Beyond Outsourcing: The Demand - Supply Transformation at DHL Ron Kifer, SVP and CIO DHL Express U.S. / Canada
Page 2 FINANCIAL SERVICES EXPRESS/LOGISTICS MAIL Leading retail bank 10 million customers Strong business unit Financial logistics solutions 72 million mail items per day High transit time quality Global mail: International mail dispatch solutions Strength in Domestic Products and Services #1 International Express Company #1 Worldwide Air & Ocean Freight & Logistics Deutsche Post World Net nDPWN ranks number 70 on the 2005 FORTUNE Global 500 (up from 75 in 2004). nDPWN Revenues exceed $55B Introduction to DPWN
Page 3 De-centralizationCentralization What drives the changes from one extreme to another? Why Does IT Reorganize?
Page 4 Centralization Alignment with business Time to market Responsiveness to customer Flexible / adaptive Visibility to spend Decentralization Economies of scale Ease of integration (M&A) Standards Compatibility Global Why Did DHL Reorganize?
Page 5 Classic Centralization Issue
Page 6 DHL resources and know-how traditionally downstream Classic Centralization Issue
Page 7 Business IT IT Services Management of demand for IT Services Supplier of build and run services Stopping the Pendulum – Demand/Supply Model
Page 8 Demand Alignment with local business Time to market Responsiveness to customer Flexible / adaptive Visibility to spend Supply Economies of scale Ease of integration (M&A) Standards Compatibility Global Benefits of the Model – Best of Both Worlds Prague
Page 9 The Value of Business IT
Page 10 The Value of Business IT
Page 11 IT Governance Before CIO Mail CIO Mail CIO IT Solutions T- Systems Corporate Functions Overlapping responsibilities and unclear interfaces Germany Logistics EMA Asia Pacific Europe Americas CIO Global IS DHL CIO SupplyDemandDemand and Supply CIO
Page 12 nMail CIO nExpress CIOs nExpress CIOs nExpress CIOs nLogistics nIT Services Demand Supply Build/Run nCorporate Functions CIO Clear responsibilities and interfaces IT Governance After
Page 13 Demand / Supply New Organization Model Business Unit CIO Organization DEMAND MailExpressLogistics Corporate Functions CIO Accountable for IT costs and benefits Accountable for quality of service delivery IT Services Center Prague IT Services Center Scottsdale IT Services Center Cyberjaya IT Solutions Application Services ( Build) SUPPLY IT Services Organization IT Services Center Prague IT Services Center Scottsdale IT Services Center Cyberjaya T-Systems Germany Infrastructure Services (Run)
Page 14 Demand / Supply Focus Supply Role –Specify application system and acquire or build solution –Define technical and physical architecture –Manage supply portfolio and cost –Manage demand priorities and resolve conflicts for supply –Manage IT infrastructure and operate IT services for the business –Interface to business demand and Third Party IT Vendors Demand Role –Specify application requirements, volumes and growth –Define business and application architecture –Manage demand portfolio and cost –Manage business priorities and resolve conflicts for demand –Mediate service-cost trade-off in Service Level Management –Interface to the business and supplier of IT services Strengthen IT by defining a clear boundary between Demand and Supply
Page 15 RUN Service Desk Maintenance & Support Services Distributed Computing (Desktop) Server Storage Back-up/ Archiving Hosting Services Telecom BUILD Develop- ment Consulting/ Project Services CIS Customer Integration Mainframe Man Days # of mailboxes # of tickets # of CPUs # of MIPS # of archived GB # of GB Line costs $ / MIPS / Month $ / CPU / Month $ / GB / Month $ / Day$ / Box / Month $ / Ticket Direct / Desktop split / adjusted BaU key $ / Day Service Catalog nService level categorized as high, medium, low nPrice variably based on service level nPrimarily for maintenance and support
Page 16 DHL Key Success Factors nHighly centralized IT infrastructure nHighly distributed business governance (regional/country – P&L based) nStrong core competencies in: –Vendor/Outsourcing management –PMO (project, program, portfolio) –Demand management
Page 17 Conclusions nMore than an IT organization model nDemand / Supply is not a one size fits all solution –Global organizations –Highly geographically distributed organizations nCan offer a balance between organization extremes nIs not a new or unproven model We are not alone….
Page 18 Who Else is Pursuing this Strategy?
Page 19 Questions & Answers