What is Nissan's IT environment and what direction have you set for it? Let me give you a little bit of history. About six years ago, Nissan as part of its survival activities, outsourced IT within North America to IBM. I came on board, approaching a year and half ago, and looked at where we stood with that agreement and analyzed it. The world has changed pretty substantially since the original outsourcing was done, both in terms of the competitiveness of the outsourcing marketplace and the increased use of offshore vendors. We had a lot of discussion internally and with Renault Nissan Purchasing Organization (RNPO). [Nissan has an alliance with Renault.] The RNPO organization was set up to leverage the combined purchasing power of both entities.
Regarding the IBM agreement, what did you like and not like about it? When I looked at the agreement and assessed how we were operating in relation to our strategies that were emerging and where we wanted to be from a purchasing strategy perspective, looking at multi-vendor sourcing really seemed to make sense for us. So the way we went about doing that was to take what was a sole-source agreement for both infrastructure and application maintenance and enhancement services and break it apart and put it to bid. We bid separately -- the application maintenance and enhancement activity, as well as the infrastructure activities. We were happy with the services from IBM but the world had changed.
IBM presented a very compelling infrastructure proposal, both from a financial perspective as well as from a risk mitigation perspective, given the amount of change and transformation activity that was needed within the physical infrastructure. On the application and maintenance side, Satyam essentially did the same thing. There were several Indian vendors bidding along with IBM, and Satyam just came in and just won the deal. They did a great job.
What is attractive about multi-sourcing? Did you have any reservations about taking this approach? We did. One of the things that also took place with the original outsourcing to IBM was we probably outsourced too much. I think this is something that goes back and forth within the IT world when you're outsourcing: how much? We had outsourced a lot of the business analysis activity, the program management activity and the application and infrastructure architecture activities in addition to the physical execution. We decided to bring those back internal, so we're going though a fairly large hiring effort at the moment in order to do that. One of the risks that we looked at was in breaking up the services that we buy -- going from a sole source to a multi-source environment. And should we have been trying to, let's say within the application maintenance and enhancement space, have two competing vendors. We decided that when you actually looked at the applications portfolio and at the emerging capability of our internal organization, that was a risky approach versus the amount of incremental savings that we might obtain. So we decided to go just with the infrastructure contract and an applications contract.
What's involved with bringing those IT functions back in house? First off, it's a lot of hiring, which in and of itself is a fairly significant effort. Nissan has made a decision as well to move its corporate headquarters from L.A. to the Nashville area, so I have to go through a large hiring process anyway since a significant percentage of the [workforce] is choosing not to move. There is massive hiring and there is significant training and that training has to take place also in the context of moving these applications offshore, so there is fairly significant activities associated with knowledge transfer from the existing IBM staff as the knowledge is transferred both to Nissan personnel as well as Satayam personnel.