In 2004 InBev sent out a Request for Proposal asking outsourcing suppliers to devise improvements to its network based on six categories:
Ten companies responded, which InBev short-listed to four. It selected BT, but told the second choice candidate that is was put on ice. It wanted to outsource to them if the negotiations with BT failed.
Why did InBev select BT? "We had to have a global player that had a matching business strategy," explains Teulings. One component of that strategy was opening new markets. "We asked them, 'What about China? What can we do in Russia?'" he recalls.
InBev signed an outsourcing agreement with BT to manage its network in July 2005. That includes the brewer's wide area network, local area network, PBX management, video and audio conferences, fixed voice and mobile management, and telephone expense management.
Working in Multisourcing
InBev awarded the infrastructure management piece to a global Tier-1 provider and some application support to an application service provider. "Documenting your operational processes and aligning them with all parties is the way you let strong players to work together," Teulings says.
"InBev was very sensible in going about this. They regulated how we would work together. Everyone was clear about the linkages between the towers," says Colin Spence, COO, BT Americas. He says BT is "relaxed" about working with other outsourcers since its sweet spot is the network not the entire IT infrastructure.
BT set up a network operating services center in Brasil to do InBev's work. "We spread the work so we can get as close to the customer as possible," says Spence.
The service-level agreements are business oriented. "We're worried about them being able to transmit files around the globe, for example," says Spence.
How Outsourcing Helped the Brewer Meet its Business Goals
Teulings says outsourcing has popped open a number of financial benefits. While declining to mention numbers, he says the cost savings have been "significant." BT included a gain-sharing arrangement on the mobile phone segment, which has produced some heavy gains for both sides. The result: net profit in 2006 was up a stout 56 percent; IT contributed its fair share in the company result.
BT has a worldwide network of relationships and suppliers "which has gotten us better and more competitive pricing," Teulings reports. These relationships have also allowed InBev to reduce the number of vendor contracts it has to manage. "This has reduced our complexity," he continues.
BT has local resources in 53 countries and legal entities in more than that. That allows BT to handle all tax and regulatory issues and deal with export/import issues as well.
InBev has been able to support the business in developing markets with BT's help. For instance, InBev expanded into the Russian market since outsourcing. "We asked BT to help us cover 11 time zones in Russia," says Teulings.
BT did so well in the rest of the world, that InBev penned an amendment and added China to the contract. The brewer has 17 plants in China, which also represents a large growing market for its beer. "This is a new market for both of us. It's a challenge because there are so many regulations," reports Michael Teulings. Together the partners are finding their way.
BT's internal 411 has allowed InBev to analyze the consumer-goods market with greater accuracy.
The brewer has been able to look at utilizing newer technologies like VoIP (Voice over Internet Protocol) that BT offers, something it probably couldn't afford to do on its own with the same speed and scope.
Why the Relationship is a Success
"We are tough when required and always honest and fair," says Teulings. Talking a lot (sometimes over beers) helps a lot. "You need to listen and understand what the other one is saying. And it helps that we are clear."
Teulings says at the outset he clearly explained InBev's emphasis on financial discipline. He also outlined the company's procurement strategies.
They try to handle disputes at the lowest level possible. If that doesn't work, it's up to the zone managers to correct the problem. Problems should rarely get to Teulings's level.
"We always have factual discussions. Our rule is: try to understand the other's point of view," he continues. When he disagrees with BT's assessment, he likes to say, "Show me the data!"
The InBev executive says both parties have tried to build relationships up and down the chain of command. That includes the leaders of the account in each country as well as the managers of each zone.
Teulings says he trusts his BT counterparts. "I don't feel I always have to challenge all details, but I can work in an open relationship where we can challenge each other if we feel that it's appropriate." he says.
I'll drink to that!
Lessons from the Outsourcing Journal:
- The buyer developed clear and rigid processes so its major IT suppliers could work together. It outlined the linkages between the two towers to avoid finger-pointing.
- InBev selected an outsourcing partner that was also eager to open new markets. Together they are forging ahead in Russia and China.
- In an outsourcing dispute, listen to the other party and clearly study the data to resolve the conflict.