638 Part IV • The Information Management System
model put structure around our decision-making
process and brought clarity to the relationship.
—Virginia King, Director of Outsourcing, SchaefferThe second recommendation was to establish a
Project Management Office (PMO) structure, with an IT
lead and several enterprise architects. Schaeffer also imple-
mented this recommendation and established a Project
Management Office (PMO) for approving IT investments
as well as coordinating in-house systems development ini-
tiatives with the IT infrastructure teams at ABC. Another
important change was to implement a Portfolio Review
Board for large projects:
What we have established is a Portfolio Review
Board (PRB). Each senior VP has a designee on this
board. Their job is to meet once a month, review all
project requests that are submitted, and prioritize
them. Any project that requires shared services
between the divisions has to come through our PMO
organization.
—Penelope Overton, Director of PMO, SchaefferThe Colbert executive who served as the liaison with
ABC for that division attended the weekly outsourcing
meetings chaired by the new director of outsourcing and
also was a representative at the monthly PRB meetings.
Insourcing European Operations
Around the same time that the PMO was kicked off, the
IT infrastructure costs in Reitzel’s European business
units were rising alarmingly. Domestically, the IT infra-
structure costs were as anticipated, but in Europe the
costs seemed to be spiraling out of control. Despite the
fact that a key benefit from the original outsourcing con-
tract was the ability to expand globally with very little
difficulty, Reitzel was having a difficult time justifying
these skyrocketing expenses, especially since its
European computer operations were being primarily run
out of its Vilonia data center on the same ERP system as
its domestic operations:
I learned a very painful lesson. If there’s anybody
talking about global outsourcing, I’m going to say:
“Europe is very difficult—be very careful in this ge-
ography.” They’re all country towers. You’ve got
tons of management fees layered on top because
none of the country managers talk to each other. The
cultures are very, very different. As any other com-
pany trying to deal with multi-cultures, it costs moremoney... and I would be willing to bet that every
outsourcer has that same problem.
—Alan Harding, vice president of IT at SchaefferThe insourcing of computer operations for its
European units would provide Schaeffer with more opera-
tional control, as well as more control over its costs.
Schaeffer’s IT leadership team, therefore, renegotiated
with the vendor to insource the entire European computer
operations. (Global support was a centralized service
based out of the United States, and the termination of the
local country agreements in Europe did not change this
part of the agreement.) Since the contract stipulated high
contract termination costs, a compromise plan was worked
out. ABC would not invoke the termination costs if
Schaeffer would agree to allow ABC to move some of its
infrastructure support offshore to South America. The on-
going benefit for ABC would be that it could provide the
same services for Schaeffer using its own offshore center,
but at a cheaper cost—due to labor market differences.
Unlike offshore locations in Asia, moving the sup-
port to South America would also provide no new coordi-
nation problems due to different time zones. However,
there was considerable skepticism among Schaeffer’s top
management about moving IT infrastructure support off-
shore. An on-site visit was arranged for the vice president
of IT and his leadership team, and they were impressed
with what they saw. The contract with ABC was revised,
and the new agreements took effect in early 2005.The director of outsourcing, the project executive
and I—we all took a trip to Argentina so that we
could see that infrastructure. Not the infrastructure
of ABC, but the infrastructure of the city to make
sure we weren’t sending it to some backwoods. I was
absolutely overwhelmed with how European this
city in South America was. Like any transition, it
was a little rocky in the beginning... but since my
team doesn’t come to me complaining about it, I
know that it’s working fine.
—Alan HardingBringing Back Desktop Support
Even after two changes in the contract, some Schaeffer
employees still expressed frustrations about the quality
of service that ABC was providing. In particular,
simmering discontent with ABC’s handling of desktop
support was surfacing within Schaeffer. As time went
on, it had become apparent that the contract with ABC
was not fully meeting the needs of Schaeffer’s business