About the Company
THE Automobile Association has changed immensely since its inception as a car enthusiasts’ club in 1905. Today, its 15 million members are offered breakdown services, driving instruction, route planning and car insurance services, while it also gives advice on motoring issues to government and safety experts.
In 1999, the AA was demutualised and bought by Centrica, the parent company of British Gas, for £1.1 billion. At the time it was thought that the combination of the two companies could create opportunities for cross-selling services, as well operational efficiencies from their extensive network of service staff that travelled the country.
But the AA became one of the first prominent UK businesses to attract the interest of private-equity investors. In 2004, Centrica sold the AA to a group led by CVC and Primera for £1.6 billion.
Trevor Didcock, who joined the AA as IT director only six months prior to its acquisition, was charged with migrating the company away from Centrica’s shared IT services centre, establishing its own infrastructure – all in less than 12 months. As part of that migration, the AA has cut its annual IT costs by £22 million, and reduced the number of servers it uses by 60%.
Information Age (IA): Before splitting from Centrica, how much of The AA’s IT estate was shared between the two companies?
Trevor Didcock (TD): Our infrastructure was part of a completely common one, right across Centrica. The applications were by and large unique to the AA, but we did have some common applications, like a common SAP application for finance and accounting, and a common data warehouse – which was part of the rationale for the [Centrica] acquisition in the first place.
We sat within Centrica’s data centres, we used their desktop services, we used their local area network (LAN). Our wide area network (WAN) was managed as a single set of deals. So all of our contracts were combined, our service contracts were combined, our teams were combined, and the infrastructure was physically combined, so separating it was quite a job really.
IA: What were your priorities in establishing the new infrastructure?
TD: Firstly, to be able to get out of Centrica within 12 months. We had what is known as a transitional services agreement, whereby Centrica gave us service for up to 12 months while we migrated everything out. But migrating out 700-odd servers, all of the elements of the infrastructure and getting the desktop infrastructure set up was going take a lot of time, so that was a priority.
Secondly, we wanted to cut as much cost as we could. Because we felt we could do it less expensively outside of Centrica, we wanted to find ways of taking out services we didn’t need, and setting up the services we did need less expensively. We also had to deliver the right end-user experience, but it was primarily focused on time and cost.
IA: You eventually decided to outsource your entire infrastructure. What prompted that decision?
TD: We literally couldn’t have bought our own date centres, fitted them out and launched them in 12 months’ time. That was a physical impossibility, so we had to outsource. But we also knew that we’d get a better ‘bang for the buck’ if we did.
CV
Name:
Trevor Didcock
Company:
The AA
Title:
Director of information systems
Highlighted challenge:
Setting up an independent infrastructure following the separation of the AA from its parent company, Centrica.
Background:
Didcock began his career in engineering for petrol company Esso, but soon moved into IT. He then spent nine years at confectioner Mars, where he eventually became head of IT. He subsequently became IT director for motoring services organisation the RAC, before switching to arch-rival, the AA.
IA: How did you go about choosing your supplier?
TD: The sale of the company completed on 13th September 2004. Between exchange of contracts and completion, we’d been working at our strategy and gone out to the marketplace. We went down to 15 players, and went though a big RFP process.
By October, we were down to four players; then we wrote three parallel contracts, so it was a massive undertaking. We took three suppliers right the way to the decision point, with one dropping out two weeks before, and in the end IBM did the best job of selling the service.
IA: Why did you write three whole contracts?
TD: My feeling was that we only needed to do two, because I couldn’t believe we could do a good job of developing three contracts in parallel. But in light of the commercial skills of our CEO and also the private-equity boys sitting behind us, we talked it through and decided that we needed three. Also at one stage, one of them was inevitably going to drop out, and if one drops out you have less negotiating power.
IA: What have been your perceptions of the outsourced service to date?
TD: We’ve had good times and bad times with IBM. Overall it has been a positive experience, but we’ve had our moments. When we first let the contract, we had a fantastic sales team, but during the first month of building the operational team, there was nobody there. It took a long time to get the right people in place, which in most cases wouldn’t have been a problem. If it had been a regular outsourcing job, then we would have held on to our own people for a little longer. But IBM hadn’t twigged just how urgent it was, and that they had to work in a different way with us.
IA: In the process of splitting from Centrica, you’ve managed to reduce yearly IT costs from £56 million to £34 million, and reduced the server estate by 60%. How did you manage that?
TD: We chronicled absolutely everything we had, by literally going into the data centre and counting the servers, so we only took across what we knew we needed. We built a service map by hand, which is basically just an incredibly complex Excel spreadsheet. We found we were over-licensed in many areas, and ‘over-servered’ as well.
That took about six months to prepare, and we were constantly checking it as we moved across to IBM’s data centre in Warwick. It was a pretty manual process – we had these enormous diagrams of what was in the data centre and what was going where in Warwick.
But once you’ve chronicled what you’ve got, it lets you have a really good conversation with the business unit leaders. You can sit down with them and say, ‘What do you need? This is what it costs you; this is what you get. If there’s anything there you don’t want, we’ll take it out’, and go through it section by section.
It encourages a really open conversation with each of the business units, which helps develop trust and you don’t get people saying your costs are too high. Or if they do, you can say, ‘Show us where and we’ll take it out’.
IA: Do you think that, from an IT perspective, private acquisition has benefited the AA?
TD: There has been an awful lot of press coverage of private equity which talks about asset stripping, but we’ve seen exactly the opposite of that. We’ve had the biggest investment in IT in the history of the company.
