Mittal scraps global standardisation plan

Steel giant finds business is too complex for single SAP system

The world's largest steel company has abandoned a project to standardise business processes and consolidate on a single ERP system worldwide, on the grounds that it would increase, rather than cut, complexity.

The project was designed to improve control across the firm's expanding business.

Mittal Steel, which merged with rival Arcelor last year to create Arcelor Mittal, had been working on a mammoth project to develop core business processes supported by a standard SAP system for deployment across the world.

But the enlarged firm has rethought its plans and will instead standardise business processes and SAP systems in each of 10 business segments, determined by market and geography.

"We have dropped the idea of having one process model at group level because it was too complex and there was too high a diversity in business models and intrinsic complexity in the different segments," said Patrick Vandenberghe, group CIO at Arcelor Mittal.

"A segment that produces long steel for constructing is a very different business from one producing flat steel for automotive construction."

Vandenberghe said the group, which has an IT operation with an annual budget of £355m and 4,000 staff, would manage IT process standards between segments by maintaining seven global SAP competency centres to share experience and develop some shared resources and application features across the company.

Andrew Hughes, research director at analyst firm Gartner, said that, with big mergers such as Mittal and Arcelor's, both sides were likely to have a reasonable ERP policy in place, and taking a cautious, flexible approach to any integration plan was crucial.

"The rule is, don't rush into changing it if it works already," he said.

Jane Barrett, research director at AMR Research, said being able to standardise on SAP, as Arcelor Mittal had planned, was a rarity in industrial manufacturing, but it was a more realistic proposition in other sectors.

"Some big consumer products firms or chemicals companies have achieved it, but companies such as Arcelor Mittal, which grow through acquisition, change their structure as they go along and are rarely able to put in a single instance of SAP because it takes too long. The managing value chain overtakes the advantage of having a single system," she said.

Vandenberghe said Arcelor Mittal's goal was to buy the entire supply chain for steel manufacturing, from raw materials to finished products, but these processes could not always be integrated.

"In ERP, a lot is down to what business process is central to the business, and manufacturing is going to be different from mining," he said.

Vandenberghe said that IT to support the management of the business away from the supply chain was still on course to be centralised.

He said all the IT infrastructure, including networks, datacentres, mail systems and desktops, would in time be standardised and managed on a global basis and at group level.

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