With Fonterra due in the next few weeks to announce whether it will proceed with an outsourcing contract with EDS, IDC New Zealand manager Dinesh Kumar says it’s unlikely the dairy giant will decide to keep its IT services completely inhouse.
In September Fonterra said EDS’s selection was “a further step in a very thorough analysis of whether outsourcing is the best option for Fonterra”.
Kumar says with a final decision on outsourcing due soon, Fonterra would be unlikely to decide against it. “I think if it wasn’t going to proceed it would have announced it by now.”
Fonterra stated from the start that it was evaluating outsourcing as a business model. “And that’s exactly what it’s done,” says Kumar. “It made a fair comment [at the beginning] that ‘we don’t know if we’ll go down that path’, and having been through the due diligence process it’ll have a clear view of the benefits of outsourcing.”
The outsourcing scoping process was done earlier this year, after Fonterra put out a tender. EDS, HP and Unisys were selected as finalists, with HP and Unisys subsequently joining forces before EDS was selected as the final vendor to “continue negotiations” in September.
An outsourcing contract would involve taking care of Fonterra’s IT processes, including the desktops, laptops, servers, network, helpdesk services and utility software for the 34 countries Fonterra operates in. Such a deal is believed to be worth $800 million over several years, and while not as large in monetary terms as EDS’s $1.5 billion outsourcing contract with Telecom, the Fonterra model is more complicated given its global nature, IDC’s Kumar says.
EDS spokeswoman Adrienne Perry would only confirm that contract negotiations are continuing.