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Virtual engineers could transform IT outsourcing

Stephanie Overby | Sept. 1, 2014
Before Marcel Chiriac took over as CIO of Rompetrol two years ago, the European oil company's IT sourcing strategy had swung back and forth between total insourcing and total outsourcing. And both models failed.

Before Marcel Chiriac took over as CIO of Rompetrol two years ago, the European oil company's IT sourcing strategy had swung back and forth between total insourcing and total outsourcing. And both models failed.

All of IT was handled in-house from 2004 until 2009. During that period, IT costs grew rapidly along with the size of the company. In an attempt to remedy the situation, the management team decided to outsource all of IT to a single company for a flat multibillion-dollar fee. It was a from-the-frying-pan-into-the-fire shift as the outsourcing provider overcharged for work beyond the contract scope and subcontracted Rompetrol's IT support to more than 100 other IT suppliers adding complexity to the environment.

"There was no transparency in costs," says Chiriac. "And there were a lot of other suppliers providing service to Rompetrol that had no actual relationship with the company."

By 2012, Rompetrol had completely lost control of IT. Company leaders could not even wrest the company's administrative passwords from one of the subcontractors. "We had no leverage," Chiriac says. "It was a very risky position."

When Chiriac arrived, he discovered that, in order to control costs, the outsourcing provider had ceased paying maintenance licensing fees on several critical applications.

A New IT Outsourcing Model

The arrangement had become such an operational and financial drain that Chiriac was compelled to gain control of the systems, get costs under control, and stabilize the company's systems as soon as possible.

"We didn't have many choices, to be honest," says Chiriac. "Could we bring it all back in? It would be impossible to find and hire 100 people [in a couple of months]." Issuing a RFP for a new single provider didn't seem like a good option either.

Like many other CIOs today, Chiriac chose to move to smaller, shorter outsourcing relationships. Rompetrol opted for a hybrid IT environment: bring governance, strategy, and vendor management in-house and outsource the rest to the best outsourcing providers in each category of service.

Chiriac went back to Rompetrol's software vendors to get up to date on licensing. He replaced the one person managing a single contract with a team of 26 IT professionals. He and his new team renegotiated contracts directly with 48 of the vendors who had been working for the company indirectly via the previous outsourcing contract. And then the hard work began.

The incumbent provider had done a poor job supporting Rompetrol's infrastructure. "I asked my guys to do an analysis on the status of the infrastructure," Chiriac says. "It's was almost disastrous."

In addition, the outsourcing provider proved hostile on the way out, refusing to cooperate with the transition process and participating in no knowledge transfer.

 

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