Supplier alliance cuts costs, says EDS

Fonterra chief information officer Marcel Van den Assum expects challenges among alliance partners. Picture / Paul Estcourt

Cisco. Dell. EMC. Fuji-Xerox. Microsoft. Sun. What do these companies have in common?

The answer is IT services giant EDS and, closer to home, Fonterra.

Those vendors, along with Siebel, Oracle, SAP and two smaller specialist consulting firms, form what EDS is calling its Agility Alliance.

Instead of putting together and managing technology from everyone in the industry, EDS wants to build systems with standard components - network equipment from Cisco, Dell servers and desktops on the periphery, Microsoft for the desktop environment, Sun servers in the data centre, EMC storage, every printer a Fiji-Xerox, Oracle database and middleware, and SAP for EDS' business process outsourcing activities.

Robb Rasmussen, EDS vice-president for global alliances, told journalists in Sydney last week that sticking with the reference architecture could reduce costs by up to 20 per cent over the life of a typical multi-year outsourcing deal, and cut out-of-the-box costs by 8 to 12 per cent.

EDS is putting together an alliance development centre in Texas with 250 embedded resources - that is, people - from the various companies, and smaller centres around the world, including one in Sydney.

EDS can pull such an alliance together because it has clout as a customer. It spends US$6 billion ($8 billion) a year on the technology needed to host customer applications and data and US$5 billion to manage desktop services.

"It ends a long period when we have been technology agnostic," said Rasmussen.

While many EDS customers run systems from IBM and Hewlett-Packard, if clients wanted the optimal platform, it was the platform of these partners, Rasmussen said.

The alliance marks a change in the way EDS bids for deals. Instead of putting together a proposed solution, checking costs against the likely price to win the contract, then going back to beat up suppliers for bigger discounts if the cost is still too high, the vendors will be brought in earlier to help shape the solution.

Asia-Pacific vice-president Phil Pryke said in the past EDS had treated its partners as subcontractors.

"We have not got their expertise into out solutioning," Pryke said.

Sales teams will get incentives in the form of higher commissions to sell alliance solutions.

Dairy giant Fonterra signed a seven-year outsourcing agreement with EDS in December 2003, before the Agility Alliance was formed, but it is following the programme.

By July it expects to have overhauled its network, replacing all switches and routers with Cisco equipment.

It is building new storage area networks in its data centres in Nelson St, Auckland, and Land St, Wellington, using EMC Clariion storage.

Sun V440 and V490 servers are going into the same data centres. Sun V890, V440 and V480 servers have gone into Fonterra headquarters in London St, Hamilton, to provide the extra capacity required for the Jedi supply chain optimisation programme, and about 400 application servers from multiple vendors, at sites around the world, will eventually be consolidated onto Sun boxes.

Dell has been chosen for the desktop refresh, amounting to 10,000 desktops world-wide.

The desktops will run the Microsoft XP SP2 operating system along with Windows 2003, Exchange Cluster 2003, Active Directory 2003 and SMS 2003. Instead of 300 printer models from multiple vendors, all printers will be Fuji-Xerox models.

Fonterra information chief Marcel Van den Assum said the company outsourced its infrastructure because it wanted to move to a utility computing model.

"If you look at the principle underpinning global agile infrastructure, you need scale which you can leverage to increase asset utilisation. You need an organisation with global scale," Van den Assum said.

Fonterra has more than 140 locations around the world, some of them extremely remote.

Fonterra's contract with EDS is expected to cost between US$350 million and US$380 million over its life. "The transformation is incorporated in that investment so ultimately what EDS is doing is transforming our infrastructure for improved service and to drive down cost."

Fonterra has a seat on the supplier council EDS has created with its Agility partners.

Van den Assum said the council met quarterly to discuss technology trends and issues.

"By having this governance structure at a senior level, we expect alliance partners to challenge each other on wider trends they can capitalise on, so the Agility value proposition stays where it needs to be," he said.

"It also means we have the key partners in one place, so we are not dealing with them in isolation. We can communicate our priorities and challenges to them."

* Adam Gifford travelled to Sydney as a guest of EDS.

EDS reference architecture

* Agility Alliance is a collection of suppliers with which services giant EDS bids for business.

* EDS claims limiting its suppliers will enable it to reduce the cost of multi-year services deals by up to 20 per cent.

* Alliance members include Cisco, Dell, EMC, Fuji-Xerox, Microsoft, Sun, Siebel, Oracle and SAP.

* EDS outsourcing customer Fonterra is transforming its IT infrastructure with equipment from Agility Alliance partners.