Offshore Winds: Outsourcing

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With more than 150 stores in airports, hotels and high-end resorts throughout North America, Asia and the Pacific Rim, DFS Group Ltd. knows how to peddle life’s niceties to international travelers. But a policy of decentralized IT systems in far-flung locations had distracted the duty-free luxury-goods retailer’s attention from the finer points of efficient global retailing and high-quality customer service. So by the end of 2000, the San Francisco-based company had a sprawling IT set-up with ten data centers, ten help desks and ten versions of roughly the same software running on 24 systems scattered across ten countries. “The code was brittle and difficult to maintain,” says Ron Glickman, until recently senior vice president and CIO at DFS. “There was no documentation. All the details were stored inside people’s heads.”

Glickman’s solution? Outsource everything to a firm able to consolidate systems, update and unify applications and keep the operation humming around the clock. But he’d have to figure out how to create this far-reaching IT solution for less money than he was already spending on 250 full-time staffers. And if DFS was going to do more for less money, it would have to do it somewhere a whole lot cheaper than San Francisco. As the summer of 2001 drew to a close, he and his managers were putting the finishing touches on a 36-month plan to consolidate DFS’s servers and hardware operations in Singapore. DFS would then turn over the administrative system keys to Cognizant Technology Solutions, an IT consultant headquartered in Teaneck, N.J., with development centers in Chennai, Kolkata and Pune, India. The events of Sept. 11 made the cost efficiencies that much more imperative if DFS hoped to survive the deep plunge in international tourism that followed the terrorist attacks.

In the end, DFS managed to squeeze the highlights of its three-year plan into just nine months. Global IT expenses dropped 35 percent. The company’s IT staff shrank 43 percent in the first year and 59 percent in the second. In six months, support for 7 million lines of code, located in ten countries, moved to a single development center in India, without any disruptions in business. Meanwhile, Glickman learned so much about the strategic management issues involved in offshore outsourcing that he decided to leave DFS this past December to become a change-management consultant. Does he recommend offshore outsourcing to every client? “Offshoring is a means to an end and not an end in itself,” Glickman says. “I’m focusing on helping organizations transform, and if global outsourcing makes sense, certainly I can advise companies on offshore strategies.”

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