When Sunoco decided to transform its IT infrastructure, it performed 90 percent of its IT services in-house. After an honest assessment of its deficiencies, Sunoco decided to outsource 90 percent of its infrastructure to multiple suppliers.
The key to that successful transformation was changing how Sunoco defined the work, according to Tim Murtha, the now-retired Sunoco executive who managed the metamorphosis.
Just last month, Murtha completed an online book titled “Refining IT at Sunoco: A Case Study In Multisourcing.” It is a 4.5 year snapshot of how his team changed Sunoco’s internal IT infrastructure by outsourcing to four key suppliers.
The easy-to-read, 33-page book is now available on the (i)Structure Web site at www.i-structure.com. The book is designed to be a practical guide for other companies who are considering outsourcing their IT infrastructure or who want advice on how to manage a multi-source outsourcing. The book lays out in granular detail “an effective infrastructure management model that really works.”
Murtha says when he started in IT 40 years ago, life was simpler. (He joined Sunoco in 1964.) When Sunoco went to the marketplace for a solution, there were only one or two ways to solve a problem. That changed when technology began “to explode” in the 1980s. Murtha says today “the demands on an internal IT department have exploded also.” With so many choices, he realized he couldn’t look at IT the same way anymore.
Issues Facing IT Organizations Today
Murtha says Sunoco faced a series of IT issues that many large organizations also face today. They include:
- Multiple generations of incompatible technology
- IT infrastructure owned and supported by business units
- Lack of consistency in IT processes
- Under-investment in IT
- Changing business priorities
- Lack of critical technical skills and expertise
- Multiple or outdated email systems
- Dependence on internal staff “heroics” to maintain operations
Mike Jones, (i)Structure CEO, reports in the book that “if you’re responsible for IT operations, especially in a mid-sized company, chances are you’re feeling squeezed.” He says many of (i)Structure’s customers tell him they are asked to deliver services 24/7. They have to curb costs. Then there’s the weight of one new compliance measure after another and “the dark cloud of always-increasing security risks.” Add that together and IT managers “have an impossible situation.” At this point, “IT infrastructure becomes an unsupportable anchor” holding down the organization, continues Jones.
Sunoco solved these challenges by creating “an effective infrastructure management model that enables, supports, and controls multisourcing and selective outsourcing.” Murtha says this model has become a best practice others can follow.
Looking at IT Work a New Way
Murtha says the solution turned out to be a simple idea: “It’s all about the work!” He adds, “It’s not about different kinds of technology, no matter how new or transformational.”
For the last 40 years IT executives like Murtha hired people around the technology they were supporting or the services the business units asked them to deliver. But when he took a fresh look at the work, he realized “the lion’s share of the work the corporate infrastructure staff does is administrative in nature.” This includes mundane tasks like establishing file sharing, setting up access to the database, building PCs, or enabling users in a particular application.
Murtha says he did not want his high-priced, highly-skilled staff doing this administrative work. He determined it was a better use of time and labor to move the administrative IT tasks to lower-cost resources, whether they be internal or external.
Murtha was insistent that the staff he kept after the outsourcing become “truly focused on our core business.” He assigned his talented staff work “higher on the value chain,” which included decisions about architecture and strategy.
Instead of organizing IT tasks around vertical silos, he had an epiphany: why not have the staff do similar work across silos? He wanted to capture common transactions across the silos that the lower-priced workers could perform again and again. In other words, he wanted to enjoy the leverage that repeatability generates.
This consideration led him to the decision to outsource IT transactions. (Sunoco outsources its server and mainframe infrastructure to (i)Structure.) “Outsourcers have to be good at their processes because that is the key to their delivery,” says Murtha.
The Cable Company Paradigm
Murtha used the cable companies to demonstrate his new work paradigm. He says people who get basic cable get the minimum number of channels. He equates that to the administrative, transaction-oriented tasks and standard products and services. For example, everyone at Sunoco needs a PC, a phone, a data connection, an email account, and access to applications. p>Moving up the stack, some people pay for extended services like HBO or Showtime. Telecommuters and the sales force need mobile service and access to the virtual private network (VPN.) These people want to send email to a fax or have their voice messages sent to their email address.
Murtha maintains these users should pay an additional fee for the extra services. He says IT departments should adopt the “pay-per-view” paradigm and pay for what they use–a variable on-demand cost.
He says historically companies expected their IT departments “to do it all.” Murtha says that attitude has created part of the delivery problem in today’s internal IT departments. Outsourcing, on the other hand, allows companies to break out their costs for individual services, which makes the pay-per-view system possible.
Sunoco, like other companies, was concerned about the security of its outsourced data. “Will the outsourcer be as vigilant as we are about security?” he wondered.
What he found was outsourcers like (i)Structure are better at data security than Sunoco was “because we didn’t do enough of it.” Today Sunoco needs tight security around remote access and its VPN for its mobile users. “The breadth of technology is now so vast an internal department doesn’t have the opportunity to get good at it,” Murtha says.
On the other hand, infrastructure suppliers have to be good at data security in our very uncertain world “because it’s their lifeblood.” Murtha posits that an infrastructure provider who’s not good at security “won’t be around for long.”
As Murtha says in the book, “This is your future. Your IT organization will be overwhelmed faster than you can say Blackberry, VPN, IM, and SOX,” unless IT managers learn to:
- View infrastructure support in terms of the kind and quality of work involved in providing these services
- Learn to make as much of your workload “common” by increasing repeatability, thus driving down costs
- Cluster workload based on whether they fall into the common (administrative) or advanced (technical) categories
- Find ways to free your valuable internal engineering talent from administrative work, allowing them to focus on the strategic, income-producing tasks that will drive your company forward. An effective sourcing strategy makes this possible.
Because their collaboration was so successful, Murtha and (i)Structure decided to write this book to help other companies with their outsourcing decisions. You can read it at www.i-structure.com.