There’s a motto in the IT department of JT International (JTI): “Source the service, not the technology.” Gunter Hagendorf, Director of Vendor Management and Service Delivery for JTI, says that his company–which is part of Japan Tobacco Inc., the world’s third largest tobacco manufacturer–decided it must focus on strategic decisions and not technology and operations. This decision is a key feature of its mandated corporate transformation from a multinational corporation to a global company.
For the last 10 years, JTI, which produces brands like Camel, Salem, Winston, and Mild Seven–(In Japan, JTI enjoys a smokin’ 72.9 percent market share)–has outsourced its global communications to Equant.
In 2003 JTI looked “to put more in Equant’s basket” as part of its business transformation. The services now include: local and wide area networks; fixed and mobile voice; PBX, maintenance, and video and audio conferencing. But to make sure it was getting the best deal available, Hagendorf says JTI put out a Request for Proposal (RFP) for wide area networks before the final decision. As it turned out, Equant was the only provider that had the global reach JTI needed. Based in Geneva, Switzerland, this manufacturer employs more than 11,000 people in 48 countries.
Testing the VoIP Waters
Peter Moebius, Vice President of Equant Global Solutions, says “voice over Internet protocol (VoIP) has undermined the classic business telecom model.” Until now, corporations have built separate data and telecom networks. “Today there is a tremendous opportunity to converge the two networks into one homogeneous infrastructure,” he explains, with the data network carrying the voice, too.
JTI has a high utilization of video conferencing with its major locations around the world. And VoIP makes video conferencing as easy as file sharing.
Hagendorf says JTI wanted to enjoy the new offerings and applications made possible through VoIP. For example, VoIP can significantly reduce the cost of international mobile telephony as well. In a couple of countries already, international mobile telephone calls can be redirected to an Equant voice gateway and afterwards transported via VoIP to its final destination at a JTI office.
The JTI executive says he was reluctant to try VoIP in 2001-2002. But in 2003 with the new Equant contract, he agreed to an initial attempt for the UK–a greenfield (new) implementation for a shared service center. After much success, JTI engaged Equant for a VoIP-based call center environment for a virtual global call center for end-user IT support with agent locations in Russia, Malaysia and Canada.
Here’s how it works: A JTI caller uses a typical TDM trunk or PSTN line from wherever he is located. Then the voice call crosses the next Equant voice gateway to the Equant IP network to the JTI IP network, which then routes the call to the appropriate agent location.
“We’ve had quite good results,” reports Hagendorf. He says the voice quality is significantly better for some countries in Eastern Europe and Southeast Asia than traditional phone calls because these countries have poor landline infrastructure.
How Outsourcing Helps the Manufacturer Stay Ahead of the Pack
Moebius says “the pace of innovation in the telecom space is moving very fast.” He says buyers like JTI don’t want to invest in the infrastructure and people necessary to enjoy the new technologies like VoIP. They believe outsourcing is the way to go.
Getting the cutting edge technology was just one benefit of the increased scope of its outsourcing engagement. The manufacturer requires the flexibility to move from one manufacturing site to another. In today’s global competition, it may downsize a manufacturing unit in one country and increase the operation in another. Telecommunications are crucial in both spots.
“We have to follow the requirements of our business and react at a fast pace,” says Hagendorf. In its fiscal year ending March 30, 2004, JTI sold 423.5 billion cigarettes in 120 countries.
Equant offers a host of services at a set price. “We like being able to choose the services we need from their catalog,” says Hagendorf. “That gives us great granularity as well as tremendous flexibility,” he says.
The financial guarantee was attractive, too. Equant made a financial commitment to JTI: It guaranteed agreed savings from the first day of signature, an agreement the board welcomed. “Manufacturing is an extremely competitive industry,” says Moebius. “Manufacturers are always looking for the most cost-effective solution. He points out that manufacturing pioneered offshore outsourcing using contract manufacturers 20 years ago to cut costs.
“JTI wanted to get rid of the management of its infrastructure and they knew we could do it more efficiently than they could,” says the Equant executive.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].