Diebold Cancels Outsourcing Contract, Brings Home IT, ERP

In a case of life imitating survey results, Diebold's decision will cost the company about $7 million.

Last spring, Deloitte Consulting released a study noting that 70 percent of large companies had negative experiences with outsourcing and that 25 percent brought outsourcing projects back in-house.

This spring, Deloitte Consulting learned that one of its outsourcing customers -- Diebold Inc. -- will bring its Deloitte outsourcing contract back in-house.

In an announcement Wednesday, Diebold said it will take over the implementation and support responsibilities for its Oracle global enterprise resource planning (ERP) system and some additional IT-related functions on June 1. Diebold said the shift will result in a charge of about 7 cents a share, which calculates out to about $7 million. The original contract was scheduled to last for seven years.

Diebold spokesman Mike Jacobsen said little disruption is expected in the move because the 80 IT employees involved already work at Diebold headquarters in Canton, Ohio. Moreover, most of them worked directly for Diebold until four years ago when Deloitte's affiliate, CD Outsourcing ITO L.P., began the contract.

"These are Diebold employees coming back into the company fold," said Jacobsen, who added that the new situation will enable Diebold to gain more and tighter control over its IT operations.

While outsourcing including offshore outsourcing has grown rapidly in recent years, many U.S. firms have taken the outsourcing operations back in-house, often citing a desire to bring their operations under tighter control.

Jacobsen said Diebold has a small offshore outsourcing software operation in India and that unit won't be affected by Wednesday's announcement.

"Regaining direct control of our IT operations and ERP implementation will allow us to expedite the process of realizing the long-term benefits of an enterprise-wide information system," said Thomas W. Swidarski, Diebold president and chief executive officer, in a statement. "This strategic decision is critical to achieving the operational improvement targets we have set."

The firm said the decision to bring the IT operation back in-house is also designed to accelerate its ERP deployment.