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Tuesday, 09 December 2008
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The Case for Outsourcing at Kimberly-Clark
Outsourcing: More Than Cost Savings

By David F. Carr


To explain the value of his relationship with outsourcing and offshoring firm Cognizant, Kimberly-Clark chief information officer Ramon Baez recalls a conversation he had with one of its on-site consultants who rattled off such an impressive string of business metrics that he had to stop her to ask how she knew his business so well.


"I remember asking the young lady presenting to me how much she knew about what goes on inside Kimberly-Clark," Baez says. "Because I was thinking, 'Wow, she's really knowledgeable.' And she told me, 'Oh, I've been on the project from the beginning. Yeah, that's how we do things.'" Baez had joined Kimberly-Clark in early 2007, shortly after the engagement with Cognizant started, so he hadn't initially realized the extent to which members of the project team were the same people who had come in to study Kimberly-Clark's operations and put together the vendor's initial proposal. That struck him as remarkable partly because of his experience with other outsourcers at prior jobs.


"I've seen these vendors have a fantastic proposal team, and the reason the company wins the proposal is because of the people on that team. But then as soon as they've got it, those people move off to another contract, and you get someone you have no relationship with to run the actual project," he says.


Because Cognizant has proven willing to make a serious investment in understanding Kimberly-Clark's business as well as its information technology needs, the $18.3 billion consumer products company, best known as the maker of Kleenex tissues and Huggies diapers, has broadened the scope of its relationship with the vendor in turn. It's an example of how outsourcing can turn from tactical to strategic, once a vendor wins sufficient respect. In the beginning, when Kimberly-Clark signed a five-year, multi-million deal to have Cognizant assist with development and maintenance of its SAP systems, cost-cutting was the major impetus. Cognizant supports them with a workforce located primarily in India and other offshore locations. Headquartered in Teaneck, N.J., Cognizant started as an I.T. development and maintenance arm of Dun & Bradstreet and offered the mix of offshore talent in India and elsewhere, combined with strong project management in the U.S. and other places Kimberly-Clark operates.


But as the relationship has evolved, Cognizant has also grown into a strategic partner. Rather than simply doing the grunt work of supporting legacy applications, Cognizant has been helping Kimberly-Clark figure out how to rationalize its application portfolio—for example, by getting operations in Europe and the U.S. to use the same version of a software application so that they can more easily be supported by the same team. Cognizant even followed Kimberly-Clark to Buenos Aires, Argentina. When the manufacturer set up a "captive" offshore IT operation (one operated by the company itself, rather than an outsourcing firm) there, Cognizant set up one of its own nearby to support Kimberly-Clark and also tap the local talent pool on behalf of other customers.


This was Kimberly-Clark's first large-scale outsourcing relationship, Baez says, although certainly the company had previously hired consulting firms for specific projects and employed plenty of contractors. At around the same time, Kimberly-Clark also hired TATA Consultancy Services to manage IT infrastructure and outsourced human resources management.


"The cost benefit had to happen - that absolutely needed to occur," Baez says. The outsourcing initiative came about as part of a series of competitive improvement initiatives the company started in 2005, aimed at shaving $350 million from the company's overhead costs by 2009. The goal for this year is to produce savings of $75 million to $100 million. The emphasis on cost savings is proving particularly important to Kimberly-Clark now, at a time of economic stress and commodity and transportation cost increases.


Kimberly-Clark won't say how much of the savings is related to IT (the total number includes many other factors, including factory closings). But the company has been reasonably happy with the cost savings within IT, Baez says. For example, Kimberly-Clark has saved about 90% of what it originally projected it could by outsourcing application development and maintenance. "We didn't get to 100% because there were a few things we didn't account for, but we hit about 90% of our target number." And that was considered pretty good, he says.


Next: Outsourcing: More Than Just Cost Savings at Kimberly-Clark



 
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