Fonterra taking on IT partner in huge outsourcing deal

By PETER GRIFFIN

Fonterra plans to have an IT outsourcing partner in place by September, in a massive deal that may require the winning candidate to design and implement an internet protocol migration for the dairy giant.

Three companies, EDS, Hewlett-Packard and Unisys, are shortlist candidates and have until May 23 to put together their bids for the contract.

Fonterra wants to outsource the management of most aspects of its IT systems, from support of its 10,000 desktop PCs and laptops and 1000 servers, to network administration. Encompassing mobile computing devices, the IT provider will take responsibility for the infrastructure underpinning Fencepost.com, the online interface with Fonterra used by thousands of farmers to monitor their milk fat yields and productivity.

Fonterra's chief information officer, Marcel van den Assum, said there would be no separate outsourcing arrangement for Fonterra's telecoms infrastructure needs.

"There will be one deal in terms of infrastructure. The shortlisted suppliers will have to work with [telecoms] partners to pull together the right solutions. We're looking for one integrated solution from one of the three we have shortlisted."

Fonterra uses a wide range of telecoms suppliers - Equant manages its wide area network and Telecom is a large local supplier. But the IT supplier would have to undertake an "architectural evolution of Fonterra's communications", which might involve an extensive IP implementation.

Still being assessed, FonterraNet - a scheme to bring wireless broadband solutions to farmers - is not included in the scope of the outsourcing, but will need to be integrated down the track if Fonterra decides to take it nationwide.

The deal will cover a period greater than five years and will not include applications development and maintenance.

Van den Assum would not reveal why IBM had not made the shortlist. He said Fonterra and IBM had not got to the stage of talking about price.

"Collectively it was decided IBM would not submit a bid. We've talked generically in terms of figures, not in dollar terms."

One outsourcing expert who has worked with IBM suggested that the company did not like the approach of TPI, the US outsourcing specialist Fonterra has recruited to manage the RFP (request for proposals) process.

"TPI have a set way of doing outsourcing contracts that IBM might not have agreed with. The way they write their contracts leaves a lot of things open for interpretation," he said.

Fonterra has more than 300 IT staff in New Zealand and around the world, some of whom will shift to the candidate chosen as the outsourcing partner.

"There's a lot of intellectual property in our infrastructure team and any partner would need to retain significant IP and capability," said van den Assum.