Royal Philips Electronics has signed new, multi-year outsourcing contracts with Indian IT services providers Cognizant and Wipro.
Details of the deals are thin on the ground, but Philips says it is undergoing a "paradigm shift in our IT delivery model".
Cognizant said the company is transforming its IT organisation "to a platform and output-based managed services model across multiple business lines and corporate functions … enabling Philips to variablize [sic] its cost structure, drive structural savings, and free up resources to create higher value business capabilities."
Wipro said that it will work with Philips on transforming business processes including ‘idea to market’, ‘market to order’ and ‘order to cash’. This involves working on a variety of ‘technology enabling platforms’ that include integration, user interaction and security and authorisation. "Wipro will also be the system integrator for key initiatives across these Philips’ businesses and platforms," it said.
Philips is already is a significant user of offshore outsourcing. In 2007, it signed multi-million pound BPO deal with Infosys, which saw 1,400 staff transfer to the Indian company.
In 2009, it announced a consolidation initiative entitled ‘One Philips, One IT”, which aimed to cut the company’s data centre footprint from around 400, and the number of IT suppliers from around 800 down to 10. That year, German IT services giant T-System took over data centre management and SAP support for the company.
Last year, it initiated a multi-yeae transformation programme entitled Accelerate!, which aims "to signiﬁcantly boost proﬁtable growth by stepping up meaningful innovation and competitiveness, expanding margins, driving productivity and reducing complexity and working capital".
"Philips is transforming itself from a predominantly functional organization to a process-driven end-to-end
collaboration model, embracing business excellence principles such as LEAN," wrote CEO Frans Van Houten in the company’s 2011 annual report. "
The report outlines Philips’ approach to IT sourcing. "Philips is engaged in a continuous drive to create a more
open, standardized and consequently, more cost-effective IT landscape. This is leading to an approach
involving further outsourcing, off-shoring, commoditization and ongoing reduction in the number of IT systems."
In 2011, Philips recorded a 4% sales increase up to €22.6 billion, but swung to a net loss of €1.3 billion.