• White Papers |
• Blogs |
• Video |
• Webcasts |
• Podcasts |
• Events |
• Solution Centers |
• Newsletters |
• Magazine |
• RSS Feeds

Ending an Outsourcing Early

By Edward Prewitt

February 01, 2004 — CIO — John Crary, the CIO and vice president of IT for Lear, an automotive parts manufacturer that’s number 131 on the Fortune 500 list, uses outsourcing to save money and free up his IT budget for other purposes. He holds contracts with three different IT outsourcing vendors for a range of activities, including Lear’s help desk, basic data processing and high-end ERP support. Crary is very practical about his outsourcing deals, judging the success of each relationship primarily by the savings he accrues.

So when his arrangement with Hewlett-Packard turned out to be costing Lear more money than it was saving, Crary wanted out. But the 1999 contract contained no clause for exiting the deal early. Crary needed a plan for cutting his outsourcing costs without raising his legal fees.

Shotgun Wedding

Lear is the fifth-largest company in the intensely competitive auto parts industry. The company recorded $14.4 billion in revenue in 2002. It employs 115,000 people at 283 facilities in 33 countries. Lear grew to its current size through acquisitions. Starting in the late 1980s, Lear went on a massive shopping spree, making 17 major purchases. One of its last acquisitions was the automotive division of conglomerate United Technologies Corp. (UTC) for $2.3 billion in 1999.

As part of the UTC deal, Crary inherited a contract with a large Hewlett-Packard data center in Atlanta. Negotiations for the purchase of UT Automotive were handled by Lear’s mergers and acquisitions team, with minimal input from Crary. Although the arrangement with HP was presented to Crary as a contractual obligation, he could have pushed for a change of terms had he chosen to do so. But at the time, the outsourcing deal seemed in his interest, and he had many other, more pressing integration issues to deal with. "I had a lot of fish to fry at first, and nothing was broken, so I left it there," he says.

The data center had formerly handled multiple UTC functions?from HR to finance to ERP?across the entire enterprise. After the acquisition, HP transferred the data of the Lear subsidiary into a separate set of servers that handled only Lear data. At a stroke of the pen, Crary became an HP customer for plant ERP, corporate finance and EDI to its auto manufacturing customers. (Lear was already a big HP customer for PCs, mainframe processors, network monitoring, information security monitoring and other services, all of which amounted to several million dollars in sales each year.)

 

Email

Print

Comments

Share [+]

Digg This

SlashDot

LinkedIn