Wondering how to tackle that daunting integration project? Take a look at how other enterprises have dealt with the issues.
The driver for integration can come from various directions. It may be the result of a takeover or merger, the need for greater business efficiency, a preference or requirement for best of breed applications over a single vendor's offering, or even the search for operational efficiencies within the IT function.
In this first of a series of features on enterprise integration, Technology & Business examines four real-life cases where organisations have successfully taken the integration route.
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Case study 1: Hewlett-Packard
Last May's merger of Hewlett-Packard and Compaq to form "the new HP" has to be the mother of all integration efforts.Kerry Holling, information technology group director, HP Australia, explains that the two companies did not wait until the merger was a fait accompli--instead, a "clean room" strategy was put into place where HP and Compaq people "were locked away for many months" working on plans for the different aspects of the merger. Some of the results could be seen immediately--for example, the products and services roadmap was available to customers on day one of the new HP. The internal IT integration, however, was a longer process, with projects extending over two years.
At the infrastructure level, things were relatively straightforward because both companies had a global platform for messaging, file and print serving, and so on based on Microsoft products. The main task was to combine the domains inherited from the two companies. This was simplified by the experience obtained during the earlier Compaq-Digital merger. While ensuring that users from both camps were visible to each other from day one was "a great win" for IT, according to Holling, completely integrating the domains is a big task--the two companies were the world's first and third largest Exchange users--and not all capabilities have been implemented yet. For example, the ability to check everyone's availability for meetings is not expected until the end of 2003. This situation is a good illustration of the need to ensure that users' expectations are set at an appropriate level: delivering the last 20 percent of functionality can require 80 percent of the effort, so ensure a realistic timetable is distributed.
A different approach was used to make the choice between applications used at HP and Compaq. In most cases, the criterion was how widely deployed the candidates were, so an application used around the world on one side of the fence would win out over a regional standard from the other. "That can be suboptimal from a country perspective, but it's in the best interest of the company," says Holling.
An example can be seen in the pricing systems. Compaq was using country-specific systems while HP had a global pricing and discounting application, so the latter is being deployed throughout the new HP.
Situations in different countries can be very different "so there have to be compromises", Holling observes; however, the clean room process did away with arguments about those decisions and left everyone working towards effective deployment, which involves changes to business processes as well as technology.
"The most difficult part of the integration is the interfaces to the downstream order management systems that haven't been integrated [yet]," says Holling.
Similar problems occurred even when both sides of the company were using the same application. For example, both businesses used PeopleSoft's human resources software, but the unified system is only expected to be online shortly before the first anniversary of the merger. "There's still a lot of work to be done in making it a reality," said Holling in late February. Much of the effort is the result of having to integrate HR with other systems used by the two sides. It is not possible to update all of the related systems at the same time, Holling explains, so it is necessary to integrate the HR system with applications that will be replaced at a later stage of the overall project.
One advantage of selecting the most widely used applications is that the need for training is reduced, as many users are already familiar with the programs. "It's less taxing than if you implemented a new system from scratch," says Holling. But training requirements are not being ignored. The company is standardising on Siebel's CRM system, and although ex-Compaq staff are familiar with that software it will be new to those from the HP camp. Consequently, the company will be "very diligent" in ensuring customer-facing staff can use the system properly.
Holling's experience with previous integration projects is that the actual IT spend can be as little as 25 percent of the total budget, with training and related issues accounting for around 50 percent.
Issues of cultural integration can have an impact on IT. According to Holling, Compaq had an e-mail culture while HP was voicemail-centric and the systems in place reflected this. HP people were used to having features such as broadcast voicemail. "I probably had more complaints about that particular issue than anything else," says Holling, but it is "a non-trivial task to introduce that capability across the board". Plans are in place to do so, but the project will take time and money, and the company is working with vendors to find a more cost-effective solution.
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HP: “Recently merged companies should not divert all their IT resources to integration projects, or they risk falling behind.” |
The integration process is taking some of the cost out of the company's operations, and these savings are being delivered ahead of plan. Savings of 15 to 20 percent have been realised though addressing the "low hanging fruit and achieving economies of scale," such as avoiding duplicate work or obtaining better prices from suppliers. Another 10 percent has been saved by operational efficiencies arising from the genuine integration of systems. Significantly, most of the latter category accrues to business areas rather than showing up in the IT budget. The company has maintained its market position while making these savings, he claims.
Holling warns that recently merged companies should not divert all their IT resources to integration projects, or they risk falling behind competitors.
Other current projects at HP include a rollout of ERP-to-ERP tools to provide "true e-commerce" links with partners, and mobility solutions to improve workforce (and especially salesforce) productivity.
But by the end of 2003, he expects all the key integration work--Windows domains, supply chain management (SCM), HR, financials, CRM, and sales compensation--will be complete. "Once we get through these big ticket items . . . we'll be in a ‘not unusual' operating environment."
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Case study 2: Port Waratah Coal Services
The need for integration at Port Waratah Coal Services (PWCS) came from a completely different direction.Located at the Port of Newcastle, the company operates the world's largest and most efficient coal handling operations. Various types of coal from multiple suppliers are blended and loaded onto ships for export. With a shiploading capacity of 89 million tonnes per annum and 24-hour operation, equipment maintenance is a significant issue.
PWCS was using MRO Software's Maximo Maintenance System and Oracle Financials, but needed to implement an improved planned maintenance system closely linked to purchasing, inventory, and financials. Fully integrated systems from various single suppliers were considered, but the cost and impact of changes at PWCS meant the latest versions of Maximo and Oracle were the best choice. Maximo would provide the planned maintenance and supply functions, while the general ledger, accounts payable, cash management, and assets management would be handled in Oracle. The packages would be linked though a standard interface fully supported by both vendors.
"We were firm on the type of design we wanted," says PWCS project manager Terry Tynan, and that meant a vanilla installation of both packages with no customisations beyond the required integration work.
A project team comprising staff from PWCS, MRO, and Oracle applications specialist Sysao was assembled. "It really was one team," says Tynan, explaining it was crucial to do everything to suit the needs of the overall project rather than to make it easier for either package.
It was also important to ensure that what the company wanted to achieve was practical, and the advice of the consultants involved was key to this.
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PWCS: “You have to make sure that all aspects of the project are proceeding at the same pace to allow testing.” |
Unix-based HP servers were selected for the project, and new hardware installed. "It is critical to ensure you have the right hardware," says Tynan. All the applications use a single Oracle database. This configuration was chosen because there is no advantage in having Maximo running if the financial applications are down, or vice versa. A single database also takes up less space, and overall this configuration offered the best cost-benefit ratio.
As part of the project, a reliability centred maintenance (RCM) consultancy was engaged to train PWCS in the principles of RCM. These principles have been applied by PWCS to ensure appropriate maintenance schedules, taking into consideration variables such as cost, machine criticality, downtime, and manufacturer recommended maintenance patterns.
"Planned maintenance is now the bible here," says Tynan. The entire maintenance system is now online and integrated. Work orders are created for all maintenance activities, stock levels of spare parts (including any reserved units) are visible in an online catalogue, online requisitioning from work orders is available, and all costs pertaining to a work order are tracked, leading to better budget management.
"We've certainly seen great results," says Tynan. Breakdowns have been reduced, and spare parts are being purchased more competitively by ordering in advance from preferred suppliers instead of paying the price demanded by whichever supplier had stock for immediate delivery following a breakdown. At the same time, the company has also been able to reduce its inventory of spare parts. Labour costs have been cut by reducing the number of after-hours callouts and reducing the reliance on contractors. The true costs of maintenance are also visible to management, allowing better budgeting and forecasting.
Tynan believes good project management practices were an important contributor to the success of this implementation. Testing is vital--"there's no doubt about that," he says, "but you have to make sure that all aspects of the project are progressing at the same pace to allow testing."
He also recommends that sufficient time should be allocated at the beginning of such a project to select the most appropriate software and to analyse the integration options. PWCS spent considerable time over this to ensure the best value outcome. "I couldn't have been happier with the way our consultants participated in this process," Tynan says.
User acceptance is important for the success of any new system. This project had the backing of PWCS's general manager, who assigned system critical employees to the project team on a full-time basis to be sure the company got the system it needed. End users were involved in the design, implementation, and testing stages, and attention was given to providing the right kind of training at the right time. The company chose to have project team members receive specialist training from the consultants so they in turn could train users. This ensured in-house staff had a sound knowledge of the systems--"we didn't want consultants that walked away leaving us with a black box," says Tynan.
PWCS expects the system will pay for itself within 24 months of implementation.
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Case study 3: Dowd Corporation
Dowd Corporation provides an outsourced corporate apparel management service to large organisations in Australia and New Zealand. With clients including National Australia Bank, Air New Zealand, Australia Post, St George, Medicare and Medibank Private, the company takes orders from and delivers corporate apparel directly to around 250,000 employees in Australia and New Zealand.Dowd undertakes to handle the details of corporate outfitting on behalf of its clients, and therefore has to ensure that people only order the quantity and type of garment they are entitled to, that they do not order more frequently than the uniform scheme permits, and that they pay the correct prices (some positions may attract free uniforms, while others get a subsidy).
Five years ago, all this was done manually. Dowd saw its clients beginning to shift towards intranets and e-procurement, and followed suit. "We knew we had to connect to our clients," says managing director Christopher Waller. "We're using the Internet wisely to cut out frustration, improve the supply chain and drive costs out of the process."
With the manual system, around 30 percent of orders received contained errors. Correcting these mistakes required a lot of work. Now that each client employee has a personal account and can place their orders via the Web, most of these mistakes can be detected and fixed before the order is finally submitted. A corporate wardrobe typically includes around 100 items to cope with extremes of climate and age preferences, but employees' selections are restricted by their jobs: Dowd's entitlement system means "we only show them what they're allowed to have," says Waller.
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Dowd Corporation: “The combination of Web-based ordering system and integration with the back-end IT processing has reduced the typical lead time from eight weeks to five.” |
When customers place their orders via the Web, the details flow automatically into Dowd's ERP system. This combination of Web-based ordering system and integration with the back-end IT processing has reduced the typical lead-time from eight weeks to five.
Another key requirement for Dowd was the ability to connect to a variety of different e-procurement systems. Many clients were adopting e-procurement strategies, but the lack of standards meant Dowd needed flexibility. After an extensive search, IBM's WebSphere was chosen as the basis for the project.
"It's been absolutely integral in changing the way our clients regard our service," says Waller. The elimination of ordering errors has provided a significant reduction in costs, and because so many customers do their own data entry by ordering via the Web, Dowd has largely done away with the temporary staff previously used to key in orders during peak periods. "We've pushed the order entry process right out to the consumer," says Waller. "If we didn't have the technology to help us, it would be a very labour-intensive order entry process."
Interestingly, the number of people employed to handle phone calls from customers hasn't changed. The mix of calls has changed from mainly orders and enquiries to include questions about using the Web ordering process, so the operators have been retrained appropriately to handle these help desk-style calls.
The company achieves an on-time delivery rate of 98 percent, but inevitably some problems arise. When that happens, the customer is normally advised by phone or, for low-impact situations, by a personally written e-mail. Waller says this provides better customer service and avoids the risk of multiple messages being sent in a short period as an automatic response to triggers raised by the ERP system. Having company staff acting as intermediaries makes it easier to respond flexibly--if a customer had ordered a particular shirt as part of a compulsory wardrobe and its delivery has been delayed by two or three weeks, it is relatively easy for a human operator to offer an alternative.
Secondary impacts include reduced stockholding with a shift to just-in-time delivery, and more accurate estimates of delivery dates plus the ability to provide customers with those estimates more promptly. Currently, delivery estimates are communicated via e-mail in about 10 minutes, whereas it was previously an "administrative nightmare" according to Waller.
The software and hardware needed for the million-dollar project was justified over a five-year life, but it paid for itself within three years, including the investment planned for the remaining years. "It takes time to build up momentum" and get significant numbers of customers ordering online rather than on paper, explains IT manager Frank Pulitano. For example, one client committed to going "100 percent paperless" but is still moving towards that goal after two years.
"We took it easy at first" by using batch processes to connect WebSphere to the AS/400-based ERP system with a 10 to 15 minute turnaround, says Pulitano. According to Waller, customers haven't really needed immediate notification of a delivery date; e-mail notification in 10 minutes or so has been adequate. The ability to calculate delivery dates based on stock and work in progress automatically rather than manually represents "a huge process improvement." This year the company is moving to live integration of the two components. The tighter synchronisation will mean Dowd personnel will be able to use the same entitlement software that controls Web-based ordering, making the system more modular. The company would be able to buy an off-the-shelf ERP system, for example, and connect it to WebSphere to handle entitlements. "Java [and] Web applications are so much easier," says Waller, so it makes sense to move business customisations into the WebSphere front-end.
As customers are becoming increasingly mobile, they will appreciate immediate advice of delivery dates, but the staged approach to integration "saved a lot of headaches," says Waller. WebSphere was selected because "we wanted a more modular approach to software," explains Pulitano. Dowd can now mix and match components from different vendors, relying on WebSphere to integrate them. "It gives the ability to choose best of breed applications." For example, he is planning to move to different accounting software in the near future, and to upgrade WebSphere to the latest version and move it from the existing Windows NT server to the AS/400. "Four years ago, you would have laughed at the suggestion of Web serving from an AS/400," remarks Waller.
Dowd's experience yields some lessons for other organisations. Waller says they initially underestimated the amount of management time that would be required, and this led to the restructuring of roles within the IT operation including the separation of development from maintenance and operations. "We were breaking new ground, even within WebSphere . . . we created a sandpit of new thinking," he says.
Pulitano stresses the importance of developing the right business strategy before implementation starts. "We probably spent six months on a whiteboard" identifying the potential benefits. Once development starts, "you can't change your mind half way through," instead you have to replan.
He also recommends identifying the most important aspects of the project from the customer or internal perspectives, and implementing those first. The simplest things often give the biggest return on investment, he suggests. Once the most important features are in place, others can be added in turn. "That process has served us well," he says.
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Case study 4: NSW Department of Housing
Sometimes there can be payoffs in integrating just one aspect of IT operations. The NSW Department of Housing could see the potential benefits of installing a single backup system across its multiple platforms. According to data centre manager Gavin Watts, the department sought to simplify the skill set needed, to implement standardised data retention policies so that different classes of data could be stored for specific periods, and to share a tape library across the platforms.|
NSW Department of Housing: “We didn’t want to go to a situation where we had to have three different backup products.” |
The project started by backing up Oracle databases running on IBM Unix systems to the StorageTek L700 library, and this was soon extended to SAP on Windows 2000, Exchange, SQL Server, file and print servers, and help desk applications. The department is currently adding Novell GroupWise to this list, although a gradual migration to Exchange is under way. "We know we won't have any choice" about supporting other platforms in future due to the nature of the organisation. Watts says. "We didn't want to go to a situation where we had to have three different backup products."
It is too early in the project to calculate the actual savings yielded by the integrated backup system. We spoke to Watts about three months after the L700 was purchased, and he estimated there was another two months of work "without 100 percent effort" to be done. The work was carried out in parallel with the installation of new systems such as Exchange and the migration of SAP between platforms, so the project was tracking a moving target. However, the new system has removed problems with backups running all weekend as well as the need to sacrifice backup windows in order to restore data, "so there are savings in other areas," he says.
The work required includes the conversion of archives created with the old software (which had been in use for three years) to the new format.
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