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EDS Takes Over IT for Auto-Parts Maker, NaviSite Expands in India
By John Moore, Ziff Davis Internet


Contract Watch: A new round of contracts demonstrates renewed interest in outsourcing, but not just for technology. Business processes, off-shift workloads and procurement of manufacturing as well as office supplies fatten the deals.


EDS Helps Affinia Go Global

Electronic Data Systems Corp. has been pulled into the midst of a restructuring program at Affinia Group Inc., which makes and distributes auto parts for the aftermarket.

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On Monday, EDS said it will manage much of the Ann Arbor, Mich.-based company's information technology infrastructure. The 7-year deal spans Affinia Group's enterprise applications, servers, desktops and networks in both North America and Europe.

Affinia Group, whose brands include Wix filters and Raybestos brake parts, launched last year. The company was created through the acquisition of Dana Corp.'s automotive aftermarket business. The Cypress Group LLC, a private equity firm, engineered the $1 billion transaction, which closed in November.

Since then, Affinia Group's management has been retooling the company, shedding operations and reducing head count. Just days before the EDS announcement, Terry McCormack, Affinia Group's president and chief executive officer, described the "difficult work" during the company's second quarter earnings conference call.

"We are taking a $2 billion aftermarket company that employs 12 to 13 thousand people and we are completely re-engineering it," McCormack said. The company's objective, he said, is to move away from its past orientation as a North American-driven company to being a global enterprise.

EDS describes its role in this transformation as being to broaden Affinia Group's ERP (enterprise resource planning) deployment to support a global operation. EDS will manage the ERP application and supporting servers at its Service Management Center in Tulsa, Okla. EDS will also manage the company's 3,700-plus desktops in North America and Europe, according to an EDS spokesperson.

Affinia Group IT staffers in Canada, Poland, Mexico, the United Kingdom and the United States will be invited to transfer to EDS, according to the companies.

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NaviSite Ramps Up India Operation

NaviSite Inc. aims to bring global sourcing to midmarket customers as it builds a presence in India.

Andover, Mass.-based NaviSite in June unveiled its global delivery strategy, which hinges on the company's NaviSite India unit in New Delhi. To build its presence in India, NaviSite has hired Sumeet Sabharwal as senior vice president of global delivery and managed solutions.

Sabharwal played a similar role at Sapient Corp., where he expanded that company's operations in India to more than 800 people in less than four years.

NaviSite, which offers infrastructure and applications management services, currently employs about 35 people in India. The staffing level is projected to grow to 120 people by the end of this year, according to a NaviSite spokesperson.

Sabharwal said global sourcing has largely bypassed middle-market companies, a situation he seeks to change at NaviSite. The penetration of global sourcing, he said, "has mostly been done with Global 1000 or Fortune 500" companies. "We can … bring the global delivery model into play here," he said.

The India operation will let NaviSite provide a "follow-the-sun" approach, providing round-the-clock support, Sabharwal said.

He said teams supporting Oracle Corp. and PeopleSoft enterprise applications are stationed in the United States and India. NaviSite can also deploy and manage custom applications, he noted.

Vendor Sees Procurement Outsourcing Shift

The outsourcing of various facets of the corporate procurement function has emerged as one of the hotter areas in business process outsourcing.

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Initially, most of the activity has focused on outsourcing processes associated with indirect materials, such as office equipment. In the past, the outsourcing of processes related to direct materials, the raw materials used to create goods, has been perceived as too risky.

But ICG Commerce, a pure-play procurement services provider, has witnessed greater interest from companies on the direct materials side.

"A few have outsourced direct materials," said Jason Gilroy, vice president of outsourcing at ICG Commerce. He said the company will build out capability in the direct materials area as more customers move in that direction.

On the indirect side, Gilroy said, projects are growing in scope. A few years ago, companies were outsourcing 5 to 10 percent of their indirect spending, while in recent deals, that percentage has grown to 50 percent or greater, he said.

ICG Commerce's services include strategic sourcing in which personnel negotiate supplier agreements on the customer's behalf. The company also provides the technology for managing transactions.

One of the company's customers is Avaya Inc. ICG Commerce manages about a third of Avaya's indirect spend. That deal has been in place for about 18 months.

ICG Commerce and its rivals in the procurement outsourcing space find themselves in an expanding market.

"Prospects for growth are extremely high," said Tim Minahan, a vice president with Aberdeen Group Inc. "We've seen more RFPs [request for proposal] on the street in the past … 12 months than ever before," he said.

Minahan said he believes the market has opened up as service providers have crafted service offerings that better meet customers' needs. Vendors earlier tried to sell customers on the notion of outsourcing the procurement function in its entirety, he said, but customers weren't necessarily looking to outsource the "full, end-to-end process."

Instead, companies are interested in offloading potions of the procurement process. In response, ICG Commerce and other service providers have begun to offer more modularized offerings, Minahan said.

Convergys Closes Deloitte BPO Deal

Convergys Corp. this week completed the acquisition of Deloitte Consulting LLP's finance and accounting BPO (business process outsourcing) business.

The acquisition broadens Convergys' BPO offerings, which have focused on human resources. Some industry watchers view finance and accounting as a small, but fast-growing, BPO segment.

Accenture: F&A; Stuck in Manual

A new report from Accenture suggests there could be plenty of upside in the finance and accounting BPO sector.

The report found that 15 percent of the companies surveyed transact the majority (60 percent or more) of their accounts payable and accounts receivable functions on a fully automated basis.

The Accenture study identified the biggest barrier in the path of automation as "a lack of awareness within … organizations about what technology could actually do to improve transaction processing."

The Accenture report is based on survey of more than 120 senior executives. The Economist Intelligence Unit conducted the survey on behalf of Accenture Finance Solutions, a finance and accounting BPO services provider.

     
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