1、IT StrategyFebruary 24,2000Case Study of a Recent Client ExperienceRob Trollinger,Principal,DallasChris Wisler,Manager,AlexandriaKimberly Brown,Associate,Alexandria.Todays discussion uBackground of CompanyuCompany IT OverviewuCause for ActionuIT Strategy ApproachuApplication ArchitectureuTechnical A
2、rchitectureuEstablish the IT Program OfficeuOrganizational Effectiveness and IT AlignmentuSummary.Background of company.uBegan in 1909 as a partnership between an innovative chemist and a businessmanuPioneering work in leather tanning uBest known for expertise in acrylic chemistry uEssential compone
3、nt to detergents,diapers,cell phones,industrial coatings,and more u50 manufacturing,research,and technical facilities worldwide uSales in 100 countries,totaling$4 billion annuallyCompany ACompany BCompany A announced their intended merger with Company B in 1999u1848,founding uLargest and most recogn
4、ized business for a particular consumer productuMajor supplier of basic inorganic chemicals derived from saltuEssential ingredients in CDs,newspapers,magnetic tapes,sports equipment,and moreu36 mining and processing facilities,68 chemical manufacturing,research,and technical facilities worldwideuSal
5、es total$2.5 billion annually.Drive the short-term value Exceed the markets expectationsIntegrate the Organizations as Seamlessly as PossibleuDevelop and communicate a shared strategic agenda uDefine organization structures,key business processes and technology platform/architectureuSelect leaders a
6、nd staff positionsuDevelop metrics and budgetsuIntegrate the business Integrate day-to-day operations Position for the future growthAchieve Business Value Goals as Quickly as PossibleuAchieve$200 million of savings within 12-18 months(running rate by 2001)Ensure customer retention Corporate Center r
7、ationalization Administrative overhead reduction Sourcing/Procurement savings Product line and operations rationalization Manufacturing productivity and supply chain improvements Reduction in technology costs The focus of the integration was to quickly achieve operational synergies while combining t
8、he organizations to support top line revenue growthA.T.Kearney was asked to structure,drive and manage the entire integration process for what would become one of the largest specialty chemical companies.Latin America and Asia-Pacific Region Operations:10%of sales20 manufacturing facilities10 distri
9、bution sitesNorth American Region Operations60%of sales60 manufacturing facilities230 distribution sites(1)While the potential source of the synergies were somewhat clear,smooth and timely integration of the two companies was less assuredChallengesuSome manufacturing processes and technologies were
10、incompatible between the two companiesuCombining two companies with both direct product overlap uAcquiring company was more of a“intermediates producer”and the acquired company was more of a“formulator”uSignificant facilities consolidation opportunitiesuDistribution consolidation and improvement req
11、uired changing the business model and the mindsetStandard lead timesStandard service levelsuSignificant customer overlapuSignificant EH&S issues needed to be addressed,competing away scarce capital resourcesEuropean Region Operations:30%of sales40 manufacturing facilities60 distribution sites.After
12、an accelerated integration program,the merger was deemed a success by the CEO as well as the analyst communityu“By the end of 3Q,the new company had achieved cost reductions of$100MM on an annualized basis,three months ahead of schedule.”Morgan Stanley Dean Witteru“Already,the company has achieved a
13、$100MM annual run rate in cost savings ahead of schedule”Janney Montgomery Scottu“The integration process is running smoothly and in fact better than expected achieving a$100 MM lower run rate”J.P.Morgan Securitiesu“The integration efforts continue to track ahead of plan”Deutsche Banc Alex Brownu“Co
14、nsidering the steep increase in raw material costs,the new company was able to meet expectations with its rapid integration of the acquired companys operations”Brown Brothers Harriman .PerspectiveExternal FocusInternal FocusIncrementalTransformingValue Creation(P/E Ratio)New Business ModelNew Segmen
15、tsNew TechnologiesAcquisitionsShare GainTechnology ImprovementGeographic ExpansionPortfolio ManagementWork RedesignSupply ChainOperating Excellence2-3%Sales Growth4-5%Sales Growth6-8%Sales GrowthFollowing the integration,the CEOs Agenda is to double the rate of growth while maintaining high levels o
16、f profitabilityCost improvement,customer service and retention and e-business have been identified as key areas of focus.uRapid assimilation of acquisitions with limited additional financial staffuGlobal shared servicesuIT provides a strategic advantage in support of growth initiativesTarget Capabil
17、itiesuGlobal processes and metricsuInterim information on sales,profitability and cost of operationuAutomation of routine processes and transactionsuFinancial staff is aligned with the businessuContinuous launch of service offerings that cannot be easily matched by competitorsuQuality built into an
18、automated processes uHumans manage the relationship not transactionsuIntegrated supply chain network(S&OP process)across multiple enterprisesuInventory commitment using production,sales and balancesuAbility to reach customers globally without a local presenceGrowth/AgilityStrategic ImperativeCost Im
19、provementCustomer Service&Retentione-BusinessNewCos business strategy will place additional demands on the entire organization.Company IT Overview.Finance/Back OfficeDemand PlanningSupply Chain&Customer ServiceHuman ResourcesClient/Server(Windows NT or Unix)High-level ProcessesIntegratorSAPISGeneral
20、 LedgerOrder History(Focus DB)Transportation ManagementRailmaxManufacturingPlanningTransport SafetyOrderingTeserac(HR)InfiniumHRFinancial ReportingOther HR/Payroll SystemsManufacturingQuality SystemsCurrent transactional systems are complex,reside on multiple platforms and are integrated through a n
21、etwork of interfacesAS/400Mainframe.Intrinsic manual processes result in a high cost effort that cannot support the speed of todays e-business environmentGrowth/AgilityStrategic ImperativeuLack of automation prohibits additional workforce leverageuSystems are running out of physical capacityuIncreme
22、ntal improvement mindset limits strategic developmentObserved Key ThemeCost ImprovementCustomer Service and Retentione-BusinessuFocus is on reconciling balances and correcting errors and not root cause error preventionuProcesses(especially billing)are manually intensiveuGlobal processes are desirabl
23、e but difficult to implement consistently uTransaction systems are becoming increasingly difficult to maintainuSpecial customer requirements and services(e.g.SOMI)are implemented but at a relatively high cost uInspection of errors protects/masks the customer from errors inherent in the systemuManual
24、 intervention presents a barrieruBusiness information is not easily assimilateduQuality of global customer information is suspect.Roughly 72%of the IT budget is spent on maintaining current service levels and infrastructureTo maximize business value,we need to shift the spending from maintenance to
25、business development and long term IT support and infrastructurePercent of IT Spending by CategoryIT Support&Infrastructure2%Maintenance72%Business Development19%Non-discretionary7%.FunctionsCurrentLimited Point Source SolutionsPoint Source Best of Breed SuiteorLegacy SystemsProposedA future vision
26、of the enterprise architecture must seamlessly and efficiently integrate core business processes in an e-business environmentEvolving Strategy:AIM,MicrosoftIBM AS/400,NT,?CompaqCompaqDigital,IP,ExchangeSAPJDEPeopleSoftStandardized,Low Cost,Mixed after mergerOracleProcesses of Strategic Value and Com
27、petitive AdvantageOperations and Transaction Processes(Low Cost)InfrastructureData,MiddlewarePlanningISMOptimizationCRMHR/PayrollMainframeMid-range,Client/ServerDesktopsLaptopsVoice/Data,Networks,EmailApp.InterfaceData Mgmt Customer Facing e-Business SolutionsPRISM/Supply Chain SystemsProcurement Lo
28、gisticsManufacturing Operations Order Billing A/R A/P G/L ReportingMiddleware.Cause for Action.Information Technology StrategyuExploitation of current product&customer base through geographic expansion,new services&cross sellinguExtension of the traditional supply chain beyond current customer and s
29、upplier baseuFormation of partnerships and alliancesuAdoption of new value chain models exploiting todays technologyuGlobal management and measurement processesuContinuous cost improvementPossible Business Unit ResponseAcquisitionsShared ServicesGlobalizatione-BusinessContinued industry consolidatio
30、nSupply Chain Value NetsBusiness Model RevolutionPace of Technology ChangeKey Business Change DriversInformation technology must reinvent itself to develop capabilities that deliver substantial business value at the pace of todays business environmentAlign and SupportAn updated IT strategy is necess
31、ary to align the organization and its service offerings to business unit requirements and operating models.Corporate AgendaIT Strategy Alignment68%Revenue Growth11%Return on Net AssetsuAssume leadership role in design&implementation of customer enabled processes to promote scalabilityuLeverage e-bus
32、iness technologiesuDevelop data mining techniques to leverage customer information leading to increased sales uInstitute a program management approachProfitable&Sustainable GrowthOperational ExcellencePost-Merger IntegrationuContinuous design of new processes and service offerings to promote custome
33、r intimacy and service excellenceuImplement low cost high availability infrastructureuSimplify company and customer compliance with regulationsuContinue migration to Company As applicationsuRapid deployment of new processes and technologies to enable cost initiatives uRapid application development a
34、nd deploymentE-business strategyCorporate ObjectivesLinking the strategy to the CEO agenda reinforces ITs commitment to be a high value service partner.Business StrategyIT StrategyBusiness MissionScopeCompetenciesGovernanceIT MissionArchitectureCompetenciesGovernanceAlignmentuAlign the IT organizati
35、on to meet business unit requirements of the new CompanyuDevelop and communicate the application and technical architecture directionuReplace the current technical“roadmap”with a comprehensive and specific deployment flight plan depicting timing for replacing applications and technologies and implem
36、enting process/service changes uImplement a program management process to determine IT investment priorities&set IT directionThe IT strategy aligns with business strategies to define matching priorities,complementary capabilities,and compatible organization dynamics IT Strategy Outcomes.IT Strategy
37、Approach.The IT Strategy is comprised of an IT vision,strategy and deployment plan that will enable rapid delivery of cost effective IT products and servicesGap to CloseCompe-tenciesArchi-tectureGover-nanceIT-Future StateCompe-tenciesArchi-tectureGover-nanceDeployment PlanCompe-tenciesArchi-tectureG
38、over-nanceBusiness StrategyStrategy Development ProcessIT Strategy DeliverableSynthesesIT StrategyIT VisionCore CompetenciesApplication&Tech.Architecture DirectionSelf Funding Investment PlanGovernance ProcessesDeployment Strategy and TimingFilter/PrioritizeuCorporate StrategyuBusiness Unit Strategi
39、esuBoundaries from Executive CouncilA new CIO was brought in to champion the effort while becoming the IT Change AgentIT-Current State.A set of guiding principles will allow us to“rethink”the current way of doing business as we progress our strategy development processuThe applications and technical
40、 infrastructure must be aligned with business strategies and create substantial shareholder valueIT will focus its energy on competencies that are results driven and add significant business valueOur goal should be to deliver project results in half the time and half the cost(time to market is essen
41、tial)IT budget will be owned and driven by the business for discretionary projectsuThe organization will adopt a virtual and collaborative approach to address business problemsuThe future state will drive our strategy design;how we do things today may influence our future but there are no sacred cow
42、suWe must provide significant growth opportunities for our people to attract and retain a highly skilled and motivated staffuWe will share clear,unified communications at every level led by IT Leadership Team.Four parallel workstreams will contribute to development of the IT vision,strategy and depl
43、oyment planOrganizational Effectiveness and IT AlignmentEstablish the IT Program OfficeApplication ArchitectureTechnical ArchitectureuHow should the organization be aligned to the businesses?uWhat competencies should be developed to meet the challenges of todays business climate?uWhat specific appli
44、cation suite will best meet transaction processing requirements?uWhat platform(s)is most effective for the chosen application suite?uHow should we support the companys e-business requirements?uWhat process is required to prioritize and manage the IT portfolio?uHow should IT best involve senior manag
45、ement and the broader organization in the IT process?IT Strategy Project.Application Architecture.The applications architecture will result in an ERP“backbone”vendor selection and provide guidance and direction for all other applicationsAll ApplicationsCustomersSuppliersPackage selectedImpact assess
46、mentDirection/value propositionDefine NeedsOverall guiding principles/rules applyTechnicalDecisionSupportCustomer Relationship ManagementEnterprise Resource Planning(ERP)Supply ChainCollaborativeComputing .uApplication OptionsVendor 1Vendor 2Vendor 3Vendor 4Vendor 5Vendor 6uTechnical OptionsuDatabas
47、e x,y,zuOp SystemuComputeruConsensus with teamuPublish application architecture solution setuPublish impact analysisAlternativesDecision/ResultThe application architecture team is following a structured analysis process that test vendor solutions against our decision criteriaEvaluation Criteria1Hypo
48、theses/Criteria Test Questions2Analysis“Leverage/Synergy”3Evaluation and Decision Making4uCompile evaluation criteriauDefine“must meet”criteriauAssign criteria weightingsuDevelop test questions and hypothesesuPerform option analysisuDevelop decision treeuDevelop fact base to test hypothesesuEvaluate
49、 results against criteria and decision frameworksuAgree decisionProject Stage GatesKey Project Check Points.The vendors will be evaluated against four pre-defined dimensions,each of which will be weighted by business stakeholdersInvestment/ViabilityuSoftware and hardware costsuBolt-on and interfaces
50、 costsuImplementation and conversion costsuTraining costsuFinancial statusuOrganizational strengthuVendor commitmentuEmbedded base/ReferencesuMarket positionuCustomer supportuTraininguCultural fituImplementation resourcesuImplementation RiskFunctional RequirementsuSupports process manufacturinguOrde
