The Cutting Edge: Computing / Technology / Innovation : CASE STUDY: How technology changed a business : Rockwell Goes Outside for Computer Help : Technology: Its space systems unit will save up to 28%. But about 60 workers lost their jobs.
Rockwell Space Systems got a doozy of a request from the National Aeronautics and Space Administration 18 months ago: Cut maintenance costs for the space shuttle fleet by 20% or risk losing the contract.
The Downey-based division of Rockwell International Corp. decided that one place it could save was on computer costs, which exceed $30 million a year. In a bold step, it decided to buy computing services from an outside firm instead of the corporation’s internal computer department.
The winner was Software Maintenance Specialists Inc., a Santa Ana company with $10 million in annual revenue. It focuses solely on supplying computer processing needs for its 30 corporate customers, which range from restaurant chain owner Denny’s Inc. in Spartanburg, N.C., to clothing maker Esprit in San Francisco.
SMS won the three-year contract by beating Rockwell’s internal cost projections for providing computer services to the space systems division, promising that quality of service would not be sacrificed. It replaced 70 people with 11, taking out layers of managers such as buyers, who did nothing but order equipment.
The losers: an estimated 60 Rockwell employees at the company’s computer center in Seal Beach, who lost their jobs. The human toll makes outsourcing a soul-searching experience for any company contemplating it, said Mike Winder, president of SMS.
“It’s emotional for one group, the one that may lose the jobs and a way of doing business,” Winder said. “It’s a kind of housecleaning for another. It’s a way of relating costs and benefits. The market place is global, but it’s cruel.”
Rockwell’s transition to outsourcing is a case study in how a big company shaved its costs without starting a civil war among its data center employees, who are non-union. For SMS, the $5-million annual contract is a foot in the door at Rockwell and a chance to showcase its cost-cutting prowess.
“Five years ago, outsourcing was viewed by corporate computer managers with great fear,” said Marcia Blumenthal, editor in chief of CIO magazine, a Framingham, Mass.-based periodical aimed at corporate chief information officers. “Now it’s business as usual.”
Rockwell eased the process by requiring the new firm to interview its data center employees and offer them jobs if possible. Before the layoffs, Winder recruited 11 Rockwell employees to work at SMS’ data center in La Mirada.
“Many of them had the impression that the only way we could do it cheaper than them was by running a sweatshop where you work 16 hours a day,” Winder said. “But we surprised them.”
Harvey Schuster, a former Space Systems employee, was one of the lucky ones at Rockwell. He saw the writing on the wall when notices went out in December about anticipated layoffs. He called SMS. By mid-February, he was hired as SMS’ lead manager on Rockwell contract.
Instead of a sweatshop, Bridget Husenan, a systems programmer with nine years of experience at Rockwell, found that under SMS, she had more responsibility to make her own decisions without bureaucratic obstacles. For her, that was a better alternative than being “downsized.”
Now she deals with Rockwell’s Space Systems unit as her customer. She has had to learn more technical jobs so she can pitch in to help others in a crunch. She says shifting from being a specialist to a generalist has tested her skills.
Winder said his company provided comparable pay and benefits to the Rockwell employees it hired. Such moves are often necessary because studies show that computer professionals who move from their parent corporation to the outsourcing company often leave after a short time, Blumenthal said.
SMS saves Rockwell money by spreading the cost of maintaining its data center among 30 different companies, or the other companies that have hired SMS. Michael Nozaki, who heads the project at Rockwell’s Space Systems unit, estimated outsourcing will save 20% to 28% on the division’s computing costs.
Rockwell pays only for the computing functions it uses, not the costs of maintaining a center with several mainframe computers and storage equipment. SMS also pays lower costs for licensing software and computer hardware from vendors by driving harder bargains than Rockwell’s people could.
As IBM and other companies pioneered mainframe computer systems in the 1960s, the functions of computing became concentrated in centralized machines at large companies.
But that trend reversed in the 1980s with inexpensive personal computer networks, which enable computing power to be decentralized. Rockwell has a complicated patchwork of older centralized computers and newer PCs from a variety of vendors. About 500 people manage the system.
Since February, Schuster’s team has been planning how SMS will take over the computer operations. To handle the job, SMS spent $500,000 on new computer equipment, added employees and beefed up its security.
The project got its real test last weekend when Rockwell Space Systems transferred control of its computerized manufacturing processes to SMS’ data center. Winder and others involved described the 107-step process as intense and precise as a countdown to launching a space shuttle.
“I get a real feeling of exhilaration from this conversion,” said Schuster, who spent 23 years at Rockwell.
Essentially, SMS will maintain Rockwell’s owner’s manual for the six space shuttles, or critical information that NASA won’t tolerate falling into the wrong hands. SMS computers hold the space shuttle maintenance records as well as payroll, finance, inventory management and other data.
SMS now controls the flow of information from 16,000 computer storage tapes in the data center to nearly 4,000 personal computers, workstations and larger business computers throughout Rockwell’s space shuttle operations in Florida, Texas and California.
