Business Transformation: The Aftermath of Growth by Acquisition
It’s not unusual for multinational companies to expand and grow through acquisition. And the resulting dilemma – a heterogeneous IT landscape that is expensive to maintain and disruptive to business – is not unusual either. It’s the price companies pay must pay, and sometimes, although it’s worth every penny the price can be hefty.
When business started to be disrupted in a large multinational discrete manufacturing firm, the CIO of the firm (named Gammacorp for anonymity) knew a major IT transformation was inevitable. The initiative, which is detailed in a recent article, entitled “Shaping the Future of Gammcorp,” in 360° – the Business Transformation Journal, was planned as a five-year program and is now well under way.
Pushing systems to their limits
The 100-year-old company, with $1.6 billion in revenue, had over 5,500 employees worldwide in ten factories in four countries, with over thirty sales and distribution centers. Through acquisitions, the company ended up with nine locations that had twenty organizational entities, each with their own individual structures and processes integrated into the same system.
The IT landscape was disparate, maintenance was expensive, and updates were nearly impossible. This all began to impact the company’s operational performance, as there was no master data management, and information flow between business units was being disrupted. And when the company acquired another company in 2009, the integration exceeded $10 million, an economic risk that could no longer be standard procedure.
Simply put, the company’s growth, shifting business model, and increased regulation compliance requirements brought the infrastructure to its limits. It was time to orchestrate a major IT transformation that was organizationally driven, with a reengineering process that would include top management and essentially all key parts of the company.
A clear vision leads the way
The CIO first got management buy-in first, and then included business process owners as part of the program and a critical link between the business and IT. A massive IT team of 50 internal and 30 external resources was assembled from around the world.
Together, they developed four objectives for the program, which was named “ONE Gammacorp.” The agreed-upon objectives included:
- A robust platform for accelerated integration of acquisitions
- A significant increase in business process efficiency
- Assurance of compliance needs (such as product and logistic regulations and accounting)
- Reduced IT maintenance costs
These objectives would help the company focus on synergies and process integration that would avoid isolated solutions in different locations, reduce manual work steps, gain full transparency, and make processes lean.
Step by step to success
The company devised a template for this global transformation and piloted the program, with a go-live phase in over 50 locations (11 manufacturing and 40 sales and service facilities) and significant results are evolving.
- The rollout time to get an enterprise system up and running in a new acquisition was reduced by 60%. This will contribute significantly to the company’s organizational competitiveness, as there is less complexity, effort, and costs in these initiatives.
- The company now has a centralized master data management and distribution system, which is reducing redundancy dramatically. To start with, there is an 80% reduction in material numbers. This helped improve data quality in business processes and decrease maintenance costs.
- Maintenance costs were reduced further by the use of standards, the harmonization of implementations, and the upgradability of the system.
This was a model transformation for future endeavors in the firm’s parent company in that it set the appropriate strategic focus and enabled a shifting business model through a new infrastructure. It also used communication to foster coherence, and there was a balance of planning, building, and running the systems.
To get more details on this company’s business transformation, access the full article on page 64 of Issue 10 of 360° – the Business Transformation Journal. This publication is produced by the Business Transformation Academy, a thought leadership network devoted to providing cutting-edge insights on innovation and business transformation. For more business transformation articles on the SAP Community Network, please visit the 360° – the Business Transformation Journal library.