Akzo 'bundle' prefers Wipro

"Why should a chemicals company be in the IT business? That isn't what we do and therefore we should hand it over to those who know it best." Words, that heads of Indian IT companies would want to hear all the time, and increasingly they aren't being disappointed.

That particular quote came from Gerard H Helmink, group information officer at Akzo Nobel Chemicals, one of three groups at the Dutch multinational company, Akzo Nobel.

Around ¤14 billion in fiscal 2005 sales, the chemicals, coatings and pharmaceuticals company is "moving toward a combination of 'preferred vendor' and 'multi-vendor' policy'", Helmink, head of IT for the chemicals group, said.

And looking for a preferred vendor to manage some of its data centres, Akzo Nobel found an Indian firm, Wipro, had a better grasp of its way of doing business than existing European vendors and one US based multinational firm, he said.

The company's Chemicals group, which contributed some ¤3 billion in sales for the fiscal year 2005, has just moved from European contractors to Wipro.

The Bangalore headquartered IT services firm will maintain the SAP systems at Akzo Nobel Chemicals' data centres in Arnhem, Netherlands, two in Orebro, Sweden, and another in the US. It will also maintain a management information system based on Siebel, he said.

The contract, worth Eur 4 million over three years, is a fourth of what it would cost Akzo Nobel at home, even if the work had been outsourced, as it indeed had been before Wipro took over.

Atos Origin and Cap Gemini, doing the job before Wipro, were also in the run for the re-negotiated contract. Others on the short list Wipro beat include multinational American IBM and Wipro's desi rival, Infosys Technologies, he said.

Helmink said, "Of course, the cost advantage is there, but we found that Wipro understood our philosophy of business best."

N S Bala, a vice president at Wipro and head of its Manufacturing Solutions, said, "The ultimate goal of infrastructure and application consolidation is to allow AkzoNobel to respond faster to changing business and organisational needs. For instance, a typical engagement, with a customer for a certain type of chemical, today might take up to a year. Our goal is to reduce that to weeks."

Akzo Nobel, for ease of operations, divides itself into "bundles" that share data centres,infrastructure and connectivity as groups and not as individual business units. "We realised the value of a company that had reduced some parts of this work to a level where it was like using a utility", Helmink says. The chemicals group gets to close its data centres, which frees up capital better employed in its core business "" chemicals. "Money thus saved is profit in real terms", he said.

Wipro has now become the preferred vendor for the data centre bundle of the chemicals group. "We are very excited by this choice," said Leon Hintzen, lead demand manager for the Chemicals data centre.

"You can say this is a test of our belief in the global economy, but for us the main benefit is that it will definitely bring costs down, without compromising on quality."

Bala says, "We were chosen as a strategic IT services partner for Infrastructure management, Data Center Hosting and SAP services".

In March and April This year, Wipro took over the maintenance of some 140 Windows servers running SAP and a portfolio of specialised applications, including the management information system.

In what is going to be an 80 per cent offshore operation, Wipro will bring to Bangalore, mostly, and Chennai, work now done in Sweden and the US in the second half of this year.

Bala's team will also design the architecture of an offshored data centre. That will "provide Akzo Nobel not only storage-on-demand but also processing power-on-demand." The SAP-based ERP application suite that Wipro will "consolidate" will help reduce storage costs too, he said.

But, in the end there is a warning: Helmink says, Wipro got the contract for they are the best today. In two and half years, when their work comes up for review, "we may decide to go else where." In fact, in that time, "if China offers greater advantage, we won't hesitate to go there".