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The Cost Benefit Of Centers Of Excellence

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Donagh Herlihy | CIO | Avon

The biggest part of an IT budget that I typically am in charge of is going to be the people cost. Typically, people may be somewhere around half of the IT-related costs. Taking the benefit of being a global company, what we like to do is build what we call a center of excellence. Whether it's around an infrastructure or around a business applications area, we create a center of excellence that's a global team. Typically they are located in two, three, or four locations around the globe, but they're one team. If I give an example, it would be, say, we're implementing a lot of Web technologies. We have a Web center of excellence. They're responsible for building, operating, and enhancing those Web platforms. We would locate those people in Asia, in Europe, and in the Americas. What we're looking to do with the center of excellence is two things, as it relates to cost. One is eliminate or minimize the need for expensive external consulting. By definition, if you hire and develop really strong people in a particular area of technology, you need to spend less of your dollars on bringing in consultants to work your people to help them get the work done. That's one piece of the cost side of the center of excellence puzzle. The other piece is leveraging the fact that we're global. If I take people—in our case, in New York, Malaysia, China, India, Russia, and in the U.K., places where we typically have our major IT locations—and I have a team that's spread geographically like that, I can do a couple of things. I can stay close to the business in their time zones. We can and do follow the sun coverage as it relates to supporting the seven by 24-hour operation. We can also leverage the different wage rates around the world. What we get is a blended cost that's actually a significant saving versus having everybody in the U.S. or having everybody in the U.K. The other perspective is not as easy to measure, but it is cost related. The center of excellence is a learning organization. So it’s Avon people who work on an implementation or work on an initiative. They carry that knowledge and that information forward to the next initiative, and to the next country if you're rolling something out country by country. You just get faster and you just get better at doing it. If you can do it faster and you can do it better, you can do it cheaper. With the consulting firms, or even with the offshoring outsourcing partners, it’s difficult to keep the same people on the engagement if it's a multi-year program. The other issue we have found, and I would typically find them building a center of excellence, is—it's kind of hinted at in the term, but it is more central. That means in an organization like ours, where we have 60 IT groups around the world, some of the work has to flow from the country level and move into these hubs, or these centers. If you try and build a center of excellence model that doesn't move work, I think you actually duplicate costs as opposed to become leaner and take costs out. There are some organizational challenges as you move people to the centers, and in some cases, have to make decisions as to how you redeploy people that need to be thought through.

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