The Alcan Case - Coursework Example

? The Alcan Case Alcan Aluminium Limited (Alcan) occupies the second position as a producer of aluminium products in the world. Headquartered in Montreal, Canada it has business operations in 61 countries and employs 68,000 people. The annual revenues of the company are generated from four major business groups in which the company operates: Primary Metal, Engineered Products, Packaging, Bauxite & Alumina. The last group contributes the maximum to the annual revenues of the company. In January 2006, Robert Ouellette joined Alcan as the Vice President – Corporate Information Technology. In January 2007, he was appointed the Chief Information Officer of Alcan when his responsibilities expanded to include the global management of IT services and the development of the shared service endeavors. Hardware Advantages and Disadvantages of the current Alcon technology infrastructure When Robert Ouellette joined Alcan as the Vice President - Corporate IT, the company was found to spend 80 % of its annual IT budget on external consulting and outsourcing services and also on hardware equipment and software. The annual budget for technology infrastructure was estimated to be around $76 million. Alcan had a complex technology infrastructure to support its diverse business operations. This consisted of 400 network sites and six main data processing centres. Under this regime, Alcan also used extensive hardware equipment including 3,000 servers, 31,500 personal computers and about 9,000 laptops. In addition, the IT employees had to manage information in 30,000 voicemail boxes and also answer 3,700 calls per month. To facilitate the smooth functioning of such technology infrastructures, Alcan had forged partnerships with numerous IT firms. Thus the current technology infrastructure included a range of diverse equipments. (Dube, Bernier, Roy 2009 p 7) The company’s network was extremely complex in nature. Alcan had developed clusters of interdependent sites through a period of continuous acquisitions. Different suppliers provided service on these networks: it included big suppliers like MCI, Equant, Bell, Videotron as well as small local suppliers. In order to access the central network one had to go through many of these interdependent sites which were linked to a master site which in turn was linked to another master site that was finally connected to the main network of the company. So, a person wanting to access the company network had to go through a number of sites before that. As Alcan increased its acquisitions and sales, the clusters of these sites also multiplied in number. Gradually the whole system became so complicated that it started giving rise to instabilities within the network. It was hard to predict the after effects of removing even one single link, but it could be safely presumed that the consequences would be difficult to manage. (Dube, Bernier, Roy 2009, p8) Alcan had contracts with six different companies till 2009 for managing its six main data processing centres. They included the Hewlett Packard and the T-Systems in Germany, the T-Systems in Paris, the IBM in Toronto, the CGI in Montreal and the CGI in Saguenay. Thus, a lot of time and resources were spent in managing these different contracts. Gradually, the responsibility of simultaneously managing the six data processing centres required a greater amount of technical expertise than that which was already available within Alcan. (Dube, Bernier, Roy 2009, p8) Advantages and Disadvantages of the new Alcon technology infrastructure Alcan started implementing an infrastructure standardization plan in 2003 after it had acquired Pechiney. Under the regime of the new technology infrastructure, an Infrastructure Shared Service Centre was first set up for bringing the networks, servers and workstations to a common platform and thus decrease the complexity of the existing technological installations. Though the operations of the different business groups varied widely from each other, their technology infrastructure requirements had a lot in common. Every group needed access to a network, a message managing system and also required servers, workstations and data processing centres. This infrastructure needed to be economical and also function optimally in terms of performance and reliability. These common infrastructure requirements could be easily transferred to the Shared Service Centre which would take care of them. The Primary Metal business group was the first group to comply with this idea of the Shared Service Centre and the others followed suit. (Dube, Bernier, Roy, 2009, p8). Under the new technology infrastructure regime, Alcan selected Orange Business Services as a single supplier of its network and entered into a contract with it. This supplier was a part of the France Telecom Group. However, Orange Business Services did not provide service in the Australian telecommunications area which was almost monopolized by Telstra. Thus, Alcan entered into a partnership with Telstra to provide network services to its Australian branches. After these contracts were negotiated, all the sites of Alcan were gradually shifted to this new network. Similarly, Alcan also selected IBM as the single supplier of its message management system. The IBM offices in Toronto and Montpellier used to monitor Alcan’s message management. (Dube, Bernier, Roy 2009, p8) Under the leadership of the CIO, Robert Ouellette, Alcan also chalked out a global strategy for the transformation of the data processing centres. Ouellette wanted to utilize only two out of the six data processing centres. One centre was planned to be the mirror image of the other one. A team of 78 members was set up in Voreppe, France in order to regain the control of activities including those which were outsourced. This group was set up within the Infrastructure Shared Services Group. Similar regional groups were also set up in Montreal, Shanghai, Saguenay and Brisbane. The team of specialists in these centres managed Alcan’s contracts with the different companies, supervised the company’s infrastructure needs, evaluated the performance of the technological infrastructure installations and worked with Alcan’s partners towards the further development of its technical infrastructure. (Dube, Bernier, Roy 2009, p9) The Infrastructure Shared Service Group also set up an Information Technology Infrastructure Library (ITIL) to efficiently manage the activities of the group. The Group used the ITIL to single out the best methods of IT infrastructure operations and management. The Shared Service Centre utilized processes to manage its service delivery and used the technical domain to operate its support services. This resulted in Alcan gaining a better control over its service quality and also delivering an improved performance overall. The group of specialists in France was awarded the first prize at the 2006 IT Service Management Forum for achieving supremacy in its ITIL process implementation. (Dube, Bernier, Roy, 2009, p9) Suggestions of Additional Improvement of Infrastructure Under the new technology infrastructure regime Alcan has a contract with Orange Business Services to provide network services to its branch offices around the world. Only network service to Alcan’s Australian offices is supplied by Telstra. Gradually, the supply of network services in Australia can also be brought under Orange Business Services, once the latter gains a sizeable foothold in the country. This would make the Alcan network completely uniform across the globe. In addition, the efforts required to maintain the network contract with only one firm will be more economical than the efforts which are needed to maintain two contracts now. It will also be advisable for Alcan to always maintain an updated version of its Information Technology Infrastructure Library as this would be beneficial to all the IT employees. In the case, of any new addition to the existing technology infrastructure, this should be suitably added in the ITIL. The company has already exhibited an enthusiastic initiative in this area when its specialist group in France secured the award for the successful implementation of the ITIL process performing better than industry heavyweights like Carrefour, Airbus and GE Capital. Software Advantages and Disadvantages of the current Alcon application management Under the current Application Management system, each of the business groups of Alcan planned, developed and maintained their respective own information systems which were specific to the requirements of the respective groups. Three important SAP implementation projects were being carried out in different business groups. Since these were parallel initiatives being implemented on the same technological platform, they entailed a huge pressure on the company’s internal capabilities in the SAP area. The projects used SAP variants, involved complicated transfers and the reuse of information and required regular updates and the implementation of more recent versions. This obviously entailed a great degree of SAP expertise from Alcan’s IT resources. Majority of the applications utilized at Alcan had gradually grown to be diverse and complex over the years which hindered the easy access of information. As an example, only financial management alone entailed 400 diverse applications. This complex system resulted in escalating the costs of application management which involved the maintenance and operation of these applications, updating them regularly and also training employees in the various applications. Under this regime, Alcan also had to maintain partnerships with a number of technology provider firms. (Dube, Bernier, Roy, 2009, p9) Advantages and Disadvantages of the new Alcon application management The new Alcon application management wanted to standardize the networks, servers and workstations which would simplify the diverse and complex technological installations. Under Alcon’s new application management regime, the Application Shared Competency Centre was created by the senior management of IT to realign the global application management at Alcon. The Centre was entrusted with the responsibility of creating, developing, maintaining, delivering and monitoring the applications. However, under the new model the administrative applications including the SAP applications were retained within the business groups. When a development in technology was required the responsibility was shifted to the Competency Centre. Actually the applications which catered to the specific requirements of the business group like the MES application was left under the supervision of the respective business group while the important applications common across the various business groups were transferred to the Shared Competency Centre.(Dube, Bernier, Roy. 2009, p9) The reason behind such a decision was that since the operations of the business groups varied widely among themselves, so it was thought economical to transfer the responsibility of development of the common applications to the Shared Service Centre. Expectedly, the business groups reacted strongly to such a decision being apprehensive of the fact that their control over their systems would be lost once the responsibility of the development of the applications was shifted to the Application Shared Competency Centre. In the process of shifting to this new arrangement, the applications’ central management was structured in a novel way and began functioning in a way so that they became extremely essential to the business groups. Gradually, the business groups increasingly started depending on the suggestions and skills of this central management of applications. In this way, the Application Shared Competency Centre slowly became functional. The Centre acquired the responsibility of maintaining several of the existing applications. These included the applications, which were being developed on the SAP platform. This entailed a slow transfer process, but one which was devoid of hazards. Thus a great advantage of the new Application Management system was that it realized the importance of the maintenance of applications within Alcan and took the necessary steps to facilitate it. (Dube, Bernier, Roy 2009. p10) The Application Shared Competency Centre gained the responsibility of maintaining the new applications because the legacy applications were brought under the SAP platform. There were offshore resources which used to render their service to the Competency Centre. Alcan had two major service centres in Montreal and Chicago in the American continent where service was provided by 17 internal resources and 55 external consultants and contract workers. Voreppe and Genevillier had a similar group of resources consisting of 73 internal staff and 53 external consultants and contract workers who used to provide service to customers of the rest of the world. The Shared Competency Centre also outsourced many services involving the development, maintenance, testing and surveillance of the applications. In this respect, the senior management of IT decided to function in a hybrid model where a huge part of the work was outsourced to the Accenture centres in Bratislava (Slovakia) and Hyderabad (India). (Dube, Bernier, Roy, 2009 p10). The Application Shared Service Competency Centre provided Alcan with an overview of its information systems across the globe. It also provided useful insights regarding the optimal usage of the company’s resources. Under the new application management regime, Alcan selected SAP as its basic technical platform and all new application initiatives were developed on the lines of a SAP integrated development project. (Dube, Bernier, Roy 2009, p11) Agreement or Disagreement with the Proposals It is feasible to comply with new application management regime in the long-term interests of the company. Under the current arrangement, the responsibility of maintaining and developing of all the applications specific to a business group rested with the group itself. However, under the new regime, the work of developing the applications common to the needs of the business groups, was transferred to the Application Shared Competence Centre. This division of responsibility has a number of advantages. It would increase the efficiencies of the application and economise the costs spent on their development. This arrangement would determine the optimal utilization of the existing resources within the organization and also encourage the specialization of skills. The transfer of the development of the common applications to the Shared Service Centre is also likely to standardize the practices and norms followed by the company, promote the interconnectivity of projects, facilitate contractual agreements with the supplier firms and on the whole generate economies of scale in the long run. (Dube, Bernier, Roy, 2009, p 6). In future, if there is a need to implement a project on a particular platform which is common to some of the business groups (as the SAP implementation in Alcan), the Shared Service Centre would facilitate it. The technical resources are likely to work at a single site of the project implementation instead of working at different sites had the project been undertaken simultaneously by more than one business group. The presence of the Shared Service Centre would ensure the optimal allocation of resources in this way. However, as we have seen, under the new application management model, the maintenance of the applications specific to a particular business group is retained with the business group itself. This arrangement ensures that the business groups remain involved in some IT functions at least. Alternatively, it would have been very difficult to convince the business groups of the effectiveness of an application management model which transferred the management of the entire gamut of IT applications of all the business groups to the Shared Service Centre. Management Integration Advantages and Disadvantages of the current Alcon IT management system Prior to the introduction of Robert Ouellette into Alcan as the Vice President – Corporate IT in January 2006, Alcan had a decentralized IT management system. Each of the four business groups had its own IT organization which planned its goals according to the need of its own business group. The IT organizations planned the IT strategy and designed the IT infrastructure to meet their specific requirements of their respective business groups. Under this arrangement, only the IT employees belonging to the same IT management of a specific business group were required to co-operate among themselves. There was no need for the IT employees of the different IT management of the diverse business groups to co-ordinate with each other with respect to work. When Ouellette joined the company, three important SAP implementation projects were being undertaken in the various business groups without any inter-group co-ordination. This kind of arrangement also made it very difficult for the IT management at Alcan’s head office to chart out the common IT objectives of the company and to monitor them. Although, there were some IT processes like finance, procurement etc. that were common to the four business groups, but even they were not well-coordinated among themselves. (Dube, Bernier, Roy 2009) The company followed a complex system of management and utlisation of IT under the current regime. During the five years prior to the joining of Ouellette, Alcan had made many acquisitions which in turn had resulted in a highly fragmented IT atmosphere that had been developed to support these new processes. At that time, the company was working with more than 1,000 information systems, out of which more than 400 systems dealt with financial data. This made the business processes slow and cumbersome. It needed a huge manual effort to produce specific information from this IT system. It was costly to manage and apply particular Government regulations like the Sarbanes Oxley Act through such an IT system (Dube, Bernier, Roy 2009 HEC020, p4) Under the current system, Alcan was reported to spend around $200 million annually on the IT services as a whole. However, when Ouellette made a detailed cost analysis of Alcan’s IT department, the calculated figure was much higher at around $295 million. The analysis unearthed many disparate methods of calculating costs that were in practice in the IT department at that point of time. Thus, the cost calculated by these methods was far removed from the actual expense. Moreover, the three SAP projects that were being implemented in the separate business groups entailed an overall cost of $500 million. This proved to be a huge cost on the company resources. In addition to this, Ouelette also found the project risk calculation to be faulty and the transformations planned for the IT system were not adequate. The scope of the IT projects that were being implemented across the company was huge and the expertise of the existing employees seemed insufficient to satisfy it. Ouellette’s analysis also reported that the management of the IT projects was inefficient: some of them had been delivered late and exceeded their stipulated budget. (Dube, Bernier, Roy 2009 HEC020, p3) Advantages and Disadvantages of the new Alcon IT enterprise architecture In January 2006, Robert Ouellette became the Chief Information Officer of Alcan and set about to reform the enterprise technology architecture. A new Enterprise Architecture Director was appointed and it was decided that all new technical development in Alcan would be done by the support of standardized technologies and practices which had to be designed suitably. The enterprise architects who were already working for the company were evaluated on the basis of their competencies. Among them, the three best architects were transferred to the team of the Architecture Director. In addition to this, there were four positions created in the new team where new resources were recruited. Firstly, the team analyzed the main projects that were being implemented in the company and identified the common technical goals underlying these projects. From this, the team created a list of fourteen important foundation blocks which were the common platforms and applications utilized by more than two business groups. These foundation blocks would form the basis of the current and future technological developments in Alcan. Some of the blocks comprised of the Information Exchange Infrastructure, Document Management, Enterprise Portal, Identification and Access Management, Knowledge Management, Business Intelligence and the Web Services Platform. Of these, the first and the third blocks were considered to be most important by the IT management and the new architecture team started by focusing on these two blocks. The team outlined the main concepts of the foundation blocks with reference to technologies, standards and rules, determined their responsibilities and prices and also provided the technical solutions for each of these platforms and applications. (Dube, Bernier, Roy, 2009, p7) The leaders of this new enterprise architecture team were based in Montreal and reported directly to the IT senior management. The members of the team who worked in Montreal and Voreppe worked in close coordination with the members of the Infrastructure Shared Services Centre and that of the Application Shared Competency Centre. First, the enterprise architecture specialists would identify a foundation block after which it would be developed and made ready to be used by the business groups. If the block belonged to the infrastructure domain (hardware) its management would then be transferred to the Infrastructure Shared Services Centre and in case it belonged to the application domain (software), the responsibility of its management was transferred to the Application Shared Service Centre. Under the new enterprise architecture, the leaders of both the Shared Service Centres reported directly to the senior IT management and the Centres were financially supported by internal billing facilities. (Dube, Bernier, Roy. 2009. p7) Staying with the current IT system or moving to the new enterprise architecture In the long run it will be beneficial for Alcan to migrate from the current IT management integration regime to the new enterprise architecture. This can be showed with the help of an example. The Information Exchange Infrastructure foundation block involved the exchange of data in a SAP environment, as one of its significant functions. There existed huge diversity in the methods in which the business groups arranged the data exchanges between modules, between modules and the external sources and between modules and other Alcan systems. The business groups had independently implemented an increasing number of SAP applications which had created this complexity in the data transfer process. This diversity generated the demand for a variety of expertise, which was not always satisfied by the company. To provide a solution to this issue, the new enterprise architecture team identified the original SAP product platform and developed the required tools for the transfer of data. Once the applications that were currently being developed as well as the future applications integrated these standard tools into their respective interfaces, the process of data transfer would be facilitated. (Dube, Bernier, Roy 2009 p 7) The new enterprise architecture at Alcan has helped to bring an increased visibility in the IT management of the company. The shift would signify the migration from a regime of decentralization to an arrangement of distributed collaboration. Under the current arrangement the IT management was in the midst of confusion due to the lack of direction and specific aims whereas the new architecture team has been cohesive in chartering out a common objective for its own perusal. This will definitely prove to be beneficial for the IT department and for the company as well. Alcan plans to undertake important IT projects in future that would help in reforming the organization. The new enterprise architecture team provides a solid support for the IT management team to achieve this vision. (Dube, Bernier, Roy, 2009, p 1) Therefore, in a period of a little more than one year, Robert Ouellette had effected major transformations in the technology infrastructure, the application management processes and the enterprise architecture of Alcan. All these changes were capable of generating potential benefits for the company. He earned the support of the business groups to effect these transformations in IT as a result of his own good relation with the groups as well as the due to the strong reputation of the Central IT team. After the reforms, the central IT management, the business groups, the Shared Service Centres coordinated among themselves to plan out the implementation of new IT projects. (Dube, Bernier, Roy, 2009, p 12) References Dube, L., Bernier, C. and Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part A. International Journal of Case Studies in Management. 7(2):May. HEC020. Dube, L., Bernier, C. and Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part B. International Journal of Case Studies in Management. 7(2):May. HEC021. 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