How Compuware's Outsourcing Services Enable Lear's Business
Unlike people or vehicles - which can go in only one direction at a time - companies must be able to quickly move in several directions simultaneously. IT is the prime enabler of latitude for multi-directional objectives, but it also creates new risks at various stages of the software and hardware lifecycles.
Lear Corporation, the world's largest automotive interior systems supplier, enjoyed record net sales (up by nine percent) in 2003, saw its stock go up by 80%, increased its customer satisfaction levels, and achieved milestones in setting the stage for future growth. Obviously, Lear has an effective business solution for minimizing the risks in its enabling IT infrastructure.
Lear tapped Compuware Corporation in 2001 for an outsourced solution to increase Lear's flexibility to adapt to changing business operations. "When you're serving customers like Chrysler, Ford, and GM," explains Brian Vautaw, vice president of Information Technology at Lear, "you really have to be able to turn on a dime to accommodate their changes."
Impact of Outsourcing on Managing Operations
Buyers shifting to an outsourced solution usually encounter situations where the outsourcing provider's project management and people management approach is more formal than the buyer's normal approach.
The service levels agreed to in an outsourcing arrangement usually are at a higher level of performance than existed in the buyer's organization prior to outsourcing.
The outcomes achieved by both of these scenarios will be noticed throughout the buyer's enterprise and are likely to impact the operations of other internal processes and people's performance levels. As explained by Todd Furniss, COO of Everest Group, outsourcing has significant impacts on the departments "left behind."
The original objective that drove the Fortune 500 manufacturer to consider outsourcing started with a corporate decision that the particular ERP system Lear was using had become non-strategic and would be replaced with a new system. For the existing system, Vautaw says they would "put a box around it and not grow it - just maintain it." Given that situation, Lear's internal IT professionals supporting that system would be in a position of not having much of a career path and would simply be in maintenance mode.
Lear cares about its employees' careers and welfare; the company also recognized that such a scenario would likely trigger attrition, eventually increasing the costs of maintaining the old system. But outsourcing and transitioning the Lear professionals to Compuware, which excels in maintaining legacy systems and giving IT professionals the opportunity to learn and use new technologies, would provide excellent career paths for the Lear employees. "We decided to outsource because it provided a win all the way around," says Vautaw. Management at both companies placed considerable effort into upfront communications about what Compuware is all about and why the change would be a win for Lear's IT staff. Basically, they would be doing the same work, sitting at the same desks, but have a different project manager and a different company's name on the paycheck.
Outsourcing the Risks for Outgoing IT Systems
The five-year outsourcing agreement's original scope was for production support (break/fix) with minimal functional enhancements of the system. But, as often happens with ERP projects, the planned five-year implementation of the new system has been slower than anticipated. At Lear, everyone's job is affected by new procedures and processes because of the new system; all must learn the new way to perform their jobs before the replacement system is turned on. Training takes place in each of the 280 Lear manufacturing facilities in 33 countries as the new system is put in place.
Outsourcing Contracts Advisory
Outsourcing is a long-term relationship, so contractual provisions must be structured for flexibility, as changes in the buyer's business environment, as well as emerging technology will impact the relationship over time. While a fixed-price strategy may have initial advantages, it could become the cause of dissatisfaction (for either party) over time if:
- the buyer's business volume decreases; or
- the agreed goals over time are to ramp down the number of people from the outsourcing company who are providing services to the buyer (thus, decreasing costs for the buyer but also reducing the provider's revenue), but new scope is added over time.
Structure your outsourcing agreement with a master services contract for the long-term relationship and as an umbrella for various service agreements or Statements of Work to handle ramping up and down in scope.
The unanticipated challenge of a longer timeline for system implementation has made the outsourcing to Compuware more strategic. Compuware's scope was increased to include new development projects to enhance the old system in order to keep pace with the needs of end users not yet transitioned to the new system.
Outsourcing the Risks for Implementing New IT Systems
Part of success in business is knowing where to turn for the essentials. Lear turned to Compuware again when the manufacturing giant encountered an additional unanticipated sharp curve in the road.
Compuware's service to Lear expanded with the increased use of a shop floor application for sequencing the shipment of parts to Lear's customers. Initially required only by Ford, other automotive customers have begun requiring the sequencing. This new challenge came on like gangbusters. Although Compuware had developed the software earlier to help Lear with sequence shipping to Ford, it was developed to work with the old ERP system. So Compuware stepped up to the plate and worked with Lear to make the software more generic so that it would work with other manufacturing software installed at Lear's plants.
Beyond having Compuware to support the old ERP system - and implement a major new release of the system -- while maintaining service level agreements, Lear gains the added value of strong collaboration from this outsourcing relationship. Together, they create innovative solutions for new needs arising in Lear's factories. Some right-hand/left-hand car parts, for example, are mirror images of each other. Compuware and Lear worked together to develop a labeling print-on-demand process to ensure the right/left labels would not be placed on the wrong components.
Business success for individuals often rests on making the right connections. For companies, success today rests on making the right strategic alliances to help them take advantage of opportunities. With Compuware as its alliance partner, Lear won't be bitten by the risks of implementing IT infrastructure to enable its growth strategies.