On a Fast Track

The closer you get to the top, the harder you have to work to be number one. And the bigger you are, the more complex the task of managing all the pieces of a global operation becomes. Ford Motor Company is the second-largest company in the United States, according to the Fortune 500 list. It's a race where every business decision and every dollar count.

Ford's international network of people and production facilities includes more than 370,000 employees in manufacturing, assembly or sales operations in more than 30 countries. At each of its global locations, Ford relies heavily on IT systems to build, market and distribute its vehicles. This sprawling landscape represents more than 1,500 software applications, each with a direct impact on Ford's worldwide operations.

If these systems aren't working properly—responding to the needs of the business with reliability, speed and efficiency—the results can be disastrous. Vehicles might not make it to a dealership as scheduled. Or worst case scenario: Manufacturing plants might be shut down.

The responsibility of building, deploying and maintaining those business systems has traditionally been handled internally at multiple locations supported by Ford employees and contract staff. But this approach wasn't delivering the efficiencies that Ford requires to maintain a competitive advantage in an industry where shaving two hours off the time it takes to build a car or truck can save as much as $1,000 per vehicle.

"Our objective is to reduce, by one-half, the time it takes us to develop or enhance our software applications and to reduce our costs by 30 percent," explains Jerry Peterson, director of Ford's Solutions Delivery Group (SDG). "We need to be more nimble and responsive to the needs of a business environment where the pace is constantly increasing—so we had to step up the speed of delivering IT capabilities to the company."

	The solution was to bring together Ford's IT activities into a single center of expertise. "The central organization lets us specialize in this kind of work and develop the best possible procedures using the best possible tools, while improving the professionalism of the people," Peterson says. "By doing this, we believe we can generate some substantial efficiencies."

Creating the organizational structure is only half the battle. To make sure it has qualified professionals to do the work—without putting undue strain on its own internal staff resources—Ford turned to an approach it calls "managed sourcing." From Ford's perspective, managed sourcing means partnering with specialized IT vendors to provide the professional services required to manage the company's massive technology systems. These vendors work directly with Ford personnel, who define the business requirements of the systems and manage the process to make sure that the desired results are achieved.

In December 1998, Ford signed a five-year, $500-million application management agreement with Compuware to provide maintenance and continuous enhancement support for all application systems in the Ford worldwide Application Management Center (AMC). That move was followed by a five-year, $300-million contract with IBM, which will provide new application development services.

Two Heads Are Better Than One

One of the most important aspects of Ford's managed sourcing approach is that the company isn't simply handing over its IT application work to a vendor. It's a partnership, with each side contributing expertise and ideas to the common goal. Each partner has well-defined roles and responsibilities.

Ford established the Solutions Delivery Group, a centralized organization, to oversee its IT application activities. Three specialized groups, to be located within a new SDG building, are:

• Accelerated Solutions Center (ASC), which develops new applications.
• Application Management Center, responsible for supporting, enhancing and maintaining applications.
• Accelerated Implementation Center (AIC), which deploys new or enhanced applications.

Compuware is managing application enhancement and support through the AMC and has staffing responsibility for the AIC. IBM is responsible for new application development in the ASC. The first of the SDGs is being built near Ford's corporate offices located in Dearborn, Mich., with others to follow overseas.

"Ford's role in the process is the business orientation," explains Lynn Phillips, AMC manager. "The IT requirements will be determined by the business users—the departments within Ford that use the applications for their specific tasks."

"The business users will be the ones actually paying for the IT services," adds Peterson. "And Compuware has made a commitment, too. We've established service levels, and Compuware has accepted the potential of penalties in financial terms if there's any IT-related disruption to our business. They've really put their money where their mouth is."

The managed sourcing approach will also enable Ford to redeploy personnel to strategic assignments. Ford employees who currently work on IT assignments will be transitioned to other areas of the business, where their knowledge and expertise can be used to better advantage.

"We're freeing up people to work on core business applications such as electronic commerce, the supply chain and distribution," says Peterson. "The Ford employees who have worked with a particular application will initially move with it to the AMC, in order to share their knowledge of Ford's business before they are transitioned to another assignment."

Bill Martorelli, vice president of Application Resourcing Strategies at Hurwitz Group Inc., an IT research and consulting firm, says that although the term "managed sourcing" isn't commonly used in the industry, the concept itself is coming into favor.

"Joining with an outside provider to address these kinds of legacy maintenance issues is something we're seeing more of, particularly as it's becoming increasingly difficult to retain people who want to perform maintenance tasks," he explains. "And the idea of joint responsibility eliminates the traditional outsourcing concern of losing control."

Ready...Set...Go!

Compuware's willingness to accept financial penalties if IT services don't run smoothly "is pretty unique in the industry and certainly is a bold move," says Martorelli. Additionally, he says, Compuware committed to an aggressive schedule of employee productivity improvements—at the start of the project. "To specify a progressive level of improvements in advance speaks well of Compuware's ability to measure and manage activities."

To keep up with the speed business is moving at today, companies like Ford are wise to look at new approaches, Martorelli says. "Companies such as this need to focus their resources on more strategic initiatives, and they need to do it in a rapid time frame. The services Compuware is offering are very consistent with that type of world view."

Planning for the Future

The AMCs represent a new approach to applications support at Ford. Instead of being assigned to only one application, the staff of IT professionals is part of a pool that will be assigned on an as-needed basis to support all Ford applications.

Within the AMCs, Compuware professionals provide maintenance and enhancements, production support, continuous improvement and customer support as part of the agreement. The staff actively manages the application portfolio by prioritizing requests for application changes in line with business goals. They also will look for ways to improve response times and recommend the retirement or replacement of applications on a global basis that may not be meeting current needs. Compuware is developing a formal system of software releases, drawing upon the company's practice of consolidating enhancements to its software tools into scheduled releases.

Ford expects to implement the AMCs by the end of the first quarter of 2000 and has established ambitious goals and specific targets for completion.

"We're very concerned about keeping our fixed costs under strict control," says Peterson. "We expect to reduce the costs of supporting our existing applications through productivity improvements."

Accomplishments will be measured in a number of ways, including "function points." Function points quantify the functionality a system provides to the user, based primarily on the logical design of the system rather than the technology with which the system was built. Ford plans to use function points to evaluate the success of its new IT strategy across all of its business objectives, ranging from speed of delivery to continuous improvement.

For example, Phillips says Ford will measure productivity gains in terms of function points delivered per staff month. The AMC target, to which Compuware agreed, is to deliver an average of 22 function points per person per month in 1999, 25 function points in 2000 and 28 function points in 2001. Other objectives will be measured against baseline data for current operations, and continuous improvement will be quantified across dimensions such as quality of delivery and frequency of repeat defects.

"The best way to get better is to measure things in a quantitative way so you can see how they're actually performing," says Phillips. "So the things that are important are things like efficiency to cost-per-function point—what does it cost us to support 1,000 function points' worth of application, for example."

Because every IT task will be driven by the needs of Ford's business, the people who actually use the applications will play a crucial role in evaluating the results. Ford employees are considered customers of the AMC, so customer satisfaction surveys will be conducted on an ongoing basis so that the applications meet the requirements of the people who use them.

Compuware's APM

Service levels are also being established by the business users. "They will be calling the shots and setting the expectations for what the level of service should be," explains Phillips. "If there is a failure of some sort, the customers will determine what they think is a reasonable response time for re- establishing business operations and repairing the defect."

Along with Ford leading on the business side and Compuware taking charge of the technical application implementation and maintenance aspects, IBM will oversee technical application development. IBM expects to manage up to 150 concurrent application development projects at its first ASC, and has committed to delivering applications within four to six months.

Putting the Pieces Together

Ford is confident that its new IT application strategy will deliver the hoped-for results, largely because of a successful pilot program that began in November 1997 and has been folded into the AMC structure.

The pilot began in a Ford department: Manufacturing, Planning and Logistics Systems (now called Supply Chain Systems). At the time, Ford was developing a major enhancement to a material control system and expanding the North American application to its European plants.

"We initiated the pilot with Compuware to do the detailed specifications and programming-related work in a separate facility," explains Phillips. He says the pilot resulted in a 30 percent improvement in productivity, which correlates to a 30 percent cost reduction. The pilot also enabled Ford to reduce management time in procuring vendor resources.

Phillips adds, "The pilot gave us insights into the types of efficiencies that could be gained by applying a managed sourcing approach on a larger scale across the company, which was helpful in establishing goals for the AMCs."

Finding the Right Partner

The success of the pilot reinforced Ford's decision to select Compuware as its partner and its staffing provider in the AIC. "We already had a long history with Compuware, so we were aware of their track record of delivery," says Peterson. "We know them as an organization and as a corporate citizen, which were important factors."

Compuware already provides a number of Ford application management support services. "Because of Compuware's software products, they bring a different kind of capability than a company that only provides professional services or staff supplementation," says Peterson. "They have people who are experienced in development methodologies."

Compuware's size was another factor, since Ford was looking for a partner with the scale and scope to support one of the world's largest companies. And, ultimately, the right chemistry was a crucial component in the decision.

"In looking for a long-term strategic partner, the right fit is extremely important," adds Peterson. "It's not unlike a marriage, where you choose a partner for compatibility—which means that corporations have similar values and shared objectives. By combining the business knowledge of Ford with Compuware's IT expertise, we believe we can accomplish the goals we have identified as important to Ford's ultimate success."