Towers Perrin Outsources For Spending Control

Towers Perrin, a $1.5 billion New York management consulting firm, is counting on a combination of three IT trends--outsourcing, E-procure-ment, and utility computing--to save millions of dollars annually. The company last week began testing a new outsourced E-procurement service from IBM Global Services that also should help Towers Perrin get better control of its spending patterns when it's rolled out to several hundred employees later this month.

The consulting firm, with 10,000 employees and 78 offices in 23 countries, spends nearly 60% of its budget on items like computing equipment and office supplies. Automating and outsourcing procurement will save several million dollars this year, says John Hays, director of global sourcing and procurement. The savings could accumulate to as much as $80 million by 2007 as the firm adds procurement of marketing materials and temporary help to the system.

Towers Perrin last year decided to standardize purchasing on the Ariba Buyer E-commerce platform but quickly dismissed the idea of running it in-house. "We're already overburdened on the IT side," Hays says. "The last thing we want to do is throw something else into the mix." Instead, the company outsourced the job to IBM, cutting the implementation time by six months.

The system will let Towers Perrin consolidate thousands of vendor contracts to less than 100 and provide scalable computing power and usage-based costs, Hays says. Each year, IBM and Towers Perrin will review the consulting firm's use of the service and adjust the terms of the contract based on actual usage.

IBM's Quick Start hosted E-procurement service starts at $7,500 per month, which includes up to 10,000 transactions, 10 different suppliers, and 200 users.

Towers Perrin's deal with IBM is worth several million dollars over three years and represents an early form of utility computing that analysts expect will grow. "IT as a utility is the wave of the future, but products are just hitting the market," says Andrew Schroepfer, president of Tier 1 Research. He says benefits will come with the maturation of software like Egenera Inc.'s BladeFrame and services such as Terraspring Inc.'s infrastructure management. Both help service providers with the deployment and management of IT resources.