- Enterprise IT As-A-Service™
- Strategic Sourcing
- Business Transformation
- Service Optimization
- Service Provider Consulting
Rio Tinto, a global diversified mining company, recently announced a groundbreaking initiative they are undertaking with Accenture. This can best be described as moving Rio Tinto’s enterprise IT function into an as-a-service model. Game-changing benefits permeate this deal, and it’s an eye-opener for enterprises in all industries.
Let’s look at what Rio Tinto gains by pulling the as-a-service lever to achieve greater value in its IT services.
First, it changes the relationship between the business and IT. It breaks down the functional silos of a traditional centralized IT organization and aligns each service. In doing so, it creates an end-to-end relationship in each service, whether it be SAP, collaboration or any other functional services.
Second, this initiative moves Rio Tinto’s entire IT supply chain to a consumption-based model. This is incredibly important for a cyclical commodity industry, where revenues are subject to the world commodity markets. Rio Tinto’s core product, iron ore, is a commodity that can result in revenues slashed in half in the course of a year, leading to the need for cost reduction initiatives. Correspondingly, in boom times, commodities can double and triple in price, resulting in frenetic energy to expand production. The as-a-service model ends this commodity whiplash impact. It gives Rio Tinto a powerful ability to match costs to their variable consumption patterns.
This move will change the pace of innovation within Rio Tinto, allowing it to future proof its investments in IT. As many enterprises discover, multi-year IT projects often end up being out of date by the time they are implemented. Rio Tinto sought to shorten the IT cycle time so it can take full advantage of innovations the market generates. In the as-a-service model, it can pull those innovations through to the business quickly – which is a struggle for traditional siloed centralized IT functions.
These are game-changing benefits. It’s important to recognize that the journey to capture these benefits required a complete rethinking of how Rio Tinto’s IT (applications and infrastructure) is conceived, planned, delivered, and maintained. Moving from a siloed take-or-pay model to an integrated consumption-based model required wide-ranging re-envisioning and reshaping the ecosystem for deploying its technology; it touched IT talent, philosophies, processes, policies, vendors, and partners.
Clearly this journey will be well worth the effort given the substantial game-changing benefits. Challenging times call for breakthrough answers. The cost benefits alone are significant; but even more important is the ability of this approach to accelerate the transformation of the company into a more digital business. Rio Tinto chose to partner with Accenture to move its organization to this fundamentally different action plan for delivering and consuming IT and meeting the rapidly evolving needs of the business.
Photo credit: Rio Tinto
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A famous teaching of Jesus explains that it’s a mistake to pour new wine into old wineskins because it will burst the skins and both the wine and the wineskins will be ruined. New wine belongs in new wineskins. I think we’re seeing this principle playing out in technology – where the consequences are profound.
New wine expands and grows fast; so it requires a supple, pliant container to allow for that expansion. Old wine is stable and mature; it does better in a stable, consistent environment.
For the most part, now that the cloud experiment is over, we see that new technologies and functionalities have many of the properties of new wine. They are effervescent, change continually, move quickly and often rely on heavy iteration. They constantly expand and change. They are best suited for new architectures such as cloud infrastructure and SaaS services. New technologies also have new requirements; thus, they require new structures, new and more flexible governance vehicles to allow them to capture their full value.
Legacy applications, the systems of records in which enterprises have invested hundreds of millions of dollars, are mature and were designed for their traditional environments, which tightly govern change. They are in data centers that have the requisite management support and requisite talent pools.
The services industry is starting to recognize the profound truth of the new and old wineskins: At this point in time, legacy applications are best left in their old, original containers where they can continue to operate in a mature fashion. Old applications or systems of record need to remain in their existing frameworks or architectures. They should be changed only slowly. Furthermore, new functionalities and technologies need to go into new wineskins, or architectures, that allow for and encourage agility and other attributes that support evolving change.
Photo credit: Flickr
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