Outsourcing Case Study: BAE Systems

Honesty, flexibility and trust are the keys to successful outsourcing relationships, says BAE Systems.

The aerospace and defence company is engaged in a £1.5bn outsourcing deal with Computer Sciences Corporation (CSC).

The two signed the six-year contract covering the US and UK operations in 2000, but the relationship goes back further - a deal was clinched in 1994 to include the IT operations of Marconi Electronic Systems after it merged with British Aerospace.

A contract based on IT commodities and support was replaced by a more user-centric one as BAE set a price for IT services per head and left delivery to CSC. The contract is now a strategic alliance.

"An open and honest relationship based on flexibility and trust is key," says Allan Leggetter, head of infrastructure, shared services, IT and ebusiness at BAE Systems.

BAE is conducting a mid-term contract review to see how it 'can put what we've learned into the requirements we make in 2006', says Leggetter.

Indications are that the relationship will not hit the buffers at that time.

"We are able to get issues on the table with CSC and discuss them without the formality of always returning to the contract," says Leggetter.

"In terms of infrastructure, we are fully outsourced. We develop applications for other companies in-house but there are no hard and fast rules about what is kept in-house and what is outsourced.

"As key IT requirements, such as the supply chain, become commoditised, CSC can take responsibility."

Many outsourcing decisions are left to business managers in each of the company's 13 business groups.

"For project-specific applications, it is up to the business manager," says Leggeter. "CSC delivers services locally so each group gets the services it needs."

The bottom line is that "CSC meets the flexibility we need in our business model", says Leggeter.

This flexibility was demonstrated when BAE baulked at the £12m cost of consolidating 17 email systems into one for 70,000 people in more than 100 locations in the UK and US. CSC offered to pay the costs but retain the savings.

"Completion was due for the end of the year, but is now scheduled for the end of February. It is a small slip considering the impact of moving everyone to Microsoft Exchange," says Leggetter.

The deal is being adapted for a project to migrate desktops to Windows XP over a nine-month period. "The deal is bigger in scope, although it is not yet closed," says Leggeter.

"CSC has given us an investment opportunity. We will get a return rather than just breaking even by consolidating our PC environment."

If anyone at BAE is unhappy with the project's progress, it is likely they will have their say. "When we have a contract review, we start by surveying the IT population in the business groups and getting their feedback," explains Leggeter.

The findings are passed on to joint working groups between IT leaders and the relevant CSC account holders, and their views are passed on up to board level, culminating with ratification by BAE and CSC chief executives.

"Once ratified the decisions move back down the chain," he adds. "The key to any outsourcing deal is to evolve it into a partnership where everyone is happy."