The
merger boom of recent years and the trend towards globalisation
of business has been driven in part by the efficiencies that can be
gained from standardising IT and business processes across
worldwide operations.
However, in the same week that Computer Weekly reported that the
retail operation of
oil company BP expects to save up to £600m by standardising
processes at petrol stations around the world, news emerged
that one of the world's most ambitious enterprise resource planning
(ERP) standardisation programmes had been dropped.
The £45bn steel company Arcelor Mittal, created out of the
merger of Mittal Steel and Arcelor last year, has decided that
plans to create
global standards in ERP and business processes are too complex
to deliver savings and enable growth.
Before the merger, Mittal had been attempting to standardise
hundreds of ERP iterations onto a single instance of MySAP.
In Poland alone, the group inherited 50 different ERP systems
when it bought the state steel producer, and with similar
acquisitions in locations including Kazakhstan, South America and
the US, the company faced a mammoth task.
Arcelor Mittal group CIO Patrick Vandenberghe, told Computer
Weekly, "The strategy was, 'let's build one unique template and
everywhere we acquire a company, whether in Mexico or in India, we
will deploy, top-down, our standard set of processes'."
Business segmentation
However, after the merger with Arcelor, which had well
established
SAP systems of its own, the business decided that a global ERP
approach would pose too many problems.
Instead, the company aims to standardise processes and ERP in 10
business segments defined by regional and market alignment - each
one a multi-billion pound business.
Arcelor Mittal's experience offers lessons for other
organisations trying to reap the benefits of standardisation,
whether on a global or national level.
Although the project, codenamed Garuda, was approved by
high-level managers, it struggled to find sponsorship and ownership
across the business, said Vandenberghe.
"The day you standardise above business ownership you have a
problem, because you do not find sponsors any more and
standardisation becomes a burden, not a business enabler," he
said.
"It becomes a blocking factor for business progress and
performance improvement, because you kill innovation and
entrepreneurship.
"What we want to do is standardise at segment level because
there we have business ownership of budgets and business processes,
and these businesses need to be sure that they can define the speed
of process standardisation and SAP system deployment."
Vandenberghe said it was best to drive process and ERP
standardisation at the level at which the business managed profit
and loss. "The segment level is the level where we drive profit and
loss: sales and marketing processes, supply chain processes and so
on," he said.
Gartner research director Andrew Hughes said most large
businesses that have grown by acquisition choose to tolerate more
than one set of ERP and business processes. "A single instance of
ERP is a bit of a rarity. It is not that Oracle and SAP are not
capable of building one, it is the variety of business processes
that are a stumbling block," he said.
More pressing needs
Jane Barrett, research director at AMR Research, said that
because any attempt at business process and ERP standardisation in
a multinational would inevitably be a long-term project, it was
often overtaken by a more pressing need to improve the supply
chain.
"When you globalise, you need horizontal and vertical
integration. It would be wonderful to get SAP to do all of that,
but companies need to look at points of pain, and look at where
they can get the most bang for the buck spent on core business
processes," she said.
Barrett said large firms were using business intelligence
systems and service oriented architectures to work around their use
of different ERP systems in situations where the pain of
standardisation was not worth the reward. Another approach to
standardising processes was to use business metrics, she said.
Barrett also pointed out that some sectors, such as finance,
find it easier than others to standardise their processes. "It is
easier if you have not got a physical supply chain do deal with. If
you have to deal with the ocean freight system, it can be very
complex," she said.
Divided IT organisation
Within each segment of Arcelor Mittal there will be a huge
effort to standardise processes and supporting ERP. The group has
divided its £355m IT organisation into demand and supply
divisions.
The demand slide is governed by CIOs within business segments.
Here, processes are defined and supported by IT according to
business need.
Alongside this, the supply side of IT is being managed at a
group level. The company is striving to standardise its IT
infrastructure, with projects to create a global wide area network,
PC-build and server policy, in a bid to control support costs.
It is also standardising its e-mail systems onto a single
Microsoft Active Directory from 260 mail hubs on a variety of IBM,
Microsoft and Lotus technology.
Although the steel company is allowing different ERP systems to
be used according to the requirements of demand-side business
processes, it is developing seven SAP competency centres.
The approach will not only allow the group to make the best of
its SAP skills, but means the business could clone large chunks of
its SAP configuration, allowing different segments to use some of
the same processes.
Arcelor Mittal's approach amounts to finding a "middle way" in
creating global process and technology standards, said
Vandenberghe. "Each of the 10 segments is quite big and complex.
But we think we have found the right level," he said.
Mittal scraps global standardisation plan >>
Tony Collins'
IT projects blog >>
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