Technology re-engineering: the next step.
In an increasingly global marketplace, the pressure is on for businesses to deliver products and services faster, better, and at competitive prices. As a result, many companies are outsourcing, downsizing, and re-engineering their business processes.
But forward-thinking executives--recognizing information technology as a strategic tool and a source of competitive advantage--have moved past process re-engineering to technology re-engineering. A company strapped with outdated and disjointed information systems cannot reap the full benefits of business process re-engineering, because information cannot be shared, data is often inaccurate, and managers cannot react effectively to market changes and custome demands.
By contrast, a sophisticated information system provides the infrastructure for an organization, underpinning operations from top to bottom, and connecting divisions and subsidiaries across business, geographical, and technological boundaries. The experience of many companies undergoing re-engineering--some of them clients of SAP America--illustrates that technology empowers people. It transforms raw data into the useful information managers need to make quick, informed decisions.
SEEKING BUSINESS SOLUTIONS
The best way to look at technology re-engineering is from a business-solution standpoint. From this perspective, technology re-engineering enables companies to link core business processes and to provide the information necessary for fast decision making and response, on the technology system best-suited for individual tasks.
Companies can re-engineer their technology systems in many ways. Some find thei existing systems are still viable and integral to their operations. However, specific areas such as shop-floor management and human resources have expanded with companies' growth and require greater technological support. Rather than replacing their entire information system, companies can install decentralized, satellite systems connected to their legacy systems. This maximizes existing technological investments and allows for gradual re-engineering of information systems.
On the other hand, technology re-engineering can involve a full-scale migration to a decentralized, distributed computing environment. After a thorough cost/benefit analysis, companies may find that replacing existing, outdated systems with innovative technology systems, such as client/server technology, yields a significant return on investment.
Whether it's a gradual or "big bang" approach, businesses are redesigning their technology systems. A July 1993 study conducted by Forrester Research, a technology analysis firm in Cambridge, MA, found that 75 percent of the Fortune 1000 companies will have at least one client/server application (a UNIX-based business software application) up and running by the year's end. Several months later, an Information Week survey reported that 97 of 100 IS executives surveye already are engaged in some kind of client/server initiative, and that 75 percent of the respondents plan to spend more or client/server technology in 1994.
THE CHALLENGE OF MIGRATION
Even though many companies are jumping on the re-engineering bandwagon, they must carefully evaluate their business needs and internal resources before embarking on such an effort. Adopting new technology and business procedures leaves companies unprepared for major roadblocks. The Information Week client/server survey found that businesses see migration as a learn-as-you-go process, and it concluded, "Today's competitive business climate compels many companies to forgo the luxury of an orderly, deliberate migration."
According to a survey of current client/server implementation projects conducte by Boston-based consulting firm Yankee Group, the five major challenges to migration are:
* Combining and coordinating products from multiple vendors.
For example, a company could integrate a proprietary software application with an Oracle data base. Under such conditions, it is crucial to maintain network connections and the ability to port to different operating environments.
* Changing the IS culture.
In some cases, this could mean moving from a mainframe to a distributed environment.
* Working with unproven applications development tools.
These tools often help to customize systems.
* Training employee and managerial end users.
* Making progress on the client/server learning curve.
This could include mastering configuration, networking, security, and development.
With these challenges in mind, what business reasons are driving companies to technology re-engineering? The Forrester Research survey cited two key reasons companies replace their current core business systems: Existing systems have no kept pace with the changes in the business they support, and the upkeep of thes mainframe applications has become too expensive for MIS.
Our experience with Fortune 1000 companies supports the findings of the Forrester survey. We also see firsthand the benefits companies achieve through technology re-engineering, including:
* Integration of business and information systems.
* Consolidation of global businesses.
* Lower IS costs.
* Improved customer service.
* Increased efficiency and productivity.
Our own customers' experiences clearly illustrate these benefits.
COMPUTERVISION: INTEGRATING BUSINESS AND IS
"We sell integration into the design and manufacturing industries, so we realiz the benefits of that and want to realize those benefits within our own business operations," says Eric Johns, project leader for Computervision.
Based in Bedford, MA, Computervision is a leading supplier of computer-aided design and computer-aided manufacturing software. Its products and technologies enable engineers and manufacturers--people once accustomed to working with pencil and paper--to design and build everything from airline engines to children's playground equipment in an online, computerized environment. The company operates in more than 20 countries around the world.
But, like many companies that supply state-of-the-art technology to their customers, Computervision was not using the most advanced technology internally This company that specializes in all-in-one computer systems was saddled with more than 300 mini-computer systems spread throughout the organization. Each operated as an "island of automation" with little information shared among different countries or even different divisions.
"We have 123 unique business applications all interfaced to each other in many different ways," says Kamalesh Dwivedi, vice president of information technolog at Computervision. "My mission is to replace those 123 applications with one integrated application to run our business."
"We are consolidating our order management and distribution operations, and centralizing some of the core functions of our business to achieve economies of scale and to improve the consistency and quality of the services that we provid to our customers," adds Johns.
The cost benefits of distributed computing enabled Computervision to establish worldwide data center in Bedford with only one server supporting all its worldwide subsidiaries. With the new system in place, a single system now manages the reception of sales orders in France and the distribution operation through a regional distribution center located in Holland.
HERCULES INC.: PURSUING GLOBAL BUSINESS
The global market has become a reality. Hercules Inc., a diversified worldwide producer of chemical and related products and solid fuel systems based Wilmington, DE, quickly realized a worldwide information system is a necessity in this global market.
"Our information management systems currently are very fragmented," says Chris Witham, vice president of management resources at Hercules. "We have had a lot of individual initiatives which, for local requirements, have worked well. But now we are in a global marketplace, and we have strong competitive pressures. W need the ability to gather information on that global basis.
"Presently, only partial information is available, and business managers are forced to look at the data and make assumptions," Witham says. "We're going to fill in those assumptions by giving them real data, which will be available to them very quickly."
To do so on a global basis, Hercules formed a team, drawn from different groups throughout the organization. The team aims to implement "Core Business Transaction Systems" in more than 80 locations worldwide. The systems include financial, sales and distribution, materials management, and human resources client/server software applications.
"The intent is to make these systems uniform, so that if you're utilizing them in the U.S. or Canada or France or Belgium, fundamentally they look the same to the users," Witham explains. "Obviously, the software provides the flexibility for each of these particular environments, which allows us to provide for the specific requirements of a country. But the fundamentals will be the same."
ANDREW CORP.: MAXIMIZING ROI
Maintaining and continually enhancing legacy systems demands considerable financial and IS resources--a cost many companies find difficult to justify. On of them, Orland Park, IL-based Andrew Corp., a leading supplier of products and services to the communications industry, decided to change direction.
Most of Andrew's existing information systems were developed in the early 1980s and have been enhanced continually over the years. Its worldwide offices used different technology systems, so Andrew was unable to share information or resources effectively. By replacing its outdated mainframe system with an integrated client/server system, the company anticipates a significant return o investment.
"Andrew has looked at the return on investment and sees two areas of benefit in terms of hard dollars in expense reduction," says Edward Nield, vice president of MIS at Andrew.
The first area of savings is the overall information systems expenditure. By consolidating four data sites into one, Andrew saved money--lots of it. In addition, with new-business applications technology, the company predicts less time and resources will be required for development.
The other area is the internal administration of information. Andrew expects th new, system to reduce significantly the number of people required to handle information, allowing the company to deploy the excess employees in more useful positions, such as customer service.
Besides hard-dollar savings, Andrew expects to improve customer service, provid support for global business, and increase process and worker productivity.
"Customer service, which includes quicker, more reliable deliveries and order status, is an important part of our strategy," Nield says. "With an integrated client/server system, we will have online access to all business units, and we expect to reduce cycle time, cut labor and material costs, and increase global market share."
BERNINA OF AMERICA: SERVING THE CUSTOMER
"Part of our corporate mission is to give our customers the best possible service we can," says Mike Perich, vice president of finance and administration at Bernina of America, an Aurora, IL-based wholesaler and distributor of sewing machines. "With our integrated and distributed information system, when our customers call about their orders, our employees will have access to updated information. They will know if a product is out of stock and when we will have that product available to ship to them. They also will be able to provide them with account balances and information without having to transfer them from customer service to the accounting or credit department."
Bernina embarked on a technology re-engineering program, because its existing information system could not support the company's growth. This affected its efficiency and customer service. As the company streamlined and reorganized its business procedures, it realized the information system needed to be replaced.
"In today's environment, we all have to be competitive, and being competitive means running your business efficiently," says Perich. "We're looking at a number of different areas, such as customer service, shipping, inventory and warehouse management, sales, and accounting, to see where we can operate more efficiently and what types of jobs we can re-engineer."
Bernina's new distributed system helps the company determine which processes ca be streamlined, or even eliminated. In addition, the system offers Bernina the ability to expand its information system with additional application and data servers to support future growth. Unlike older systems, often incompatible with new technology, state-of-the-art servers snap together like Lego blocs--so companies can add new systems and applications one by one at any time.
"One of our long-term goals with the new system is to deliver 24-hour service t our customers any time of the day or night," Perich says. "Whenever they need us, we want to be there for them."
CONVEX COMPUTER: INCREASING EFFICIENCY
Increasing overall efficiency often improves customer service and profitability One measurement of high-powered computing--called internal throughput--calculates the amount of work a computer performs over a given time At Convex Computer Corp., a Richardson, TX-based supplier of air-cooled supercomputers, as business grew, the company's internal throughput became strained.
"Our current system just couldn't keep up with our changing, rapidly expanding business needs," says Susan Quimby, Convex project coordinator. "We were changing our product line dramatically and expanding our focus on quality and customer service. Our own information system needed to provide full functionality, multinational capabilities, and integration of business functions."
By streamlining its business processes while re-engineering its information technology, Convex garnered significant results from its client/server business applications.
With an integrated solution for financial and cost accounting, manufacturing, and sales and distribution, Convex improved integration among all its operational areas, increasing its productivity and responsiveness. The company also achieved greater flexibility anti financial analysis capability, and improved productivity with greater cost control throughout its worldwide operations.
"I anticipate that with our new client/server system fully implemented, we will be able to enhance every employee's working environment and personal productivity, and thereby make a major contribution to the profitability of our business," says Doyle Baker, director of information resources at Convex.
Flexibility and integration ensure that companies can improve control of business processes through information technology, not vice versa. However, to take full advantage of technology re-engineering, companies must begin with comprehensive technology and business plans. No technology, no matter how efficient, can help a company achieve its goals until its business processes have been scrutinized to determine if they should be changed, streamlined, or eliminated. With business and technology strategies in place, companies can re-engineer their operations and gain a competitive business advantage.
Klaus P. Besier is president of Philadelphia-based SAP America, a $128.8 millio subsidiary of Germany's SAP AG, the world's eighth largest software company. He formerly served as an IS specialist, general manager, and corporate vice president at a Hoechst Celanese subsidiary.
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|Author:||Besier, Klaus P.|
|Publication:||Chief Executive (U.S.)|
|Date:||Mar 1, 1994|
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