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Finnish paper and forest products company UPM is working towards having all its IT systems in the cloud by 2020.
Turkka Keskinen, CIO, said the company will be very close to its target in that year, with the exception of business-specific enterprise resource planning (ERP) systems.
Keskinen and his colleagues have put a lot of time and effort into trying to figure out where the world is going, and which way forward is best for UPM. One notable insight is the fact that not all companies can use the cloud in the same way.
“Firstly, it depends on the industry,” he said. “For example, the security aspects are different between the process industry and banking. Secondly, it depends on the maturity of the company, and its ability to implement cloud solutions.”
UPM has already moved many of its IT services to the cloud, but Keskinen expects a challenging journey to full cloud. However, the fact that 80% of the firm’s IT services are already outsourced will make the move smoother, he said. The company uses three main service providers, managed by internal staff.
UPM previously had most of its IT in-house, but began outsourcing after the turn of the millennium. First out were the global datacentres and service desks, and five years ago it was time for infrastructure and operations.
“We then outsourced nearly all applications a year ago,” said Keskinen. “Now we are studying the new opportunities that technology offers, which means we might continue with the same outsourcing partners, switch to new ones, or move to software as a service or hybrid. All options are open. What we will choose depends on quality, scalability and cost. But we are not planning to outsource more or cut employees.”
The decision to outsource was part of a new IT strategy UPM adopted in 2010. “We had a need to scale our IT services up and down,” said Keskinen. “This is critical, since we have different businesses in UPM, and some are growing and some are shrinking. There has also been an enormous cost pressure.”
Before the outsourcing, UPM’s IT department had 750 people. “Today we are 240 employees, focused on leading, steering, architecting and managing,” he said.
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Since the outsourcing began, UPM’s annual revenue has remained steady at about €10bn. “But the company as a whole has become much leaner, down to 21,000 employees,” said Keskinen. “So we have become a lot more productive, and all key performance indicators have become much better.”
UPM’s business areas are: biorefining, energy, raflatac (paper and film laminates), paper Asia, paper Europe and North America, and plywood. “Traditional paper demand is declining by 3% per year in Europe and North America, and that is a lot of business,” said Keskinen. “So we aim to compensate for that by generating new businesses.”
IT’s role in the company is, first and foremost, to help ensure the industrial processes run smoothly, said Keskinen. “We are a process industry with heavy industrial operations, and the processes are critical and complex. An incident can stop the operations, and only a few hours’ break means millions of euros in lost profits.”
Another important task for the IT function is to make sure the different businesses receive tailored IT services, he said. “We make use of economy of scale, so in a sense we are a monolith. But everything we do is serving the businesses’ needs and requests, so we are a monolith with many faces.”
UPM’s IT systems are mostly from SAP, Microsoft, Oracle, IBM and Salesforce. Before Keskinen became CIO, he led a big, global SAP project across the company. He has been at UPM for 25 years, taking eight different roles, mostly in finance and control.
“I have successfully led lots of transformations, and that is probably the reason why I was offered the CIO role five years ago, when our IT was in kind of a crisis,” he said.
UPM’s IT had traditionally been structured in separate units, but is now globalised under one CIO. “IT had been streamlined, with lots of rules and structures, but one thing had been forgotten – the business,” he said.
“IT was driving the business, instead of the business driving IT. And if the people in the company feel IT is not serving their needs, but instead is determining what they do, then there is a problem. So that was my starting point as CIO.”
The first day in his new job, Keskinen carried out a survey, asking UPM’s business employees and the IT organisation what was wrong, and how they felt. “I wanted to see if my personal feeling and understanding was correct or not, and it turned out that people felt the same way I did,” he said. “I got many responses about what was wrong. It revealed that in addition to not being driven by business needs, IT was not transparent or accountable.”
Keskinen created a new IT organisation, with a new structure and a new management team. “We made everything totally transparent, and we adopted a service mindset,” he said. “And we instituted local, accountable people, instead of just service desks.”
The IT teams were also linked to corresponding business teams. “This turned out to be very successful, because it takes two to tango,” said Keskinen. “Now IT gives advice like a medical doctor: we prescribe you a pill to take, but we do not force you to swallow it. When you understand that the medicine is good for you, you are happy to take it.”