European tire maker Bridgestone Corp. has announced plans to outsource its SAP ERP support and maintenance to an offshore firm in India, but the decision isn't expected to lead to layoffs at the company.
Bridgestone, the Brussels-based subsidiary of Bridgestone Japan, will use Satyam Computer Services Ltd. in Hyderabad, India, to manage SAP support and development, the two companies said in a statement last week.
The three-year agreement will allow Bridgestone to reduce the amount of SAP support work handled on-site "and free up resources to focus on new request and new demands," said Joe O'Neill, IT director of Bridgestone Europe.
Because its SAP support operations are already centralized, shifting the work to India won't be difficult, said O'Neill. "We already have, I would say, a near-shore support organization within our own organization," he said.
Bridgestone has six manufacturing plants, a technical center and numerous other distribution and sales facilities throughout Europe. Support for its SAP applications has been handled centrally at the company's Brussels headquarters. Bridgestone's European SAP system supports 2,000 users.
The decision by companies to move packaged application support offshore is an increasingly common move, said Atul Vashistha, chairman and CEO of NeoIT Inc., a San Ramon, Calif.-based consultancy that advises companies on offshore outsourcing. Previously, many offshore projects were focused on support of custom applications, he said.
"Now, we're starting to see significant size, longer-term ERP support and maintenance deals happening," Vashistha said, noting that many offshore actions aren't made public.
For Bridgestone, having headquarters IT staff deal with SAP support and maintenance isn't adding value to the business, said O'Neill. "Resolution of standard SAP problems, whether they're handled here in Brussels or whether they are handled offshore, doesn't really matter to the business user, provided he gets a resolution," said O'Neil.
The company is now in the "transition phase," he said, and is finalizing agreements with Satyam and getting the processes in place to complete the work.
"Even though people's jobs are not threatened by this, there is still a need for people to adapt," O'Neill said.
Bridgestone did not provide any estimated cost savings. But O'Neill said some of the benefit will arise from the company's ability to direct more resources toward other IT needs.
Manish Mehta, a director of and senior vice president at Satyam, said the company has been providing SAP support for nearly six years and has more than 1,700 employees working in its SAP practice. The company has about 100 SAP clients, and he estimated that customers can save 30 percent to 40 percent initially of what it costs them to provide similar in-house services.
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