Virgin Trains was granted the franchise to operate the UK’s West Cost rail route in 1997, a few years after the national railway network was privatised. The company won the franchise again in 2006, and is now preparing its bid to renew its licence when it expires in 2012.
According to Francis Jellings, the company’s head of IT, the fact that the company can never be certain of its long-term future makes long-term IT investments difficult. Nevertheless, the company has since 1999 entrusted the lion’s share of its IT estate to a single outsourcing supplier, Capgemini.
As Jellings explains here, Virgin Trains recently announced that it had renegotiated its contract with Capgemini for another three years. That will take the engagement into its 14th year – testament to the fact that its experience has been a broadly positive one.
But there is always room for improvement, and although the company fared fairly well in 2009 – passenger volumes grew by 18%, driven in part by a move away from internal air travel – the contract renegotiation was an opportunity to strike a more cost-effective deal. It also provided an opportunity to recalibrate certain service level agreements.
Virgin Trains’ experience with Capgemini is interesting because it contradicts the perceived wisdom of ‘multi-sourcing’, whereby companies procure IT services from a number of suppliers in order to strike competitive deals and buy ‘best-of-breed’ services.
According to outsourcing advisory TPI, interest in multi-sourcing is growing, but other observers warn that managing multiple suppliers requires a degree of sophistication that many businesses still lack. If Jellings is to be believed, making a long-term and strategic commitment to a single supplier still has its advantages.
Information Age – What is the extent of your outsourcing engagement with Capgemini?
Francis Jellings – Capgemini looks after the whole of our IT infrastructure, including the IT service desk, server management and support, LAN monitoring and support, desktop services and database management. They also undertake any IT infrastructure projects at any of our stations or office locations up and down the West Coast mainline.
What IT staff have you retained?
I’ve got a team of five, who fulfil inward-facing roles to deliver business projects. There are three IT project managers, who I’ve positioned into the different segments of the business – marketing, operations and head office systems. They each speak to their internal customers on a regular basis, and that is how we generate any opportunities within the business to undertake IT development.
Anything that is technical, I give to Capgemini; anything that’s businesswise, I keep in-house.
How have you recruited your staff – from IT or from the business?
It’s horses for courses; I’ve recruited some of them from within the business, if I thought they were the best people, and trained them up on the IT skills. Or some have had IT skills and we’ve trained them in IT project management. Often we’ve recruited externally, when we’ve needed people with specific skills, like to do with booking office systems or retailing ticket systems.
Is there a concern that you don’t have your own internal IT workers coming up the ranks to fill the management roles of tomorrow?
I’m not concerned about that. I’ve built up the team so that it’s supporting the business more than it used to.
We do try to have succession planning within the organisation where we feel we are weak in the organisation. But if one of my project managers moved on I could recruit internally or externally, whichever the case may be.
How do you manage the relationship with Capgemini?
I have a supplier relationship manager who sits alongside the Capgemini service delivery manager in our Birmingham office, and they communicate with each other very effectively.
Unless there are issues that need to be resolved immediately, my supplier relationship manager monitors the service levels on a monthly basis. We have a monthly service review with the rest of my team to make sure that the contract is supporting the business in any initiative that it has under way.
How do you negotiate changes to your infrastructure with Capgemini?
The way that our contract is structured is based on the volume of calls to the support desk, and the number of PCs or servers that I need. So if the business decides that a new department is going to be set up, and another 30 PCs are will be needed, I know exactly what it’s going to cost me on an annual basis.
Similarly, if somebody needs a new system implemented and new servers deployed, I know exactly what that will cost. If extra resilience is needed because it’s business critical, we can cost it out.
Have you made any significant changes to your infrastructure during you engagement with Capgemini?
A while ago, I noticed that some of our remote locations, such as Glasgow and Edinburgh, weren’t receiving the same service level as people in our head office, which I didn’t feel was the right way to deliver the service.
So we worked with Capgemini on how to resolve this, and we came up with an IT transformation plan.
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What did that IT transformation entail?
Previously we had a number of servers based at stations, and some of these were in rather vulnerable locations. We took the decision to centralise all the servers in a Capgemini data centre where they could be safer, more secure and managed better on a 24/7 basis.
We also implemented a standardisation programme to make sure that the service could be delivered remotely to an acceptable standard. And we went from a team of about 28 people supporting the infrastructure at Capgemini down to around five people now. We just finished this transformation about a year ago.
You recently renewed your contract with Capgemini. What persuaded you to do that?
We are generally satisfied with the engagement, and the success we had with the IT transformation was another reason that we thought, ‘why change?’
You renewed the contract for three years. Why not longer?
Personally, I don’t believe in signing ten-year outsourcing contracts. There is an argument that when you have a strategic alliance, you sign a long-term deal to get a better price. But we prefer to pursue a three-year deal, because we can look at where we want to go, how we can improve things and how we can reduce cost [more frequently].
What changes were made when you renewed the contract?
The major change was around the service level agreement relating to BlackBerrys. Believe it or not, we did not previously consider this to be a critical service; we always thought people would be able to wait until they could come into the office to get their emails if BlackBerry service went down.
But apparently, people can’t bear to be without their BlackBerry for ten minutes of the day. So we’ve renegotiated our agreement to a higher service level.
Have you been able to negotiate down the cost?
We did renegotiate a cost reduction for the contract. We’ve made a few changes so cut some cost, plus I suppose Capgemini could see more clearly what they needed to support the infrastructure [and therefore cut the price].
By having a single IT infrastructure supplier, are you not missing out on the chance to negotiate cheaper contracts?
I’ve previously worked under the model where you have multiple suppliers – maybe help desk from one supplier, server support from another and desktop services from a third supplier. But I found that if you are not careful, gaps can appear in the delivery model and you get a culture of blame [between suppliers].
Plus it makes it easier for my supplier relationship manager to manage the contract suppliers, because he doesn’t have to go back and forth between different companies.
Has Capgemini ever exploited its status as a strategic supplier to grow sales?
Before I worked with them, I thought by the nature of the company that they might be difficult to manage; I imagined that you cough and you have to pay for it.
And although, like everybody else, they are in the business to make money, this is not the case – we work together.
