Is IOM Outsourcing the Crown Jewels?

Last month Invensys Operations Management (IOM) refused to comment on the persistent rumors circulating during May and June of 2009 that it was preparing to transfer the Invensys Development Centre (IDC) in Hyderabad, India, to an outsourced service provider, but they proved essentially correct when, in mid-July, the company announced that it had "entered a strategic relationship with Cognizant . . . to help improve the design, development and delivery of Invensys Operations Management's products and solutions for customers around the globe."

Cognizant, which has its origins as the development arm of Dun & Bradstreet, is a leading provider of IT consulting and business process outsourcing and a Fortune 1000 company. It's also one of the world's leading SAP implementation houses which, given IOM CEO Sudipta Bhatacharya's antecedents as an SAP vice-president, may go some way to explaining its selection as an IOM partner.

Global Development Partner

Under the terms of what is an initial five-year agreement, Cognizant becomes IOM's global development partner, supplying what is described as "an array of development and maintenance services, including the development of manufacturing engineering, enterprise manufacturing intelligence, advanced applications, operations management, measurement and instrumentation, safety and critical control, supervisory control and data acquisition, and distributed control systems." At first sight, that looks as if IOM is pretty much handing over the crown jewels in terms of all of its development for the former Foxboro, Triconex, SimSci-Esscor, Avantis, InFusion, Eurotherm and Wonderware to Cognizant, but that isn't necessarily the case.

Having put out the original press release, which was matched by a simultaneous, but not identical, version from Cognizant, IOM summoned North American journalists to a teleconference briefing which was apparently intended to clarify the situation. Once again European journalists, or at least this one, were excluded from the event by the simple expedient of their not being informed of it or invited to it. However, we understand that it didn't add a whole lot to their understanding, and it was left to Automation World's Gary Mintchell to get some clarification by interviewing IOM Vice President of Global Development Steve Young and posting a distillation of their conversation on his Feed Forward blog.

Young was apparently eager to scotch any suggestion that IOM was handing over control of its development or its IP. Indeed, he told Mintchell, "At the end of the day, we simply can't afford to give up our core domain expertise." Instead, at least as Mintchell appears to understand it, in effect IOM is handing over the heavy lifting in terms of, for example, porting to new Windows platforms, and writing utilities such as SQL database code and drivers, while retaining its core domain expertise in the US, along with its overall technology leadership, project management and technology domain skills.

Crucial to the eventual success of the deal, and to the future of IPS as a serious contender in the process―sorry operations―management market, however, will be whether Cognizant sees it that way. Certainly their own version of the press release says that the deal "will enable Cognizant to further expand its customer base in discrete manufacturing, process manufacturing, energy and utilities, pharmaceutical and consumer goods segments with services and offerings in Product Lifecycle Management (PLM), Manufacturing Operations Management (MOM), and Enterprise Asset Management (EAM)," which does rather sound as if it is at least in part targeting some of the very areas on which IOM had set its sights.

Long-Term Growth Strategy

Nevertheless IOM's Bhattacharya describes the relationship as "another important step in executing our long-term growth strategy, part of an initiative we undertook several months ago that will help us become a high-performing, integrated technology company" and said that it will lead to "faster time-to-market on new solutions, faster innovation, faster ramp up on resources and a deeper focus on the design and development of our strategic product portfolio."

Meanwhile what of IDC? It's no secret that Invensys' Hyderabad venture has been a less than total success, suffering management problems and a high rate of staff churn, not least because, as a relatively small player on the Hyderabad software scene, it hasn't been able to offer the same career structure as bigger players such as Tata and, indeed, Cognizant. That's no doubt why an astonishingly high 95%+ of the 400 employees at IDC have accepted Cognizant's offer of employment, with Cognizant president and CEO Francisco D',Souza saying "We have been very impressed with the Hyderabad development team . . . and are excited at the potential innovation we will jointly drive into the manufacturing technology market place as they blend into Cognizant."

That aspect of the deal certainly looks like a win-win, as Mintchell pointed out. IOM off-loads the problems of managing a remote development site in an environment where it lacks the necessary management and recruitment skills; Cognizant, which has those skills in spades, gets a new client in an environment with which it is already familiar and in domains into which it has already expressed an interest in expanding.

Spot the Difference

Bhattacharya says the rest of us won't see much change. "Externally, our customers and ecosystem partners should see no difference in our products or their working relationship with us." Whether the same can be said of IOM's own people in the United States and Europe who are already remarking on what some discern as a growing Asian influence within the company, remains to be seen.

  • One of the first signs of the rebranding which will no doubt eventually follow from the creation of Invensys Operations Management (IOM) from the fusion of Invensys Process Systems, Eurotherm and Wonderware is the renaming of this year's running of Wonderware's long established and highly successful WonderWorld events as―wait for it―OpsManage '09. Whether the average potential InTouch user or integrator will immediately recognize that somewhat clunky handle as the event with which they were previously familiar only time will tell, but it's hard to believe that the WonderWare channel has greeted the change with wholehearted enthusiasm.
  • Invensys still expects to "achieve an improvement in performance in the current year," according to the Interim Management Statement for the first quarter issued ahead of the group's AGM in early July. Group order intake in the first quarter was up 17% in actual exchange rate terms and flat in constant exchange rate terms compared with the same period last year. At IOM, the company says the pipeline of order prospects in projects and solutions remains strong, although volumes are down in the short-cycle products business. That, it says, will impact the first half, but the large-order pipeline, coupled with the benefits of IOM integration and other cost-saving initiatives should lead to an improved second half.
  • The creation of IOM may well improve communication and cross-fertilization between the previous constituent entities of IPS, Eurotherm and Wonderware, but it seems that broader communication between IOM and the other members of the Invensys family still has some way to go; that is, if the experience of one senior IOM executive is anything to go by. He recently related to INSIDER his surprise on discovering that Invensys Rail had developed a Triconex-based SIL 4 safety solution of which IOM had absolutely no knowledge. Could come in handy with all that nuclear work in China!

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