CXO Challenge

CXO Challenge is a landmark study into the strategies and tools Australian organisations are employing to meet the needs of the digital consumer.

Below we profile the country's most influential technology and business executives and discuss disruptive innovation across key sectors of the Australian economy.

Sending in the drones

Stephen Phillips - Transfield Services

Paris Cowan   |   May 19, 2015

Stephen Phillips

Margins are getting tighter in the industrial services industry, so Transfield Services' Stephen Phillips looks offshore - and to the skies - for the solutions he needs to keep pace.

Phillips concedes the industrial services industry “may be slower than other industries” when it comes to digital innovation.

But this reputation hasn’t stopped the global contractor from tinkering around with a brand new set of drones.

As chief executive of Transfield’s business services wing, Phillips is leading the drone trial and visibly lights up when he talks about the “really cool” scheme.

Transfield has the statewide contract to maintain NSW school buildings. One of the most time-consuming tasks in its remit is sending staff - equipped with loads of safety gear and a specially built protective scaffolding - onto roofs to check the gutters for leaves and other hazards.

Very recently, the company has started testing out whether drones can do the same job outside school hours.

“The trial went really well,” Phillips told iTnews.

“It is an example of a technology that both improves safety and delivers a cost saving.”

Time and cost benefits aside, the drone trial is even more important because it shows that the industrial services sector - driven by cost margin and price wars - can still innovate.

“This industry would not usually be seen as being on the forefront of this sort of stuff,” he said.

“Whether or not the drone trial becomes a large scale application of that technology for us, what matters is that it represents our ability to think in an innovative way.

“These sorts of initiatives get people wondering about how we can make use of new technology and encourages them to innovate more broadly than we might traditionally do in this industry."

Next-generation outsourcing

Transfield Services has a footprint across numerous diverse industries in Australia.

It runs defence bases and offshore detention centres, rolls out telecommunications networks and services oil wells. The company employs roughly 19,000 staff, a figure that doubles when its subcontractors are also counted.

It doesn’t necessarily have a Uber or a Netflix nipping at its heels, but it has been forced to deal with a transforming commercial environment over the past six or seven years. And in many cases the most viable business response has been a digital one.

“Margins in this industry are not high, and that means we have to be able to leverage a lot more than perhaps is the case in other industries,” Phillips said.

Once upon a time, players in the first-generation industrial outsourcing sector could contract on a cost-plus pricing model that allowed providers to guarantee a percentage mark-up on the services they delivered.

But this commercial model has more or less dissipated now and businesses like Transfield are expected by their clients to wear a lot more of the risk if their services run over cost.

“But our clients are also expecting us to continue to deliver value over time,” Phillips said. “And often that continuous improvement comes from deploying technology.”

The upshot is that checking for leaves in the gutters isn’t the only function that Phillips - who oversees all business services including IT plus procurement, HR and equipment assets - is looking at automating.

Already, a number of tasks in the Transfield payroll department have been automated, a trend that Phillips expects will expand.

“Across the board we have seen a shrinking of those transactional roles and no doubt there will be more,” he said.

“There is a lot more automation that we will roll out over the course of this year that again will take a number or those roles out.”

Transfield is also in the midst of the third phase of an outsourcing journey that has already seen many of its core operational IT duties - infrastructure, applications, support desk - sent offshore with key partner Wipro.

“That was driven by a number of considerations: cost, capability, and the ability to leverage a large offshore player in terms of deeper technical capabilities than we had,” Phillips recalled.

“After that we offshored a large amount of our back-end business processes like payroll.

“The third one we are looking at right at the moment is shifting procurement overseas.

“It has not all been smooth sailing - it never is with these sorts of things. But overall we have seen the benefits play out.”

Disrupting the CIO?

How does the offshoring of tech roles affect the CIO role itself?

Phillips denied that the planned slimming of in-house IT had anything to do with the expansion of his remit from chief information officer to the chief executive in charge of the full spectrum of corporate shared services in 2013.

But he does think that a tendency towards shifting IT services to third parties is changing the way particular skills are valued.

He says “there is no doubt” that roles will change.

“When you have more of those activities being done outside the organisation, the focus moves to managing partners in that environment," he told iTnews.

“I am also seeing more investment into specialist areas like security and risk management. Where technologies such as cloud deploy smaller providers and niche providers this raises an issue around the security of that data.

“There is also an increasing focus on the IT people that are dedicated to the needs of the business. Their skills and their ability to orchestrate what we want from the broader industry is increasingly critical.”

Keeping up with customers

Phillips will need to find and retain these new, value-added IT skills if Transfield is to have any hope of staying on top of the digital wave.

He has already finished a rollout of Office 365 across the organisation, and in June expects to see the final deployment in Transfield’s migration to a single consolidated instance of SAP’s ECC6 ERP suite across the organisation.

Transfield’s growing fleet of mobile devices in the hands of its field workers presently numbers “a couple of thousand”. He's also eyeing off adding ruggedised gadgets to the collection for oil and gas workers.

Phillips says beyond the world of profit margins, one of the biggest drivers for innovation inside the company is the need to keep up with increasingly tech savvy clients.

“If we have an oil and gas client who is using augmentation technologies, we’re going to have to be able to use that augmentation as well or we will find ourselves behind the eight ball as far as our customers are concerned," he said.

"If they are technologically advanced in areas we are not embracing, then we run the risk of being exposed to other competitors who are able to do those things.

“Certainly we are not where banking and airlines are in terms of technology, but there is no way we can sit back and assume we can duck for cover as these changes play out.”

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