2001 Editor's Choice Award CSC and Bath Iron Works
Bath Iron Works (BIW) builds surface combatants, destroyers and large cruiser-class ships. Its customer is the U.S. Department of Defense, and it is the leading producer of destroyers for the U.S. Navy. The company's mid-1990s goal was to reduce costs and manage resources better, but at the same time, its most important customer was driving the company to become a technology leader. "The U.S. government wanted us to be more robust, Web-centric. They were driving us with a lot of technology issues," says Mike Bowie, Information Systems and Technology Outsourcing Manager for BIW.
With technology requirements aimed squarely at their weakest point, yet with a goal to be the government's choice to build 21st century destroyers, BIW made the strategic decision to outsource all of its IT operations to Computer Sciences Corporation (CSC). "We felt CSC would be able to support us in our effort to achieve our goal of being a technology leader and could do it at the rate at which our customer would like to see it done."
Bowie admits that BIW had blinders on when it outsourced in November 1996, not realizing the extent of technological advancement that would be required. The original contract spend was about $27 million, and it has now grown to include new services and a value of nearly $50 million over four years. Because its customer was driving certain initiatives, BIW found it needed new PCs for all employees so that they could do design work more efficiently and win more government contracts. "We've done an enormous amount of upgrades, consolidations and refreshes of equipment to help strategically position us so that we can be the technology leader," says Bowie.
Destroyers of Inefficiency
CSC brought its technology leverage to the forefront with BIW. Network infrastructure was upgraded, the mainframe was migrated to CSC's data center, there was a server consolidation project, redundancy, Y2k remedial work, disaster recovery planning and replacement of BIW's email system. Along with a technology refresh plan came implementation of PeopleSoft HR and Payroll, followed by implementation of SAP Procurement to manage the purchase of millions of parts. Now they're focused on technologies such as wireless LANs and intranets in order to increase the shipyard's productivity. "CSC brings to the table a lot of technology advancement," says Bowie. There were also some security issues prior to outsourcing, and CSC brought firewalls and other technology to create a secure environment.
The new network infrastructure has reduced BIW's downtime by about 90-95%. Another problem was solved when CSC analyzed a situation and realized that BIW's users were able to perform some functions that ran at night but made the system unavailable the next day. The supplier fixed the immediate problem and went a step further and trained the users on what not to do until some checks and balances could be put into the applications.
Bowie states that, of course, there are always issues that arise in outsourcing relationships. "But the biggest thing that makes CSC stand out is their willingness to be a partner," he says. They want to help us with our business, both from a BIW perspective as well as from a total perspective for our parent company, General Dynamics. We can sit down and work any issue out and come to agreement on anything without ever having to look at the contract, so it's a true business partnership."
CSC walked unscathed through some close-range firepower during the transition phase. BIW is a union shop, and the union people were doing IT services that would transition to CSC. In order to outsource, that meant BIW would have to strike a deal with the union to provide them sufficient, equivalent work. CSC worked with the union and offered to take them on as non-union CSC people or to honor the contracts that they had in place with BIW and finish them. But the union workers didn't want a different identity. CSC and BIW worked together on this front and provided some innovative solutions. As a result, some areas are still supported by union people, but they receive technology guidance from CSC; thus, CSC gained a few more resources. CSC also worked very closely with BIW to retain the other employees, providing a package that made up for the benefits changes in the transition. 95% of those employees stayed on and provided valuable business environment knowledge to CSC.
He cites another example of CSC going the extra mile. "We were having a lot of trouble with our network infrastructure. They designed a solution where the return on investment was such that they were going to be able to reduce their staff just by implementing this hardware. As our partner, they bring to the table ideas that may even mean they have a reduced staff onsite but that they will be able to deliver better service at a better cost to us. We can't act on everything they bring to us in technology ideas, but their innovative ideas allow us to make appropriate business decisions." He says both parties review the pricing structure on an annual basis and, "depending on how the defense industry is doing and where things fall," agree to make the necessary changes.
Bowie advises that all outsourcing relationships big or small need to be embraced as partnerships and worked that way on a daily basis at all levels. Within all of the General Dynamics sites is a function for relationship management. "I am the relationship manager at BIW," says Bowie, "and with the way CSC is willing to be a partner, it makes my job achievable."
Lessons from the Outsourcing Primer:
- Where a buyer's displaced employees belong to a union, the supplier and buyer need to work together to provide innovative solutions.
- As technology needs change, the contractual services and agreements may also need to be changed before the end of the contract term; therefore, a long-term contract is not a good strategy in outsourcing these days.
- In a partnership approach, both parties need to treat each other equitably.