Most Strategic Outsourcing Relationship
2000 Editor's Choice Award
AT&T Solutions/ Bank One Corporation
From the Editor: Outsourcing relationships work well when each company is able to focus on its core competency. The outcome is even more successful when each firm is a leader in its field. This relationship displays the powerful results when a buyer leverages the best-in-class expertise of a supplier. It is an enlightening case study in how companies should outsource their telecommunications.
Bank One came to the conclusion in late 1997 that instead of continuing to provide voice and data networking (and the management thereof) internally, it would outsource to a company with expertise in that area. Bank One is a financial services company. Besides its retail and commercial banking business, it is also involved in such other financial services as investment management, consumer lending and credit cards. Changes are inherent in the financial services industry. Along with managing its network, Bank One wanted its supplier to upgrade its infrastructure and improve the bank's responsiveness to its business needs. "We have grown through acquisition and had disparate systems in our infrastructure that we really wanted consolidated and upgraded," Lyttle explains.
The resulting outsourcing arrangement is a very successful relationship. It began with the main ingredients necessary for an effective, long-term relationship and added a few surprise ingredients.
Begin with a Large Amount of Expertise
"We were looking to leverage industry expertise in mature outsourcing areas to get best-in-class services. We wanted to tie into a company that is constantly on top of the latest processes and tools to deliver these services," says Jeff Lyttle, vice president of technology communication at Bank One. "It just made good business sense to have an expert like AT&T be our supplier for telephone services," says Lyttle.
The original $1.4 billion contract with AT&T was signed in late 1998 for a term of six years, outsourcing Bank One's voice network, data network, transport services, and long distance calling services to AT&T.
Add a Fair Measure of Flexibility
In the past, Bank One's services were bundled in a "one size fits all" program. Bank One really wanted to be more flexible. It also wanted to gain short-term and long-term cost efficiencies.
Through its outsourcing arrangement, Bank One wanted to be able to offer its banks a tiered, service level cost program. The program would allow the banks to pay for the specific service level that they need. If a high degree of responsiveness were required, a bank would pay for a higher level of service. For a response that is not so urgently needed, perhaps, within a couple of days, a bank would pay less.
Bank One also sought to move its banks to a more variable cost model, where the bank's biggest user communities would pay the most for service. The pricing model would tier, depending on the size of the community. In the past, the cost had been broken down into equal portions, with each bank paying the same amount.
Blend in a Competitor
Bank One's arrangement with AT&T specified that AT&T align with IBM Global Services on this particular project to form a partnership called the Technology One Alliance. IBM Global Services was taking over Bank One's data center, and it would be necessary for AT&T to work as closely with IBM as it was with Bank One. "This was not just an AT&T and Bank One relationship," Lyttle says. "In essence, AT&T had to be willing to step up to an alliance relationship with its competitor in order to make our outsourcing relationship work."
Gently Sift the Fragile People Issues
The employees were the most important item to Bank One in the transition to outsourcing. The corporation did not want any job losses, and it wanted equal or better pay along with comparable benefits for every transitioning employee in the scope of the outsourcing. That meant that AT&T had to figure out a way to stay in the Columbus area, knowing full well that if they moved the staff to a service center outside of Columbus they would lose a lot of employees. Indeed, investment in the city of Columbus, Ohio was one of Bank One Corporation's primary objectives when it began its search for an outsourcer in 1997. It was important for the banking institution to find a partner that would take care of employees during the transfer.
AT&T was up to the task. The communications company was already looking for another area in which to build a global customer support center to supplement its existing center in Raleigh/Durham. The Bank One opportunity allowed it to settle on Columbus. "We have had a lower attrition rate than when Bank One was managing the employees," Lyttle says. This success is attributed to the focus of both companies on the people issues.
Another objective of Bank One in its procurement process was to select a supplier that would establish the surrounding Columbus area as a potential information technology hub. AT&T has risen to this challenge and provided added value. In order to provide a fertile recruiting ground in which to generate new staff as Bank One grows, AT&T will work with local academic institutions to develop skilled IT professionals. AT&T awarded a $50,000 grant to Ohio State University to develop curriculum in activities related to the technology alliance, and the communications company will be providing internships and training opportunities for students.
Combine with Excellence in a Governance Structure
"Bank One leadership has remained very involved in how this outsourcing relationship has been implemented," Lyttle says. "We have retained accountability to the heads of our businesses so that we have a say in how the business works today, how we want it to work tomorrow and how we are going to get there with AT&T as our partner. So we are still the general contractor."
Lyttle says that if you talk to the leaders of the Technology One Alliance they would all point to the governance structure as the reason for the relationship success thus far. The alliance installed a board of directors, with the bank's CIO, Marv Adams, sitting as the chair. The board also includes AT&T chairman, Rick Roscitt, and the head of operations, Brian Maloney, as well as top-level executives from IBM.
"This board enables things to move forward and to resolve issues more rapidly than would otherwise be possible," Lyttle says. The board of directors manages all the way down to the infrastructure, delivery, management and process management side of the operation. Most importantly, it allows the alliance partners to rapidly assimilate people and resources for swift development.
Lessons from the Outsourcing Primer
- Outsourcing telecommunications can provide flexibility. This relationship allowed Bank One to offer a tiered program with cost based on usage. Before, it could only use a "one size fits all" program.
- Focus on people issues. When suppliers do, they can enjoy a lower attrition rate than when the employees worked for the buyer.
- Invest in the local university. These institutions can train new staffers.