Outsourcing — the right decision for Elders CIO

Elders chief information officer, Shaun Hughes.

When rural services company, Elders, made the decision to overhaul its IT infrastructure, Adelaide-based CIO, Shaun Hughes, was faced with the difficult task of cutting his IT department staff.

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The decision was made because the company is in the midst of a four-year IT program called Project Connect and has partnered with HP for a seven-year services agreement including infrastructure technology outsourcing and an enterprise wide SAP rollout on HP’s private Cloud infrastructure in Sydney.

With 75 staff members in Hughes’ IT department, and knowing that Elders was going to be handing over outsourcing to HP on 1 July 2011, he decided to redeploy 56 of those employees to the vendor’s Adelaide office.

“That was a reason we chose HP because they have a very big Adelaide presence and the ability to redeploy our staff was an important decision,” Hughes said.

“It’s always a challenge to cut staff but I’ve had a background in IT services so I’m a strong proponent of outsourcing. If you get the model right and have the contractual framework in place, than it can be successful.”

In addition, he said Elders employed advisers and undertook a thorough review of its IT infrastructure before commencing the outsourcing agreement with HP.

Part of the reason Hughes deployed outsourcing was he wanted to bring a “client-centric” focus back to the company. This included improving the company’s sales performance, reinvigorating the supply chain and deploying an effective capital management program. In addition, Elders needed to reduce IT costs and deploy effective technology.

“We realised that our technology footprint needed to change if we were going to enable ourselves to be the organisation we wanted to be,” he said.

In March this year, the company signed the HP agreement and services commenced in July while SAP was selected as the core systems platform for environment.

The first release, expected to go live in March 2012, will be rolled out in the head office in Adelaide and covers SAP financials, core human resources and indirect procurement.

“The second and third releases will be our branch point of sale and customer relationship management [CRM] front end systems,” Hughes said.

“In addition, the fourth release will be focused around the meat and livestock trading division and the fifth is targeted for New Zealand and other international operations in Asia."

Also, a sixth release piece will be advanced functionalities such as finance and supply chain management.

The SAP environment is based in a private Cloud operated from HP’s Sydney data centre and Hughes said it selected the private Cloud model for cost and scalability reasons.

“It’s a much better solution in terms of cost effectiveness and with a four-year whole of enterprise transformation, the ability to scale up for each release and build various development environments that are required for each release is important,” he said.

In addition, HP’s Cloud services will run Elders’ legacy IBM iSeries AS400 environment which is currently hosted at the firm’s own data centre in Adelaide.

“Because we have an iSeries legacy footprint, the journey is complex,” said Hughes.

“We’ve got to build out our new environment and then integrate it with our legacy systems as we go through each of these phased releases.”

Elders also runs 230 Wintel servers within its virtualized environment and will migrate these servers over to HP’s Cloud as they come up for renewal over the next four years.

Hughes said he expects the servers will be replaced at the rate of 25 per cent per year.

Lastly, the vendor will provide work place services to Elders for all of its devices including desktop and notebook PCs, handheld devices and printers.

“What we have is a rolling three-year refresh program with an incumbent shared footprint because we’re using HP and Dell desktops,” he said.

However, no decision has been made yet whether the company is to become an HP shop in the future.

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