DXC to Structure Outsourcing by Standardized Service Lines

Case Type: organizational behavior; operations strategy.
Consulting Firm: A.T. Kearney first round full time job interview.
Industry Coverage: software, information technology (IT).

Case Interview Question #01336: Your client DXC Technology is a large information technology (IT) outsourcing service provider. The company was formed in 2016 from the merger of Computer Sciences Corporation (CSC), Hewlett Packard Enterprise Services, and Electronic Data Systems (EDS). At the time of its creation, DXC Technology had revenues of $25 billion, 170,000 employees and operated in 70 countries.

The client DXC Technology is nearing the end of a long-term contract with its largest customer, Mega Corp. The CEO of Mega Corp. has notified your client DXC Technology of its intent to “level the playing field” of competition for its IT-related business. The customer Mega Corp. has indicated that 100% of the business DXC Technology currently enjoys will be available for bids by DXC Technology’s competitors. In addition, the CEO of Mega Corp. has announced that the bidding will be structured within a series of standardized service offering categories. Although DXC Technology has detailed information regarding its many individual contracts with the various business units of its customer, it has a very poor overall sense of the mix of services it provides to each customer unit.

DXC Technology would like your assistance in developing a view of its business with this customer Mega Corp., oriented around the standardized service offerings the customer is likely to specify. In addition, DXC Technology believes the trend to structure outsourcing initiatives by standardized service lines will continue, and therefore it views this client opportunity as a “wave of the future” that it will soon see repeated with its other major clients. DXC Technology ultimately desires to have a fact-based perspective on which of its service offerings are winners, losers or somewhere in between, so as to be able to make informed decisions about where it should invest, divest or “stay the course”.

You have been assigned to the project team for your consulting firm, and you have a meeting with DXC Technology’s executive-in-charge for this client account. Your desired outcome is to understand DXC Technology’s situation as the company perceives it in greater detail, to develop a high-level engagement approach and to do some initial brainstorming as to what insights are needed to strengthen DXC Technology’s response to the forthcoming bid process. How would you go about it?

Possible Answers:

Candidate: Our firm is pleased to have been invited to contribute to your effort to retain or grow this important piece of business. First of all, what are the critical calendar milestones we need to be aware of, so that we ensure the results of this project can be put into play as effectively as possible?

Interviewer: We have eight months until the start of negotiations with our customer Mega Corp., but we need to have our strategy nailed down internally within five months, to allow for various review cycles with our C-level executives and, potentially, with the board of directors.

Candidate: I would like to understand a little more about how much risk you realistically think you face in the upcoming negotiations with your customer Mega Corp. Have any assumptions or analyses been developed to help you quantify just how much you stand to lose?

Interviewer: We are anticipating losing a certain amount of business, and we are looking to this project to help us quantify the risk to a granular level, and thus be able to justify whatever actions we take. Our operating assumption right now is that our loss exposure to competitors ranges between 10% and 25%.

Candidate: Have you identified the key factors likely to drive the outcome, and if so, which ones can you influence most?

Interviewer: Aside from obvious factors such as unit price benchmarking and service level definitions, we believe our customer will have significant switching costs in certain areas, which could work in our favor. Therefore, in mission-critical areas, we believe our customer may be reluctant to divert its business with us to one or more competitors en masse.

(Note: You have now confirmed with your client that unit pricing, service level definition and switching costs are key factors that need to be considered within the analytical phase of the project.)

Candidate: Do you have a sense of the parts of your business that face the most risk?

Interviewer: Please clarify what you mean.

Candidate: Either by customer business unit or by the service lines you offer, does your leadership team have a sense of which units or service lines are most at risk?

Interviewer: This is among the insights we are expecting to gain from this project.

(Note: You also now know that significant work must be done to create a sensitivity analysis of, at minimum, where the risk lies by customer business unit and by the major service lines your client delivers.)

Candidate: We will no doubt dive deeper into this later, but it’s important at the start to understand the basics. Can you share with me some specific, yet basic details of what this business looks like?

Interviewer: Our master service agreement with this customer Mega Corp. today breaks down into a series of 10 individual service contracts, which closely align with the way the customer’s profit centers are organized. From an individual delivery perspective, most or all of the IT services provided by DXC Technology are consumed to one degree or another, by these contracts.

Candidate: What is the nature of the services you provide, and how are they organized?

Interviewer: We provide many different services to each of the 10 business units. Although some of these services are standardized across our company, and are delivered by our infrastructure delivery organization, we need to look closely at all of these offerings to see if common denominators exist that will support some level of consolidation.

Candidate: For the standardized services, do you have metrics in place that enable you to see profit and loss by service line, across the customer’s business units?

Interviewer: For the standardized offerings, we have fairly reliable data. Regarding the “cats and dogs” services that vary significantly from business unit to business unit, we are looking to this project to provide some insight.

(Note: You have now quantified the number of business units. In addition, you know that although some of the services you will be analyzing are standardized across the customer’s business units, potentially many others are not. This allows you to develop a set of assumptions about the tasks and deliverables that will need to be part of the project.)

Candidate: Who do you consider to be your primary competitors?

Interviewer: Based on our competitive experience in other markets, as well as with the occasional competitive bidding we have seen with our customer to date, we believe the most significant competition will come from competitors A through D (Tata Consultancy Services, Cognizant, Wipro, IBM).

Candidate: Do you have some sense of which aspects of your customer’s business these companies will attack?

Interviewer: Only at a very high level. We are looking to this project to give us a greater sense of who we will face across the dimensions of our customer’s organization, major processes and our service lines.

Candidate: I think we are getting close to understanding the landscape of where you are today, the challenges you face and the kind of analyses needed to give you the insights to best manage the decision process that lies ahead. Let’s discuss the process by which we can work with your team to begin this project. Have you identified who from your organization should work on this with us?

Interviewer: I agree. I plan to ask each member of my staff to appoint someone from within their respective organizations to commit to work on this project on a largely full-time basis, as needed.

Candidate: I suggest that we have someone who understands the financial structure of the business, and who has strong relationships with the people who are managing delivery of the services.

Interviewer: Agreed.

Candidate: I also propose that we create an executive oversight group, whose function will be to ensure that the priorities are set, and that key resources are allocated to the project as needed to drive the analysis.

Interviewer: As you decide how best to conduct this analysis, please keep in mind the fact that the very same people who have the knowledge we need to tap are also the ones running the business on a day-to-day basis. Will you be able to estimate the time commitment our people will need to plan for?

Candidate: Absolutely. Based on this discussion today, I am confident we will be able to return to you shortly with a more detailed approach and some concepts illustrating the deliverables we will create.

(Note: You have now established a framework for project organization and governance.)

Interviewer: Can you share with me what some of these deliverables might look like?

Candidate: Definitely. Based on the discussion we have had, I propose we develop a series of charts and graphs that characterize the footprint of the services you deliver to this client today. Before we consider what it will take to assess how these services stack up against likely competitive actions, we will look at your customer’s business strategy and direction. This will give us insight as to where growth opportunities may exist for us to focus on as we gather data to support the analysis. In planning our defense of your current business, we do not want to lose sight of opportunities that may arise to help your customer achieve their business objectives.

Once we have a first look at these, we will develop hypotheses about the basis for competitiveness by service line, by your customer’s business unit, and by likely competitive actions. In some cases, the facts we get from your organization will be very solid. In cases where the data is soft, we will develop various indices to fill in the gaps. In any case, we will keep your team, the guidance group and your staff informed throughout the process. Does this sound like we are in agreement and you can feel comfortable we are off to a strong start?

Interviewer: Yes. What do you think we need to do to get started?

Candidate: I will prepare a few pages on our discussion today. These pages will describe the project charter, organization, goals, illustrative deliverables and the process we will use to create the deliverables. In addition, I will provide a major task list, timeline for completion and preliminary list of participants identifying all contributors and stakeholders.

Interviewer: Great. I think you did a wonderful job.

(Note: At this point, you have identified the client DXC Technology’s current situation, the desired outcomes of the project at a high level, and the process you will use to ensure effective project execution. In addition, you have gained high-level validation from the client as to how useful are some of the primary deliverable frameworks you have in mind, and the time frame required. You are now sufficiently prepared to begin the engagement.)