CIOs planning an information technology deployment strategy for their businesses in China can learn from an oddly appropriate 2,000-year-old model-the Great Wall.
One of the Seven Wonders of the World, the 4,000-mile-long Great Wall inspires anyone who looks or trods upon it, including scandal-ridden U.S. presidents, jaded tourists and the Chinese only-child "little emperors" who race along its battlements brandishing their grape-juice boxes. CIOs too would be inspired by the Wall's tailored design, elegant simplicity and endurance -- all aspirations of a Chinese IT-deployment strategy.
Adjusting to the Terrain
The Wall's architects insisted on certain standards for its components and dimensions to ensure solid protection from invaders. And they wisely allowed builders to take advantage of the local environment, building the massive edifice along the twisting spines of steep, 1,000-foot-high hills so that it resembles a serpentine dragon waiting grimly for Mongol hordes to try its patience. The Wall's average 25-foot height is all the more awesome because it hugs the undulating mountainsides. Likewise, CIOs must hold true to their IT plan while adapting some of its elements to China's business terrain.
Compaq Computer Corp. Vice President of Information Management and CIO John White (recently retired) says Compaq's IT group prefers a centrally planned and controlled IT environment for its worldwide operations, China being no exception. "This way we don't have to have experts on systems all over the world," White says. "When we get ready to change a business process, we make the decision [at Houston headquarters], instrument the change one time, and it's instantly deployed to all our factories and sales organisations."Compaq's worldwide standard platform is the SAP enterprise resource planning (ERP) system. It runs and is supported out of Compaq's headquarters and is piped into China and elsewhere via a wide area network. As Compaq's worldwide systems supervisor, White viewed unique application requests from the Chinese and other countries to be a lower priority than global systems needs.
Seven thousand eight hundred miles away in Beijing, Compaq's president for Greater China shares the view of the on-the-scene Wall builders -- that localised compromise and adaptation are necessary to get the job done. "Where it comes to principles, processes and methodologies, they certainly should be the same worldwide," says Philip Yu. But the folks back home need to give their Chinese subsidiaries certain leeway in a controlled manner, he argues.
For example, Yu says, Compaq China must submit financial accounting statements required by local governments as well as taxation documents and customs declarations that are not provided for by a central system. If the control from headquarters is so tight that the China group can't modify anything without approval from someone sitting in the United States, then the timely delivery of information will be imperilled, he fears. "Personally, I believe China is too complex and too large a market to have people sitting outside the country trying to manage it," says Yu, a 20-year management veteran in China.
Network Signal Fires
Atop the Great Wall, smoky fires lit from wolves' dung in watchtowers spaced about 1,000 feet apart relayed signals up and down the Wall's vast length, warning of invasions or breaches and calling for reinforcements. In an IT plan, the same consideration must be given to communications systems. There are some standalone factories in China that have little need for full-time, robust connections to headquarters and sister factories inside or outside the country.
But truly global companies must tie China into their networks. And not just for passing data back and forth. "Think of the power of an engineer in Waynesboro, Va., helping someone solve a pump problem at a plant in Shanghai," says DuPont Co. Vice President of IS and CIO Robert Ridout, who is based at headquarters in Wilmington, Del. The global link "gets the best thinking we have in the company on that problem regardless of where [the problem is] located."Like the famously nimble Shanghai acrobats, IT managers should be prepared to jump through flaming hoops to get the benefit of that kind of connectedness.
Leased lines are scarce, costly and not reliable. Securing permission for workarounds such as satellite and wireless remote frequency can be interminable.
At Ford Motor Co.'s Shanghai Fudian Automotive Electronics Co. Ltd. factory, the 64K-bit-per-second line connecting the plant to the state-owned Shanghai telecom hub has a nasty propensity for going down during heavy rains. (Shanghai is a very wet place from June to August.) Ford laboured for six months to get authorities to address the unstable line, then tried another tack. "We figured it would take at least another six months of running our heads into a brick wall to get them to improve the line, so we said, 'Let's go wireless,'" says Tom Obringer, the factory's operations manager. Ford applied to the telecom authority for a wireless 128Kbps connection, an advanced technology the government was eager to try.
The Internet, the new communications tool of choice in the West, has some technical and ideological complications in China that are retarding its use.
"China's Internet just doesn't work," complains Lucien Wang, director of corporate telecommunications and information security for Motorola (China) Electronics Ltd. Motorola built its intranet using reliable private lines and frame relay working at between 256K bps and 1,024K bps. Government censorship is also frustrating, and it's not just pornography that's blocked. CNN's Web page is banned, as is information about Tibet. When Wang asked his Chinese Internet service provider for a list of URLs the government forbids, he was told the list was secret.
Mining, engineering and construction company Black & Veatch LLP is also exploring alternatives to China's ISPs. It too considered a costly dedicated intranet, but is now testing a dial-up "cloud" service from IBM Corp. Using inexpensive public access lines, Black & Veatch employees in China dial in to the cloud-a virtual private network space where IBM converts the call's SNA protocol to frame relay. The employees' calls are "forwarded" to Black & Veatch's global network and then to the World Wide Web-without ever dealing with China's Internet providers or costly leased lines. "It works like a champ and solves the huge problem of the cost of dedicated networks," says John G.
Voeller, chief technology officer and senior partner at the Kansas City, Missouri, company. IBM estimates that this virtual private network service can save customers 40 per cent over the cost of leased lines.
The materials chosen for the Wall's construction-rammed earth, stone, bricks and mortar -- were understood by labourers of the time and, perhaps more important, were abundantly available. Likewise, the IT tools chosen for deployment in China should be suited to the skills of the builders and needs of the business and be available in the market. While several multinationals are extending ambitious systems like SAP to China, others advocate more modest tools and investments that don't "get ahead of the business."For example, Pepsi-Cola International chose SAP as its ERP standard worldwide for its beverage business, except in some smaller sites in China. Here the company will use an off-the-shelf sales and financial package until the infrastructure and technical sophistication of the personnel improve, says Andrew M. Lee, IT director for Pepsi-Cola International's China and Asia-Pacific business units.
Ford, Quaker Oats and Elf Atochem also chose "ERP lite" systems for China-the first two picking Mfg/Pro from QAD Inc. in Carpenteria, California, while Elf Atochem opted for an integrated suite from the Swedish company Scala AB. Says Atochem's Marc Fischer, international IT coordinator, "It does finance and MRP II, and it doesn't require two or three computer guys just to administer it." Fischer expects a three- to five-month implementation and to spend less than $US 100,000 to equip 10 to 15 users. Finding suitably modest packages for China was a struggle because these vendors are relatively low profile, says Fischer, who coordinates IT for all the Paris-based chemical company's subsidiaries except North America. However, a fact-finding tour of other French companies in China generated a short list of vendors with good reputations for product and support quality.
Choosing appropriate technology can also mean deploying older-generation tools that, while not leading edge in the West, are suitable for China. At UPS Parcel Delivery Co. in Beijing, the uniforms and trucks are the same shade of brown seen the world over, but the technology differs from what's deployed elsewhere.
UPS's Chinese operations still use the handheld package bar-code scanners once used in the United States. "When we look at technology for China, we're not going to import it indiscriminately, assuming that if the U.S. is using it then it must be right here," says Steve Monaghan, vice president of public affairs for UPS's Asia-Pacific region. The handheld technology meets the needs of the business and doesn't overwhelm the abilities of the staff. The capital costs were also appropriate, since UPS is still a small-enough operation to handle its Beijing deliveries out of what amounts to a triple-bay garage. Yet the business is growing at 25 per cent to 30 per cent annually, and UPS delivery people are gaining technology sophistication. The timing will soon be right to replace the venerable technology with the newer electronic clipboards that digitally capture the signatures of addressees.
The Procter & Gamble Co.'s respected Chinese operations rely on even more elementary IT for distribution systems: Intel 386-based PCs running basic inventory management and financial software. P&G designed the low-end systems to match the capabilities and needs of small third-party distributors, where the technology is deployed. The low-cost system has increased sales and profitability, earning P&G a 1998 CIO Enterprise Value Award for the project and a similar effort in Eastern Europe.
Phasing In IT
The Wall wasn't completed all at once. Individual pieces were first constructed 2,500 years ago as defensive boundaries between states. Later, when the first Qin dynasty emperor, Shih Hwang-ti, unified China, the segments were connected, and subsequent dynasties, especially the Ming, extended it.
The Quaker Oats Co.'s model for IT deployment in China follows a similar, if not as protracted, phased-in approach. The company has Chinese plants that produce Gatorade and cereals. Its newest factory, situated incongruously among farmers' fields and corrugated metal shacks about 40 minutes outside Shanghai, produces Cap'n Crunch and the unique-to-China Savoury Oatmeal, a beef-flavoured instant cereal. Quaker Oats's first IT installations at this factory were an accounting package, inventory management software and processing systems for purchasing, sales and orders. Having implemented these basics, the company is waiting for the staff to become comfortable with the tools and for the business to grow, says Daniel Murray, deputy general manager of finance and administration for the Shanghai Guan Sheng Yuan Quaker Oats Co. Ltd. "Now that people understand the basics of the job [and] work-order processing for manufacturing, we'll move to the next level, MRP, which will allow sales forecasting," he says.
For Quaker Oats and other Western ventures, electronic commerce in China via EDI or the Internet is still a dream, resigned to the later phases of the IT plan. Currently, EDI is limited primarily to the relatively sophisticated electronics industries, says Quaker Oats's IT Manager Cindy Cheng. Once the company gets its own house in order, it will be able to supply and demand EDI transaction information, she says. And don't expect a stampede of webmasters going to China. Even though the mainland had 620,000 Internet subscribers as of March 1998, for most companies Internet commerce will be a low priority behind operational, factory-oriented systems.
The phased-in approach appropriate to China may seem like dillydallying to executives back home eager to hurry things along. As CIOs know, non-IT executives require painstaking education about what can and cannot be accomplished by the IT group. It's even more difficult to effect this education from the other side of the planet without making the Chinese IT group and its manager look like slackers. "Sometimes there is pressure from headquarters to implement systems in a certain time, but we have to look at what our resources are, what we can absorb and be realistic," says Murray. When the Quaker Oats team implemented the first phase of the Mfg/Pro package in only four months, the delighted bosses in Chicago wanted work to begin on the next phase. "But we said we wanted to hold off to digest this," Murray says, and headquarters relented.
Unrealistic expectations for speed also arose at Dow Chemical Pacific Ltd. Dow headquarters strategists don't always account for the limitations of the local situation, says Titus Tse, senior business information systems manager. "They forget we are dealing with a developing country," he says. Seven days in an IT plan developed in the United States would be 30 days in China, he says.
It's not just the bureaucrats who slow things down. According to Compaq's Yu, Chinese IT staff are generally only 50 per cent to 70 per cent as productive as their Western counterparts, mainly because of their lack of familiarity with Western companies' native language and the tediousness of working with programs and interfaces that must convert one language to another. Add up the possible delays, and projects that might consume six months in the United States can take quite a bit longer to complete in China.
But by adhering to the best practices of those who have gone before, newcomers to China should be able to build a sound, appropriate IT deployment strategy.
The systems implemented are not likely to become wonders of the world as the Great Wall did, but they will be strong enough to defend the enterprise from the ravages of inefficiency while 1.2 billion customers are readied to march up and do business.
Support and Service Get on Track
Compaq Computer Corp.'s recently retired Vice President of Information Management and CIO John White has seen a lot of wide area networks in his time, going back to his days at Texas Instruments Inc. So you can believe him when he says that his China WAN's reliability is the poorest he experienced anywhere in the world. "AT&T is the provider for connections into the Asia-Pacific region, and we had some issues with their support," White says. "But the problem really is that they are interfacing into less-than-robust infrastructures."It shouldn't be a surprise that even stalwart IT vendors like AT&T Corp. have trouble providing the level of service in China that customers are accustomed to in the West. IT vendors suffer the same problems their customers face in hiring and retaining technology-savvy staff and working around China's infrastructure shortcomings. But many IS executives say that the vendors are making exponential headway in their commitment and ability to make higher-quality support more accessible and affordable even in the remote regions of China.
IBM China Co. Ltd., for example, made a $US 17 million investment over three years to enhance its call centre service. The vendor consolidated its China PC-support call centres into one location, reachable by 100 per cent of its mainland customers. The Centre, currently staffed by 120 agents, can handle 336 call takers. It is housed in an exhibition hall originally built in a failed attempt to host the Olympic games-one of the only buildings in Beijing with enough telephone lines and space to meet the company's needs, according to Marcello Assandri, IBM direct marketing manager and onsite head of the project.
But even this modern facility has limitations that IBM is not subject to in the West, Assandri notes apologetically as he pauses during a whirlwind tour of the facility. For example, there is no caller ID technology available to customise call routing. Though 98 per cent of callers' problems are handled in Beijing, some problems may have to pass through three service levels, including being routed to trouble-shooters in Japan and the United States, before they get solved. "We are trying to bring that down to only two levels," Assandri says.
Another step IBM has taken to make PC support and service more accessible to its Chinese customers is a little off the rails, literally. China's railroads represent the best-developed infrastructure in the country. (Interestingly, China still has quite a few steam-powered iron horses plying the more remote rails.) The industry employs between 2 million and 3 million people and even has its own railroad universities and medical facilities. Seeing this opportunity, IBM formed a joint business venture with the ministry of railroads to set up PC service centres in 100 railroad depots for the convenience of companies and consumers. If this plan ever makes it to the United States, maybe Amtrak can turn a profit.
Tangled in Bureaucracy
On a trip to look over his Chinese operations, retired Compaq Computer Corp.
Vice President of Information Management and CIO John White observed that telephone lines loosely strung from pole to pole sagged precariously close to the ground. This was not a reassuring sight, given that Compaq hosts its worldwide mission-critical applications from its headquarters in Houston. A wide area network is Compaq China's lifeline.
Effective telecommunications is a goal of every IT plan, but in most emerging markets that is not easy to achieve. However, in Chinese metropolises like Shanghai and Beijing and their suburban economic development zones, it's becoming much easier to obtain leased lines from the telecom monopolies. Some Western ventures are coaxing their local state-owned telephone company executives to partner with them to deploy wireless and higher-bandwidth technology such as fibre optics. During the past three years the time needed to obtain a phone line has been reduced from one year to one month. Leased lines for transmitting voice and data can now be had in two to three months, though it can still take six months to receive permission to lease lines for a frame relay network.
Despite the progress, Western managers shouldn't set their hopes too high.
China does not yet have the resources to build the kind of infrastructure that is standard in the West. China adds something like 20 million phone lines a year -- almost the population of Canada -- and it can't keep up with demand.
Of course, bureaucracy isn't the only problem affecting telecom operations in China. Compaq's White was right to be concerned about wire droop. One day Compaq's plant in the fast-growing southern city Shenzhen lost its link to Houston -- and the core systems -- for the better part of a day. The culprit? Some enterprising individual helped himself to the low-hanging, valuable copper wire.
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