Fonterra plan to balloon outsourcing market: IDC

A decision by Fonterra to outsource its IT operations could boost the outsourcing market by 10% to 20%, says IDC.

A decision by Fonterra to outsource its IT operations could boost the outsourcing market by 10% to 20%, says IDC.

The dairy cooperative has asked EDS, Unisys and Hewlett-Packard to put forward proposals following indications from the three that they were willing and able to meet Fonterra’s requirements.

In scope for the proposals tender are all of the company’s IT processes, desktop and LAN, midrange servers and networks (voice and data). This includes desktops and laptops, servers, networks, helpdesk services and utility software such as Microsoft Office and email systems such as GroupWise and Lotus Notes. The global outsourcing exercise covers over 1000 utility and application services in 30 countries and 327 locations where desktops are located across 34 countries.

Fonterra CIO Marcel van den Assum says the decision to go out to tender took into account the availability of suppliers which are financially and technically able to provide a viable response. Fonterra operates in 34 countries and aims to establish and manage its IT infrastructure as an effective, integrated, global services utility. It believes outsourcing could be the best way to achieve this.

IDC predicts the outsourcing market for 2004 will be around $678.9 million and a Fonterra outsourcing deal could add $100 million to that in its first year.

Analyst Mark Cribbens says the pros of outsourcing include cost benefits, though as a driver this has become less important than being able to concentrate on a company’s core competencies. Also it’s a relatively low-risk way an organisation can gain skilled staff and infrastructure to support a new direction.

He says cons are a lack of control, loss of accountability and the expenditure of energy on managing the transition from inhouse to outsourcing. He also says getting both parties to understand what is to be delivered is a complex process.

Suppliers are expected to reply to Fonterra by May 23. Van den Assum says Fonterra expects to have whittled the choice down to two possibles by July 2 and then to determine whether or not to go ahead with outsourcing. If so, the successful supplier should be chosen by September.

IDC wouldn’t speculate on which bidder was likely to be favoured by Fonterra, saying the decision was as likely to be based on Fonterra’s overseas needs as local ones.

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