Philips assigns tasks to Cognizant and Wipro for completion
Philips Shifts IT Delivery Model, Outsources to Cognizant and Wipro
Royal Philips Electronics, a global leader in health technology, has announced a significant change in its IT delivery model, with the signing of new, multi-year outsourcing contracts with Cognizant and Wipro.
The move marks a paradigm shift for Philips, as they aim to boost profitable growth, increase innovation, and decrease complexity. Last year, the company initiated a multi-year transformation programme entitled Accelerate!, with the same objectives in mind.
While Wipro will be the system integrator for key initiatives across Philips' businesses and platforms, Cognizant will transform Philips' IT organisation into a platform and output-based managed services model. This shift is expected to enable cost variabilization, structural savings, and the creation of higher value business capabilities.
Philips has a history of outsourcing IT services. In 2007, a Business Process Outsourcing (BPO) deal with Infosys resulted in 1,400 staff transferring to the Indian company. The company's 2011 annual report outlines their approach to IT sourcing, which involves a continuous drive to create a more open, standardized, and cost-effective IT landscape. This has led to further outsourcing, off-shoring, commoditization, and a reduction in the number of IT systems.
In 2009, Philips announced a consolidation initiative called 'One Philips, One IT' to reduce their data center footprint from around 400 and the number of IT suppliers from around 800 to 10. German IT services giant T-System took over data center management and SAP support for Philips in the same year.
As part of the transformation, Philips is also transforming itself from a functional organization to a process-driven end-to-end collaboration model, adopting business excellence principles such as LEAN. This transformation includes transforming business processes such as 'idea to market', 'market to order', and 'order to cash'. Wipro will work on these transformations, focusing on integration, user interaction, security and authorization, and various technology enabling platforms.
Despite the financial challenges faced in 2011, when Philips recorded a 4% sales increase up to €22.6 billion but swung to a net loss of €1.3 billion, the company remains committed to its transformation agenda. The new partnerships with Cognizant and Wipro are expected to play a crucial role in achieving the goals set out in the Accelerate! programme.
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