Case Study: Outsourcing Plays a Vital Role at Texas Instruments
By Paul Harris

The decision to outsource a key element of its corporate learning function was born of necessity at Texas Instruments, the Dallas-based semiconductor manufacturer. The year was 2001, the industry’s fortunes were plummeting, and all fixed costs were on the chopping block at TI.

A downsizing move underway affected professional development courses made available to all employees. The catalogue of instructor-led courses was offered within a training organization that was required to break even each year. Not only was the directive difficult to meet within that climate, but complaints were mounting about higher tuition costs charged to employees who had to fly to the Dallas learning site.

“We needed an outsourcing partner,” says Kathryn Collins, director of worldwide training and organization effectiveness at TI.

But not just any partner. In order for the outsourcing relationship to work, the supplier would have to meet a variety of stipulations. It had to be flexible, willing to work with its client through good times and bad in the volatile semiconductor industry. It would have to provide TI’s full catalog of professional development offerings, and do it across North America at one price. It would have to be course content and instructor agnostic so that the company could continue to provide courses and teachers favored by TI’s techno-savvy population. For all those reasons, the plan to select a partner was named Project Flex.

And there was one other stipulation. “We were not going to pay a management fee. We demanded 100 percent shared risk,” says Collins. That meant the supplier had to recover its costs entirely from the price of the courses.

In the fledgling field of training outsourcing, the absence of a management fee was unheard of at the time, and a non-starter for most suppliers that might have competed for the contract. A cross-functional team within the training department came up with eight criteria to measure suppliers, and put it in a 25-page RFP.

But one supplier did accept the challenge: Elkridge, Maryland-based General Physics Corporation, the 35-year-old operating subsidiary of GP Strategies Corporation. GP is a global provider of training, e-learning, management consulting, and engineering services to organizations in a variety of industries, along with the government sector. Its clients include the Ford Motor Company, the U.S. Army, Agilent Technologies, Cisco Systems, IBM, Perot Systems, United Technologies Corp., and the State of Ohio’s Workforce Development agency.

Why did GP accept the stringent terms when other suppliers would not? “We felt that having a customer like TI, which would gain the training volume following the recovery, was worth it for us,” says Daniel J. Miller, vice president. The pricing model is one of three scenarios employed by the suppliers in its outsourcing relationships, he adds.

GP’s promise of flexibility was tested early. Six months into the relationship, TI’s Professional Development Group received another directive to downsize, reports Russell Priest, director of performance improvement and training at GP and principal liaison with the client. “They needed to slow us down drastically,” he says.

Although open enrollment was curtailed, GP remained on the job, riding out the drought by organizing benchmarking forums from which TI and other GP customers could benefit. GP also began to deliver Intact Work Team training at TI. This opened a new distribution channel and with the open enrollment back on track, GP now delivers both Intact Work Team and open enrollment offerings across TI.

GP’s willingness to support its client during difficult times is now paying dividends as TI’s training needs increase. The outsourcing partner has begun supporting technical education requirements, and has established a subsidiary in France to help meet TI’s growing needs for training throughout Europe, says Priest. It also has been awarded contracts to provide all training at TI’s Attleboro, Massachusetts facility and other U.S. sites.

The outsourcing relationship is in many ways typical of training outsourcing contracts being negotiated today. Namely, it’s entirely transactional in nature. Despite GP’s ability to provide higher level development and strategic planning services, similar to many outsourcing firms, TI engages it purely to manage its catalogue courses. The client doesn’t intend to outsource more strategic areas of its learning function, says Collins.

But she says the arrangement with its outsourcing partner differs from the norm in some ways, including the reason behind its decision to outsource the learning activity. “Our goal here was not to reduce costs,” she says. “It was to have the flexibility and manpower to deliver our catalog programs.” Before TI partnered with GP, it didn’t have professional development catalog offerings, she says. Indeed, training cost investments have actually increased since TI added the capability to deliver a catalog solution across the company, which it lacked in the past, says Collins.

Surprisingly, the technology company has a minimal response to e-learning, the corporate training profession’s hottest craze. “You would think that with all of the high tech people here, we would be e-learning savvy,” says Collins. “But we’re not.” Why? TI engineers prefer to get information via technology, and prefer to learn with their peers in a classroom setting, says Collins. 

Published: August 2004