The Williams Companies, a US natural gas provider that has gone through a massive reorganization in recent years, has hired IBM to help it fine-tune key business operations.
The business transformation and outsourcing engagement kicks off on July 1 at a cost of about US$320 million over seven and a half years, the companies announced this week.
Williams' headcount has fallen from about 23,000 to about 4,300 in the past four years, as the Oklahoma, company has focused on its natural gas business and shed non-related units in areas such as telecommunications.
As such, the company found itself needing to adapt certain business functions to the new size and shape of its business, said Don Chappel, Williams' chief financial officer and senior vice president of finance. A months-long re-engineering process conducted last year helped, but the company's top management felt more could be accomplished, he said.
"We saw that we had substantial opportunities and laid out a plan to move forward and capture substantial savings, yet we didn't feel that (the re-engineering) took us far enough, fast enough nor with a high enough level of confidence," he said. "We thought outsourcing might be the tool needed to go that extra mile."
Williams decided to explore the outsourcing option in November, a process that culminated with IBM's selection to help Williams transform and manage specific IT, finance and accounting and human resources operations. The main goals are to reduce costs and improve the quality of these business functions, he said.
"Our main goal is to achieve substantial cost savings," he said. "Another goal is having a partner that can provide the needed services at a high level of quality to ensure that we didn't miss a beat in terms of our business performance, and that can also take us to the next level in terms of continuous improvement, so we can explore other areas of opportunity once we nail this foundation."
Williams, which produces, delivers and processes natural gas, expects to save between US$25 million and US$40 million per year starting in 2006, a spokesman said. The cost savings are expected to come from the transfer of about 460 employees to IBM, from streamlined work processes and from the use of more advanced IT systems, Chappel said.
To make sure IBM and Williams remain on the same page, the companies have established a multi-level governance structure, Chappel said. First, there will be a steering committee made up of senior executives from both IBM and Williams that will meet regularly to make sure that goals are being met. Second, Williams has formed a small governance organization made up of key people who are experts in the details of the contract, the performance metrics for service quality, the cost of services and the management of demand, he said. This governance organization will also champion the outsourcing initiative throughout the organization, he said. Finally, there are business leaders who will also be keeping tabs on the work progress, he said.
"I think the commitment at the highest level to make sure the business case is delivered and the regular meetings will set the tone for the whole relationship," he said.
Some specific administrative tasks IBM will be in charge of helping to transform and manage include accounts payable, fixed assets, general accounting, payroll, compensation and benefits administration. On the IT side specifically, IBM will be in charge of mainframes, servers, storage, voice and data networks, application maintenance, desktop support, help desk and the completion of an implementation of Oracle Corp. ERP (enterprise resource planning) applications enterprise-wide.