When your parent company directs you to install a particular IT solution it's tempting to play the dutiful child and follow instructions. Even if you're not keen to play Russian roulette with your job, following the path of least resistance has its appeal. Go with the flow and you eliminate the seemingly endless hours of research, comparisons and reference site visits that go along with making IT buying decisions.
NSW-based cabling manufacturer Pirelli Cables Australia was in exactly that situation when it came to updating its business process software. In 1994, its parent, the Italian-based Pirelli Group, mandated SAP running on Hewlett-Packard's HP-UX as its system of choice, and expected the rest of the organisation to follow suit. But Pirelli in Australia didn't ask: "How high?" In fact, it didn't even jump, opting instead to take a punt and not follow the mandate -- for some very good reasons.
Fifty-one per cent of the Pirelli subsidiary is owned by its Italian parent; the remaining 49 per cent is locally owned, making the NSW operation also responsible to a local board of directors. While the SAP decision was right for headquarters, it wasn't necessarily right for Australia. Accepting that decision carte blanche meant ignoring local factors. So with the seemingly compulsory directive from Pirelli headquarters looming, in mid-1995 the local office set about investigating all options, in an effort to determine the best solution for its needs.
Leading the search was Peter Jedrasiak, Pirelli Australia's group business information systems manager. "Milan mandated a solution, but they weren't paying for it," says Jedrasiak. "Since they weren't paying for it, we had to assure ourselves that the solution they suggested was within our budgetary constraints and our business plans."It was Jedrasiak who first proposed the investigation. With the full approval of his board he researched options including an update to the company's legacy system, Marcam's MAPICS ERP package running on an IBM AS/400 server. The rub was that the system hadn't been pleasing its users.
What Jedrasiak couldn't discount -- in more ways than one -- during the investigation was the Pirelli Group's global SAP buying power, which would deliver the software licence at a significantly lower price than were the Australian operation going it alone. Still, before making a final decision, Jedrasiak made sure he was satisfied that SAP met the needs of the business, and not just of the accounts department. "At the end of the day, we actually showed that an SAP installation for us was really no more expensive than a new 'other' system," Jedrasiak says.
Pirelli Australia was now in synch with its parent as far as application choice was concerned, but chose to step to a different tune in other key areas. The first was its choice of software integrator. While the head office had a number of "worldwide" agreements with various suppliers and integrators, these weren't necessarily applicable in Australia. The second divergence was in the choice of a significantly different hardware and operating system platform. By mid-1996, the Australian and worldwide scenarios were looking very different. Where Italy had specified HP 9000s running HP-UX, Pirelli Australia chose Intel-based Compaq servers running Windows NT, supplied by Computer Integration Centre (CIC). Where Italy had specified a worldwide SAP integrator, Australia chose BHP-IT.
The road not taken
Jedrasiak was satisfied with his decisions, but he knew he was potentially putting his head on the chopping block. Although he had a responsibility to his local board, Jedrasiak was also answerable to the IT department in Italy should the implementation fail.
"If it worked -- good. If it didn't -- I'd be out on the street somewhere," Jedrasiak says. "We took a lot of risks with our partners; no-one else in the Pirelli Group has used them, but we went in with our eyes open. We knew what we wanted and we put a great deal of managed trust into other organisations." As for the change in plan on the hardware side, Jedrasiak says certain up-front and ongoing cost issues made Compaq and NT a more favourable option (see "Those Cable Guys").
Needless to say, Jedrasiak's neck never felt the cold steel of the guillotine.
Both his local CEO and CFO have since told him that the Australian implementation is the best and most successful financials installation of the Pirelli Group worldwide.
"Our CFO is over the moon," Jedrasiak says. "It was on time, and on budget. We did not spend one dollar more than we said we were going to spend." And it seems there's no end to the good news. The entire financials software and infrastructure was rolled out in only four-and-a-half months, defying the belief that such projects are laborious, drawn out exercises.
The business users are also ecstatic. "All we're hearing is that the system is working and they're happy," Jedrasiak says. So happy in fact that the IS department -- often the villains in a computerised environment -- are treated as real people now. "That IS group from three-and-a-half years ago, that people were merely civil and polite to, are mainstream now. They are very well regarded within the organisation because of the success that has occurred." Jedrasiak's own excitement is somewhat tempered by the fact that the systems in place previously were generally considered poor.
It was mid-1996 when Pirelli Australia opted to tread the SAP on NT path, but it wasn't until October that the official nod came from head office.
Nevertheless an optimistic Jedrasiak had anticipated a grudging "go ahead"; and he used the interim to put together an aggressive rapid implementation strategy.
The SAP financials package was slated for completion by early March 1997. From the October OK, Pirelli Australia migrated its network from Token Ring to Ethernet, abandoned Novell NetWare for Windows NT, re-equipped everyone with personal computers rather than terminals, and completed initial SAP training.
On March 3, 1997, it all worked. Two months later the materials management portion was commissioned. Now Jedrasiak is planning a March/April 1998 implementation of the sales and distribution module.
The total infrastructure cost, excluding the SAP licence fee, came in at just over $1 million. Total project cost is estimated to come in at between $2.5 million and $3 million. Jedrasiak is still waiting on an inter-company debit note for the SAP software, but believes the estimates he has made will be correct. "We worked very hard to keep the costs down, and in some areas we were really very brutal," Jedrasiak says. "But in the scheme of an SAP installation, it's not a big investment." He accredits the success so far to two key factors: clear vision within the company and good quality partners. "We had a very clear view of where we were going," Jedrasiak says. "The executive group within Pirelli Australia made a unilateral proclamation and said: 'All for one and one for all. This is what we're doing. This is where we're going. These are the steps that we're going to take and we will not deviate.' "The structure of Pirelli Australia's IS department also helped. Various degrees of cross-reporting mean many business people are aligned to IT. While the IS team itself is small, Jedrasiak says cross-reporting makes its somewhat larger and more flexible.
"We [the IS department] have knowledge of various areas that IS doesn't always get in some organisations," he says.
The SAP installation saw IS take this approach further by seconding various business personnel into the SAP implementation. One to go was the internal auditor. "That has been so successful he now works for me in IS," Jedrasiak says. "This guy was invaluable to us because he had a cross-company perspective."IS also drew in the business champions, according to Jedrasiak. "They and their subordinates played an integral part in the process design. So when it came for us to do it, it was already put down in black and white by the business," he says.
Another success factor was Pirelli Australia's very pragmatic approach to the SAP R/3 product itself. Often in SAP implementations there's a temptation to "fiddle" with the product to make it fit the business. Jedrasiak says he knew this approach would lead to a longer and more difficult implementation.
Jedrasiak says that Pirelli Australia is no different from any other company when it comes to running a general ledger. "We knew that if we left the product alone, we would have a far greater opportunity for success than if we 'played' with it. Why would you want to move 'this' field, or add 'that' there? What is the return on investment? What is the benefit?" he asks. "So the decision at the executive group, from the managing director down, was that we would have nil changes.
"We made the decision that an SAP process was a better process," Jedrasiak says. "But we also put in place that in a year's time, we would go back and review it all."Jedrasiak points out that if anyone wanted to challenge this decision (remember this was a company which had challenged head office) and ask for changes they were welcome to do so. The procedure for proposed changes meant getting a sign-off from a superior before IS investigated making the change. As it turned out, the need never arose. Part of the reason behind rapid implementation was to roll out SAP too quickly for users to get wild ideas.
"The strategy of implementing it quickly was highly successful," Jedrasiak says. "We'd 'grown up' this expectation that the new system coming was all-powerful, almighty, all-singing and all-dancing, and people were hungry for change. Because we had the [executive] hierarchy and the real doers within the organisation wanting it so badly, it was highly successful."Sorting out the internal implementation process was crucial; so, too, were the external relationships. Jedrasiak says BHP-IT was chosen to do the software implementation due to its empathy with the manufacturing sector in Australia.
Pirelli Australia even sent some BHP-IT personnel to Italy to learn more about its operations. BHP-IT facilitated all contact with SAP, including a number of sessions at SAP. BHP-IT will also undertake installation of the sales and distribution model next year.
Jedrasiak is also happy with the service he got from Compaq, through its business partner CIC. Compaq was responsible for sizing the project and determining its server requirements, which Jedrasiak says have proven correct.
"We chose the right partners," Jedrasiak says. "A year ago I would have been a lot more reserved in my statements, because we hadn't done anything. But now, it's worked -- it's been successful for us. I was speaking at a conference for other SAP users and prospective users, and they really couldn't comprehend that in five months we put an infrastructure in and loaded SAP. There was a lot of talking in the back rows. But, we have it. We've had a number of organisations come and have a look at it," he says.
Those Cable Guys
When Pirelli Australia made its decision to go with SAP running on Compaq/NT in mid-1996, it was a local pioneer. "Our reference sites were largely in Europe or the US," Jedrasiak says, "and our phone bills were staggering, doing these reference checks all over the place."According to Jedrasiak, in the end, opting for NT on Compaq systems was not a difficult decision. While staying with the AS/400 platform was an option, Jedrasiak believes a large and costly box would have been needed to get the right level of performance. "Even though now it would have been somewhat easier for us, the cost compared to the NT solution was far and away above what we were prepared to pay."The HP-UX was hobbled from the start because Pirelli Australia had almost no knowledge of Unix. "The Hewlett-Packard proposal was a three-tiered SAP solution, so we had the client, the application and the server. It was a lot more hardware, so the price obviously was a lot more." The Compaq NT solution, however, called for a single application and database server.
"We had a little bit of knowledge about NT," Jedrasiak says. "It was a very good decision. It went in very smoothly, the training was very fast, the level of acceptance by the group was very high. So we're converting everything to NT, even the engineering systems, which are still Novell."Jedrasiak says the choice of NT will allow Pirelli Australia to support a diverse range of applications in different places with a single skill set. "We made a decision at the corporate level to standardise on NT right throughout the organisation," says Jedrasiak. "So sometime in the future we will have NT at the desktop, and NT at the backend." Pirelli now has seven NT servers, and that number is growing slowly as it moves other applications such as payroll, onto the NT environment.
"We will standardise. We'll be able to support practically anyone in the organisation, because there will be one thing to support," Jedrasiak says. "We really weren't going to have the people to support a Unix environment; so the choice was really between an NT or a Novell environment."
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