Outsourcing your strategy

At the beginning of August this year InBev announced the outsourcing of its Western European and Global Headquarters’ business systems and application services to LogicaCMG. InBev’s most recent move is a follow-up of InBev’s intention announcement from February this year to rationalise its information services. It seems that if InBev continues with outsourcing its headquarter’s staff, the only people to work at its glitzy head offices in Leuven will soon be executives and cleaners only. The brewer said that the transfer to LogicaCMG involves about 70 people and covers the countries Belgium, the Netherlands, Luxembourg, the UK & Ireland, Germany, Italy and France. All staff affected by the decision will be offered the opportunity to transfer to LogicaCMG.

According to InBev, the total value of the contract is around EUR 70 million for a five-year period. Total one-off costs relating to this outsourcing decision will approximately be EUR 6 million. The average expected annual EBITDA improvement will be EUR 6 million for the duration of the contract, says InBev.

In view of the general trend of outsourcing of some form of IT, InBev’s decision is no longer headline news. But outsourcing the complete IT infrastructure still seems somewhat radical, even though InBev might set a fashion here. Nevertheless InBev’s move raises a couple of important questions that are being debated on the net. The argument runs as follows. The main reasons for outsourcing are cost reduction, quality improvement and focus on the core business. In the case of IT outsourcing, one also hopes to eliminate a complex and annoying problem: namely, how to get rid of a poor relation. Those in the know have to admit that IT has never been the greatest success story and that top management poorly understands it.

However, what about the future? It has been argued that today InBev is making its outsourcing decision in a context of what might be called “competent understanding”. There are people at InBev’s IT who know what they are doing, who understand the pros and the cons of the current IT-infrastructure and what the outsourcing market can offer. As a result, InBev is likely to be a competent discussion partner in its negotiations with potential service providers.

But what about five years from now? At that moment, most of the current team of specialists will have left the company. Who will then be a competent discussion partner in the negotiations? Further, what guarantees that the future IT infrastructure is still perfectly aligned with the changing strategic objectives of InBev’s organisation? The experts say that today, potential service provides will certainly fine-tune their offering to the specific needs of the organisation. As InBev has the competence to adjust the offering where needed, it will receive an excellent strategic alignment.

But what about five years from now? Service companies also have their own strategy and objectives. How can customers like InBev make sure that the future service offering still provides the best support for their own strategy? Questions over questions.