A Hybrid Approach to Outsourcing Fuels IT Success
Rompetrol, a European petroleum producer, rethinks and revises its IT strategy to be more cost-effective and to align more closely with business requirements.
If the digital age has proved one thing, it's that IT departments face tough questions about how to operate and manage resources at maximum efficiency. At Rompetrol Group N.V., a Romanian energy producer and trader that refines about 4.5 million tons of crude oil a year and has more than 7,000 employees stretching across 12 countries, the path to greater efficiency led the firm to IT outsourcing in 2010.
"It was viewed as a way to run things in a more efficient and cost-effective way," says group CIO Marcel Chiriac.
However, the decision to outsource the company's entire IT function, including about 200 applications, soon proved problematic, and the dream of a more efficient IT infrastructure became a nightmare. "The exercise went on for two years," explains Chiriac, who assumed the IT leadership post in 2012. "The costs actually went up when Rompetrol attempted to make some adjustments. At the same time, the level of service started degrading, and the relationship soured."
As a result, Chiriac and the executive team pulled the plug on the previous outsourcing provider when the contract expired.
"We decided to bring a number of functions and responsibilities back in house and adopt a hybrid model that involves about 60 vendors and service providers," he reports. "This was a significant challenge because there are only 26 people in the company's entire IT organization, and we manage functionality across 3,000 active users and more than 2,000 devices and configuration items."
The firm turned to network infrastructure and automation firm IPsoft to better manage systems in a hybrid environment. The vendor offers tools and systems to manage technology virtually through cognitive engineers and agents.
Rompetrol brought key functions such as security, vendor management and overall governance back in house, while the IPsoft solution manages servers, switches and various other hardware and software components, including OS and database support.
Chiriac says that Rompetrol gained key insights from the experience. For one thing, "Never put all your eggs in a single basket," he advises. "When you have one supplier or service provider, you don't have adequate leverage and control over the IT environment. You're likely to have a very difficult time knowing what is going on—even if you have service level agreements in place."
For another, he points out, there's no way to outsource strategy and governance. "An outsourcing provider doesn't have a stake in the success of the business," he says.
The hybrid approach to IT has paid dividends. Chiriac says that the automated approach resolves about 56 percent of incidents related to infrastructure without human interaction. The company has slashed overall IT costs by about 32 percent, while expanding the scope of business and IT initiatives.
At the same time, Rompetrol has consolidated the number of vendor contracts from about 100 to 48. This has led to improved oversight and cost reductions. Finally, customer satisfaction ratings have risen from about 3.4 to 4.1, on a 5-point scale.
"We have found an approach that works and provides the level of visibility we require," Chiriac says. "We have reached a point where IT is manageable."
Samuel Greengard, a contributing writer to CIO Insight, writes about business, technology and other topics. His forthcoming book, The Internet of Things (MIT Press), will be released in the spring of 2015.