TON enters new territory (Jylland) to learn about Vestas’ paradigm shift in IT and outsourcing strategy

November 10, 2015
We had a terrific program at Vestas in Aarhus on Thursday. We can report back that it’s actually quite lovely in Jylland. Who knew?!
 
The Vestas team took us on a deep dive into their significant paradigm shift in IT strategy and their corresponding sourcing maturity journey. I would like to give a lot of credit to the Vestas team for their honesty and willingness to share. Thanks.
 
Henrik Stefansen, Senior Director, Global IT Sourcing & Vendor Management, kicked off the program with a welcome and a short intro to Vestas. With more than 18,800 employees worldwide and 54,900 installed turbines in 74 countries, Vestas is the only global wind energy company. As Henrik explained it, Vestas’ IT’s goals of delivering cost efficient IT, enabling business goals and creating customer value are best achieved by leveraging external capacity and resources via an orchestrated sourcing approach.
 
Torben Bonde, CIO, opened up about Vestas Global IT’s transformational journey driven in large part by three primary forces: 1) customer demand for information; 2) Vestas’ processes and solutions are increasingly dependent upon integrated and agile IT solutions; and 3) the digital revolution means that IT is in everything. Responding properly to these forces has demanded that Vestas transforms the way that IT is developed, used, and supported. The old operating model, Plan-Build-Manage was not capable of delivering according to the new demands. Therefore, Vestas IT developed and committed to a strategic paradigm change that meant substantially increasing outsourcing and using an orchestrated model with Vestas in the center, managing appropriate levers, vendors, internal teams and technologies.
 
Eugene Pottenger, CIO Support, then took us through a detailed look at how Vestas is working with sourcing strategy. It has been quite a deliberate transformation from a policy of “thou shalt not outsource” in 2009 to a model of strategically leveraging a portfolio of sourcing models to achieve business goals in 2015. Vestas’ commitment to the sourcing strategy vision has been cemented with a re-organization of IT, effective as of October 1, that is specifically designed around the strategic context of sourcing to deliver according to business drivers.
 
Our TON network then had an opportunity to work on two challenges presented by Vestas but certainly relevant to all of our members: 
1) Implementing a multi-vendor set-up without jeaopardizing existing vendor relationships and with the intent to create an open yet competitive landscape among the core vendor group, presented by Eugene Pottenger;
and
2) Organizing and collaborating across Service Management, Delivery Management, and Vendor & Contract Management, presented by Henrik Stefansen and Steen Bech Jensen, Head Sourcing Execution.
 
In small groups, we discussed these two challenges and our own organizations’ experiences working with multiple vendors, incentives, shared SLAs, and how to become more transparent in key vendor relationships in order to enable collaboration and competition that leads to better outcomes.
 
Steen Bech Jensen and Henrik Stefansen then raised the subject of vendor management tools as a way to enable increasing sourcing maturity and re-allocation of staff to higher value tasks. Vestas bravely admitted that their own organization’s outsourcing maturity was less than optimal for achieving high value in outsourcing and that this honest insight drove them to look for ways to quickly ramp up their sourcing governance quality, one element of which is using a software tool to manage key vendors while tracking contractual obligations. 
 
The Vestas “Deep Dive” concluded with an update by Henrik Stefansen on Vestas’ large scale infrastructure outsourcing decision from 2013: That is, the reality of living with the decision and reflections on Vestas’ outsourcing maturity. Henrik gave us a quick summary of the burning platform that Vestas confronted in 2013 and the demand from the top to very quickly outsource infrastructure as a part of the larger turnaround strategy. While shortening a usual 10 month process to a mere 10 weeks is something that Henrik will not willingly do again, he saw through this dramatic episode that a typical RFP process can be significantly shortened without a notable loss of quality. From today’s perspective, Vestas can see that the drastically shortened process and decision lead to a number of assumptions, such as what a particular service consists of, that resulted in considerable energy after-the-fact to remedy. Yet, Henrik honestly noted, Vestas as a first-time outsourcer was bound to have stumbled at some points because they didn’t necessarily know the questions to ask and the criticality of having Solutions, Commercial and Legal folks sit together rather than working independently. The most critical learning for Vestas, and one that they will now use going forward, is that the intention of the contract must be expressed so that all subsequent contract disputes can be more easily rectified.
 
Our day concluded with Michael Mol, Professor, CBS, drawing The Red Thread through our program. Michael drew our attention to the issue that limited managerial attention limits the external span of control; meaning that hierarchical models (subcontracting and tiers) by definition pushes responsibility (and execution) further down the line and away from management. Newer models, such as networked and mixed, rely to a much greater degree on reciprocity and trust. Yet, these newer models while promising much more business value are not trouble-free and require much more coordination and dependence than more hierarchical models.
 
TON’s social occasion was a hands-down success and one which we definitely look forward to doing again. It was a great way to get to know our network members in a less structured manner. Thanks to everyone for making it such a great time.
 
Our next program is on January 21, 2016 and will be held at Danske Bank. Please contact Katie Gove at kg@trellis.dk to hear more.

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