A Different Reason

Software vendors and their application-service-provider partners are suggesting personnel shortages or various cost reductions as the compelling issues in any justification process. But that's not the way it came together at Simpson Industries Inc., Plymouth, Mich. The outsourcing solution for the $496 million company was the result of a search to establish an information-technology (IT) strategy to help it compete in the global automotive-component market. It was designed to support the business challenge of Roy E. Parrott, chairman and CEO, to fine-tune the company's basic strategy of shifting the product mix to higher-value-added engineered modular assemblies. "The planning process began in 1996 -- way before the current hype on outsourcing enterprise applications," notes Richard R. Lefebvre, vice president of IT. "The objectives were not on head count, but on making long-term improvements to our IT infrastructure. We wanted to concentrate on integrating systems, improving interfaces, and gaining better control. The new platform would have to integrate critical business functions such as general ledger, accounts receivable/accounts payable, production planning, and inventory control. We wanted to improve customer service with around-the-clock operations and customer support. Equally important, we wanted to reduce system downtime and improve system management practices." In September 1996 Simpson signed a contract with software supplier J.D. Edwards & Co., Denver. That triggered the analysis that eventually led to the decision to outsource, says Lefebvre. "We determined that our central computer, a rather small AS/400, would have to be replaced if we were to proceed with a conventional implementation. "That required our evaluation of outsourcing's potential. We concluded that in today's marketplace, the significant issue was to have access to the information that's needed, when it's needed, and in the form required. We also wanted to gain access to world-class IT skills, the latest technologies, industry best practices, and other advantages that our larger competitors already are sing to get ahead. We wanted to shift our emphasis from controlling the IT infrastructure to gaining control over our IT information. We decided that gaining control over business information is simply too critical not to involve the most qualified resources available. Also important to us is outsourcing's ability to enhance our effectiveness by letting us focus on what we do best." In December 1996 Simpson selected IBM Global Services to provide the outsourcing support for the J.D. Edwards ERP system. In early 1997 Simpson transferred operational responsibility to IBM Global Services and began implementing the full suite of J.D. Edwards enterprise software. The first manufacturing location went live in May 1997 with the last of nine locations concluding in July 1998. All of the hardware and software is housed at IBM's Rochester delivery center and is connected through managed secure network links to Simpson's headquarters and nine manufacturing sites in the U.S., Canada, and Mexico. Lefebvre believes an important measure of the system's success is the improvement in system availability. "Before we outsourced, staying current with customer requirements posed problems. For example, computer downtime would cause us to miss deadlines in transmitting advanced shipping notices [ASNs] to customers. ASNs are required to be sent as soon as a truck leaves one of our facilities with an order for an OEM. If we miss that notification time window, the OEM deducts quality points. With IBM keeping the system running and up-to-date, we had only four hours of unscheduled downtime in our first year of operation. Without IBM Global Services, I estimate that we would have had five times that amount."