This is the latest in a series of blogs in which PAC looks at key end user accounts and analyses the dynamics likely to drive future SITS investment.
Overview: Competitive and economic headwinds are starting to bite at Vestas, the Denmark-based wind turbine manufacturer.
The company relinquished its place as the sector’s top player to a resurgent GE in 2012, and revealed this week that it made a net loss of €963m on sales of €7.2bn last year.
The company’s CEO Ditlev Engel has insisted that there will be no major reduction to the company’s 16,000-strong workforce this year, but some big cost-cutting initiatives are expected including the disposal of some manufacturing plants, and an increasingly aggressive approach to outsourcing.
Current SITS Providers: The company has a 600-strong internal it organization called Vestas IT. Around 150 of this number are based at a captive center in the Philippines, which provides service desk, and SAP development and support services. The company’s use of external IT services partners has been limited to date.
Vestas is a major SAP user, having undertaken a global implementation in 2008, including ERP, HR, CRM and the Netweaver Portal. The company has invested in opening up access to SAP to field technicians through mobile devices. It also uses software from Infor to support its manufacturing operations, and Microsoft as its main office automation platform. In 2011, it announced a tie-up with IBM to use its “Big Data” analytics software and hardware systems to help its customers improve wind turbine efficiency.
IT Leadership Team: Vestas’ IT team is led by Torben Bonde, who has been with the company since 2004, when Vestas acquired his former company NEG Micon. Prior to that, he had a stint as an SAP Consultant at Deloitte. Bonde reports into Vestas CFO Dag Andresen. IT vendor relations are managed by Henrik Stefansen, while Vestas’ global IT sourcing strategy is led by Lasse Schmidt.
Future SITS Investment Areas: The company stated in its annual report that it will “increase the use of outsourcing” in 2013 as part of its drive to take some €400m of cost out of the business this year. While this statement did not refer explicitly to IT, Vestas may choose to follow the route set by a growing number of Nordic manufacturers in deciding that a specialist third party provider can bring greater efficiency to the table, while transferring assets of its balance sheet.
A good example is Swedish hi-tech engineering group Sandvik, which last year entered into a $250m deal with IBM which saw it transfer a large part of its internal data center and workplace management team. Other examples include Astra Zeneca, Nokia, Wartsila and Whirlpool.
Vestas’ venture in the Philippines has proved successful as way to drive centralization of IT support functions, while leveraging the benefits of lower labor costs. However, offshore centers become increasingly difficult to manage as the local skills market heats up and it becomes challenging to recruit and retain the best people.
Vestas is focusing its growth efforts on new markets such as Mexico, South Africa, Peru and Chile. The company will need to ensure that its applications and infrastructure backbone has the flexibility and agility to support future forays into these and other markets.