We have outsourced all our telecom infrastructure and services

Alex Pilar joined DHL in Prague in 1991, where he held different positions
until 1996 when he became the managing director of DHL Express Czech Republic.
In May 2001 Pilar was appointed IS director for the Europe, Africa and the
Middle East region based in London. Two years later, he became the global
program director responsible for IT integration across the combined companies of
DHL. This also included establishment and consequently, management of the IT
center in Prague, which forms part of DHLs global IT infrastructure. And with
over 1,000 employees, it provides IT services to DHL entities globally. In
September 1, 2006, Pilar took over the role of executive vice president in the
IT global business services division of Deutsche Post DHL based in Bonn, which
he held till his appointment as the CIO, DHL Supply Chain in June last year.

How is DHL structured and how is IT managed across its group companies?

DHL Worldwide consists of four divisionsDHL Supply Chain, DHL Express (CIO,
Ralf Schweighfer), DHL Forwarding (CIO, Martin Lattka) and Deutsche Post. All
the division CIOs report to the IT board headed by the CFO. We all come together
and discuss the issues and challenges and ways to resolve them.

You are an exceptional case of a CEO becoming a CIO. You were the head of
DHL Express Czech Republic and then took up the role of CIO of DHL Supply Chain.
Can you please elaborate?

Yes, I have been switching between business and IT. It is probably not
common, but it is not totally unusual. We do try to move people around. DHL has
a tradition of moving people around jobs and functions. I personally had a
background of both tech and business. It was more natural when I was moving from
the role of managing director at DHL Express Czech Republic to my current role
of CIO, DHL Supply Chain.

Can you share the IT transformation journey at DHL and at DHL Supply
Chain?

We started IT transformations in the individual groups before DHL was
acquired by Deutsche Post. The group has grown through acquisitions and this has
added to the complexity and changing landscape overnight. But our strategy has
been clear and stable for the last seven years, and it was aimed at optimization
and transformation. They have built an internal IT company called DHL IT
Services (DHL ITSC) which we are using to consolidate and optimize
infrastructure, hosting, and application support. This has been going on for
about six years. I was privileged to build an IT center in a nearshore location
in Prague which has 1,000 people and is one of the two key IT services
locations. Apart from Prague, we have one in Cyberjaya which is in Malaysias
Multimedia Super Corridor (MSC) and has around 1,200 people. This is how the
group is optimizing and consolidating the hosting, infrastructure, telecom,
application support, and help desk. This is an ongoing activity and is very
significant.

What we are also doing at the group level is taking all this to the next
level. For example, over the last twelve months we have outsourced all our
telecom infrastructure and services globally to different vendors. We have split
that activity in regions. In North America, AT&T is our partner and in Europe it
is Telefonica. The reason for this was that we thought we could optimize within
the group to a certain level and get a lot of savings from that consolidation,
but there is a limit to which this can be done within the organization. The next
logical step is to outsource and that is exactly what we did when it came to
telecom infrastructure. We intend to save between 20-30%. Our savings from
telecom outsourcing in Europe for five years will be to the tune of Euro 150 mn.

Why did you decide not to outsource IT and only telecom?

Telecom was the most logical decision to outsource. But when it comes to
hosting, we are very confident and continue to consolidate and optimize the
existing infrastructure and we will continue to do that. We also use T- Systems
as a strategic partner in Germany and in some places in Europe. We will continue
doing that in-house at captive locations for some more time. We are also scaling
up in terms of application support and application management. That is where we
are starting to see initiativesmore division specific because supply chain
would have different applications from other divisions.

How difficult is it to align IT to the unique supply chain requirements?

It is a continuous process because business is evolving and constantly
changing. Our guiding principles for making that right is to first of all listen
to our customers and understand what their expectations are. We believe that our
strong advantage against the competitors is global experience and knowledge from
various implementations in warehouse and supply chain. We are trying to design
and optimize in the true sense to best in class business processes, which have
been developed over time with our experience around the globe.

What was the impact of the slowdown on IT budgets?

It was a positive impact as we managed to reduce costs. We spent most of
last year on ensuring that cost of everything was just right in light of the
prevailing situation. More importantly, we were able to redirect our spend and
capacity into innovation and development of the new product. So, we were not
only getting the cost out but were saving on infrastructure and telecom as well.
As a part of that we redirected some of the savings into high value activities
like application development.

Sudesh Prasad

sudeshp@cybermedia.co.in