Author Spencer Johnson may have encouraged business
managers to ask, "Who moved my cheese?" but for Leon Schumacher,
chief information officer at the world's largest steel maker, the
question is more like, "Who continually moves my massive and
complex ERP project?"
The answer is Lakshmi Mittal, who as chief executive of Mittal
Steel has embarked on a rampant acquisition spree to create the
dominant force in the global steel market. In the past two years,
Mittal has bought 10 major steel-making groups and acquired 100,000
new employees around the world.
Schumacher, the sanguine German charged with moving the whole
group onto a standard SAP ERP system, knows he may wake up tomorrow
to find Mittal has bought another company. "I do not think he is
ready to stop any time soon," he said.
The complexity of the IT standardisation programme is daunting.
In Poland alone, Schumacher inherited 50 different ERP systems when
Mittall bought the state steel producer and its subsidiaries in
spring 2004. And of all the IT standardisation projects ERP is the
most complex, because it is so tightly knitted with business
processes, which differ depending on local culture.
By standardising on MySAP, Mittal can cut IT support overheads
and achieve economies of scale in IT purchasing. "You get better
skills and focus more people on the one tool," Schumacher said. The
project also allowed IT skills to be diverted to areas such as
Bosnia or Algeria, where they are lacking, he said.
As well as simplifying and reducing IT support, the project can
also deliver business benefits by allowing the group to manage
resources across ever-larger geographic areas, and make better use
of raw materials and customer demand, Schumacher said.
However, the standardisation mission does not become dogma in
Mittal. Although the company will eventually standardise on MySAP,
if existing ERP systems are functioning adequately they are left in
place, allowing the IT team to focus on systems that urgently need
replacing.
Derek Prior, research director at AMR Research, said these are
very tough decisions to make. "At the end of the day this is about
business. You have to ask: how different are the processes and how
different do they need to be?"
Although standardising on a single ERP system offered global
businesses massive benefits, he said sometimes these were
outweighed by local needs. "Sometimes you have to respect local
cultures and the local way of doing things."
In parallel with ERP standardisation, Mittal is striving to
create consistent business processes throughout its global empire.
"Within 12 months the core processes in SAP will be ready to roll,"
Schumacher said.
Although Schumacher would have liked to roll out SAP with
standard business processes, this was impossible, he said. "We
could not do that because there were so many urgent needs; we could
not wait to complete a template [of business processes]."
Despite these compromises, the standardisation project is
progressing. During 2006, Mittal aims to go live with MySAP across
businesses in Romania, Poland and the Czech Republic, together with
shared back-office services in this region.
Getting business leaders to buy in to new processes is
essential, Schumacher said. "For applications, we do not have IT
projects. You need to have the CFO or CEO involved because it
involves so many changes to how things are done. That needs to come
at the start: in some cases it is easy, in others it is more
difficult and people need to be brought in with a little more
explanation. But without this there is no point."
Schumacher is also firm on what he expects from local IT
managers. "In some countries, in the early days of an acquisition,
trying to address English is an issue. In Poland, at the first
meeting the IT managers came with a translator - they spoke little
and bad English." Soon after he insisted they came without a
translator. "You have to force them to let go," he said.
With a large ERP project, licensing is a challenge. Research by
AMR in September found that 46% of ERP licences are unused, leaving
many users with unnecessary support and maintenance bills. AMR said
companies buying licences upfront were often attracted by volume
discount deals, but sometimes overestimated their requirements and
the impact of economic slowdown.
Although Mittal is growing rapidly through acquisition and has
rationalised its headcount, Schumacher said licensing was under
control. "I do not have that problem, but I can understand that
some people have issues around licensing. If you are decreasing
staff, the way those licences are structured you face a decision to
keep the licence and pay for that, or say you will give up the
licence."
Schumacher would not go in to detail on his deal with SAP, which
allows him to move licences around the world, but said, "We know
exactly what we have and audit that on a regular basis. To me it is
good housekeeping. I have to buy new licences every year and we
have made sure that we will not sit on unused licences."
As if creating an SAP system were not complex enough, Schumacher
is also striving to standardise the supporting architec- ture. "We
have made an analysis, but have not announced a final decision. But
I do not want to run all the IBM, Oracle and MySQL databases. I
have mainframes. Ideally I would not have any, but they are
difficult to get rid of overnight."
Last month, Mittal bought a new business in the Ukraine,
underlining the fact that there may be no end to Schumacher's
mission. "We have started climbing the mountain, but it keeps
getting bigger the higher we climb. I do not get the feeling we are
getting towards the top. There is a lot of work in front of
us."
What makes a successful SAP project?
Derek Prior, research director at AMR Research, identifies three
things the most successful SAP users do to deliver business
benefits. Each of them focuses on the period after the software
goes live:
- Form a global competence centre. You need a team, including IT
professionals and business analysts, who understand the intricacies
of how the software is set up in your company and the business
processes it enables.
- Identify super-users for each location. These need to be
business managers keen to use the software to its full capacity who
also have the respect of their local business peers so they can
spread the message on what the software offers.
- You need ongoing involvement of managers in business processes
so they feel they own these processes.