Abstract
The case gives a detailed account of the sale of BBC Technology Limited,
the technology division of British Broadcasting Corporation (BBC) to
Siemens Business Services (SBS) and Information Technology (IT)
outsourcing contract between BBC and SBS. The case puts forth the
reasons that prompted the broadcasting giant to sell its technology
division and the benefits that could accrue to it as a result of the
sell-off. It focuses on the obstacles that BBC faced in outsourcing and
also gives the details of the contract. The case also describes the
selection process adopted by BBC to choose its technology provider. |
“The value and substantial savings created from the sale of BBC Technology
(division) and this procurement of our technology services is a significant
step for us in ensuring the BBC is fit for the future and continues to
create innovative programmes.”
- John Smith, Chief Operating Officer, BBC (British
Broadcasting Corporation) in 2004.
“In the medium term it (selling the IT unit) is
equivalent to selling the BBC’s nervous system to someone who can then sell it
back and charge what they like.”
- A Spokesperson of Broadcasting Entertainment Cinematograph
and Theatre Union (BECTU) in 2004 .
INTRODUCTION
On October 01, 2004, the UK-based broadcaster BBC signed an IT outsourcing
contract with Siemens Business Services (SBS) , a subsidiary of the
Germany-based Siemens AG (Refer Exhibit I for details about Siemens AG).
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The contract was one of its kind in the media industry and
was one of the largest secured by Siemens in the UK. Under the terms of the
contract, SBS acquired BBC Technology Limited (BBCTL), the commercial IT
subsidiary of BBC and planned to sell IT services to BBC for the next ten years
for £1.9 billion (2.7 billion euros).
BBCTL provided IT, broadcast systems and
telecom services to the BBC channels and other channels like ESPN and had around
1,400 employees. BBCTL was renamed Siemens Business Services Media Holdings and
all the employees were transferred to the new entity.
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The contract was signed after an intensive review of the
benefits that could accrue to BBC. The BBC expected to save around £30m per year
during the contractual period of ten years. According to John Varney (Varney),
Chief Technology Officer (CTO) of BBC, “These potential savings were so high
that we couldn’t ignore it, we had to take it very seriously.” However, BECTU
and some high cadre technology division employees opposed the deal saying that
it would result in a number of job losses and also questioned the ability of SBS
to provide high quality IT services throughout the ten year contract period.
According to a member of BECTU, “We don’t want to be swallowed up by a big IT
company like IBM or EDS.”
On October 18, 1922, a group of British and American electrical companies doing
business in the UK combined to form the British Broadcasting Company Limited, to
provide radio transmission services.The first program was aired on November 14,
1922. The company’s role was defined as “to bring the best of everything to the
greatest number of homes.” By 1926, around 2.25 million licenses to own radios
were issued and by 1938 the number increased to 8.5 million, covering around 98%
of Britain’s population.
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| Keywords
British Broadcasting Corporation, Siemens Business Services, IT
Outsourcing, IT Vendor Selection, Evaluating IT Vendors, BBC’s
Technology Framework Contract, Technology Innovations, Economies of
Scale, Outsourcing Media Contracts, Media Lifecycle Management, Content
Management Solutions, Technical Services Agreement and British
Broadcasting Corporation. |