IT key to cost cutting at Diageo

Diageo is restructuring to slash $100 million (£62 million) from its fixed costs, and IT is playing a big role in this by enabling lean processes.

“We have driven a huge cultural shift and made change happen, eliminating non-value projects through Six Sigma, and getting value from other projects,” Brian Franz, CIO at the drinks giant, which owns Guinness, Baileys, Red Stripe and other brands, told delegates at the Forrester IT Forum in Berlin.

Franz outlined some of the ways that the IT department has helped drive down costs at Diageo. Firstly, the drinks firm is investing in its supply chain, to provide a competitive advantage now and over the next ten years.

As part of the global restructure, Diageo is in talks with its vendors and suppliers to renegotiate service level agreements in order to cut costs without impacting the user experience. Diageo is also consolidating its service desks around the world.

The global beverage firms, which operates in 180 countries, outsources 70 percent of its architecture to four main suppliers: CSC, IBM, Accenture and Verizon.

“Now is the time to test the business models behind our outsourcing models,” said Franz.

“Having a lean approach is one of the key ingredients for successful change.”

“The world has changed around us, we want to pay less, and drive more value from it. We are not going to save our way without vendors. We have to do it differently, and deliver end user services in a different way than we do today, so we can consolidate service desks around the world.”

Franz advised CIOs to be transparent with vendors about cost cutting strategies. "I've not met one vendor that isn't committed to help us drive costs out, because that is going to preserve us as a client."

He described Diageo's IT operation as a “global change agent” that works with every part of the business, and business leaders, to deliver the right service and to demonstrate the value of technology to help improve business processes.

“CIOs should be part of the overall solution strategy. This is what gets us that seat at the table. Ruthlessly focus on delivering tangibles to your CEO. Deliver tangible outcomes, grow margins and sales in key markets, preserve value and build credibility through execution,” said Franz.

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