Information Technology Outsourcing at BBC

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 .

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).

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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        Case Code   ITSY051
   Case Length    13 Pages
              Period    2000-2005
 Organization     BBC
        Pub Date     2005
Teaching Note    Not Available
     Countries    UK
      Industry    Media/Broadcasting

Issues

The case is designed to help students to:

• Understand the rationale behind broadcasters outsourcing their technology requirements.

• Study and analyze the problems that the company could face while outsourcing.

• Understand the selection procedure that companies adopt to choose the technology service providers.

• Study the role of Chief Technology Officer in an organization in devising and implementing IT outsourcing contracts.

• Critically examine the strategic impact of outsourcing IT requirements in the organization.

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.

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.