From counting people to counting-servers

Requirements

A stable local partner who will participate in the start-up of a global IT centre and ensure recruitment as well as the overall flow of human resources;
Continuous cost reduction and streamlining of services after the start of cooperation.

Solutions

Change of contract from personnel leasing to a service model (the customer does not pay according to the number of employees of the centre but according to the amount of services used);
Reduction of unit price of the provided services and quality improvement by increasing productivity, motivation, and commitment of external staff.

Results

Increase of productivity thanks to relieving HP managers from routine processes related to the operation of the centre; Reduction of the unit price for individual types of services by up to 15% over the course of three years;
Effective control by means of selected indicators; Improvement of compliance with established quality criteria;
Reduction of employee fluctuation and increase of their satisfaction and engagement;
Quality assurance thanks to an option in the contract to apply a discount on the price of services.

From personnel leasing to outsourcing

In 2003, the Hewlett-Packard technology group (hereinafter “HP”) decided to build a new European IT centre for server management and support in Slovakia.

At that time, its managers did not know that they would be able to compete with similar centres in much cheaper Asian countries, which was due to a qualified and affordable workforce in Slovakia. The sophisticated management of the centre provided by Soitron also contributed to the centre’s success.

The evolution of this outsourcing project is a demonstration of how the relationship between a customer who needs to have IT specialists available in various projects in the short as well as long term; and a supplier who provides such people; can develop.

At first, employee leasing

When the decision to build a new IT centre in Slovakia was made, HP decided to acquire human resources through personnel leasing.

The company chose Soitron for its partner, whose task was to recruit people and subsequently lease them to HP. After the initial phase, when the centre was employing several hundred people, HP and Soitron began talking about streamlining. Naturally, every client wants to save costs. But to invoice less for the leased people at a time, when labour cost of IT specialists grew, was unacceptable for Soitron. “Therefore, we decided to look for inefficiencies at the centre,” says Tomáš Turkovič, Director of Human Resources at Soitron.

“While existing model was suitable for the early stage of the relationship it shortly showed to be suboptimal to meet HP needs, as it did not stimulate the environment of continuous productivity and quality improvements, neither it provided scalability and all that was critical for the overall success. As Soitron gained the deeper knowledge of the HP environment, tools and processes, and become knowledgeable of true HP needs we have decided to move out of the staff augmentation model towards service based delivery.”

Miloš Horvát

Enterprise Services Manager at HP

Seeds of change

The management of Soitron saw several possibilities to make the centre more efficient. The number and structure of employees was initially determined by HP managers on the basis of their own criteria.

So the idea was born to change, at least for a part of the IT centre, the entrenched personnel leasing into a model in which the client would not pay for people but for server management. “To avoid reducing prices, we proposed to the customer that, while maintaining the same amount of invoices, we would gradually provide a larger volume of services – i.e. the unit price for the management of one server would decrease. Or in other words, that within two to three years, the customer would pay 10 to 15% less for unit services,” explains Pavol Németh, IT Director at Soitron.

“We realised that we had a better overview of the workload of people and of what was going on in the workplace. Therefore, we suggested changing this model so that the amount of work and the number of people would be managed by us.“
Tomáš Turkovič Director of Human Resources at Soitron

New Incentives

The transition from personnel leasing to provision of outsourcing may not be easy. The HP managers were particularly concerned about losing control of the centre, quality compliance, and correct determination of the measuring unit and its price. “Eventually, economic arguments, i.e. the promise of reducing costs, prevailed” says Stetulič, Country ITO Delivery Executive at HP in regard to the decision process. A seemingly simple change of the operation and billing model had a significant impact on both contractual parties.

Suddenly, Soitron was not paid by the number of people employed at the centre but by the number of managed servers. Moreover, in line with its commitment, it was supposed to reduce unit prices, which motivated Soitron to look for ways to make the work of outsourced IT professionals more efficient. The company began introducing automation, developed and finetuned an incentive and assessment model that not only was supposed to increase the productivity of people but also to improve their engagement and satisfaction. According to T. Turkovič, for instance, the fluctuation at the HP centre was lower by half than the Slovak average at similar centres of shared services.

Measurable benefits

Of course, the new service operation model could not depend just on the price but also on the quality of provided services. A condition for the transition of a part of the IT centre from personnel leasing to outsourcing was that the quality measured by various parameters would be at the required level.

HP insured itself against the risk of fluctuations by the option of penalty, i.e. a discount of the invoiced amount. Thanks to the streamlining and quality improvement that Soitron demonstrably provided, the customer was paying less for services, or to be precise, was getting more for the same money. This ultimately improved the competitiveness of the IT centre in comparison to similar HP workplaces around the world.

Another benefit of the new model was the fact that HP managers were no longer concerned with how many people they had at the centre or the structures of individual teams. “They looked at the project from above. They knew what was happening but they mainly controlled outputs,” explains T. Turkovič. The customers not only obtained higher efficiency but also simplified the management of the relationship with the supplier. Last but not least, HP acquired greater flexibility and transferred a part of the risks to Soitron.

HP SLOVAKIA SATISFACTION SURVEY

88%

Overall satisfaction with service provided by Soitron

88%

Business alignment–relationship management

86%

Ability to understand business requirements

86%

Adaptability/flexibility

85%

Quality of service

“We proposed to the customer that, while maintaining the same number of invoices, we would gradually provide a larger volume of services – i.e. the unit price for the management of one server would decrease. This ultimately means, that within two to three years, the customer would pay 10 to 15% less for unit services.”

Pavol Németh

Technical Director at Soitron

Benefits of Outsourcing

Right on time

Get the technical resources you need, when you need them to meet your project requirements

HR Free

Don’t bother with HR stuff. Leave hiring, training, payroll, salaries, firing etc. out of your agenda

Easy to manage

Keep the optimal cost and head-count structure

Effectivity

Get the resources you need quick and for exact time period you need them.

Customer support

Let someone else to help you run the supporting functions and focus on key

Flexibility

Be prepared and flexible during peaks and downturns

Facts

European ITO Center (EITOC) HP Slovakia is the biggest service centers in area and provides services for thousands of servers in EMEA region.

Centrum is focused on solutions and support of UX and Windows systems and networking in three lines.

Each line has defined rights and capacity of solving problems.

1. Line: solves 60% of all system failures

2. Line: is dedicated to solve more complicated technical issues and strive to remove system errors

3. Line: is the highest line of solutions and support of UX, Windows and networking. Is responsible for sustainable development of systems and implementation of all improvements within servers

Client

Hewlett-Packard

Hewlett-Packard is the leader in developing technologies and has offices in more than 170 countries in the world. Through its product – technologies and services – its trying to help people and companies to solve their issues and meet their challenges. For more than forty years of presence on the Slovak.

IT market, HP has received exceptionally strong leadership in terms of total turnover and the width of their portfolio. With wide range of products accompanied with great services, HP gains the favour of enterprise customers, small and medium businesses as well as consumers, directly or through the network business partners. HP operates on Slovak market since 1967. In 2000, separate legal entity Hewlett-Packard Slovakia was established, which provides customers with a comprtehensive portfolio of services of the world’s largest technology company. In February 2003 Hewlett-Packard Slovakia and Compaq Computers Slovakia merged together.

Download full case study (PDF)

Company	Hewlett-Packard Slovakia, s.r.o.
Sector	IT

From measuring people to measuring servers