IT Management at Alcan - Case Study Example

IT Management at Alcan Part 1 Alcan falls in the quadrant which represents Responsive Solution Providers. This quadrant consists of companies that are described as higher rate of change organizations that compete on operational efficiency. The company fits best in this quadrant because in this industry it is more about price than product differentiation. The aluminum industry is very competitive with prices being determined by demand and supply. There have been many changes in the industry as companies seek to improve their positions through vertical integration and mergers and acquisitions. The industry has been through various changes since the 20th century which has seen the price of aluminum changing in various directions – up and down. There are times when there is a glut and so prices decline rapidly as in the 1990’s when supplies from the Soviet Union increased by more than four times from 250,000 metric tons to 1.2 million tons and price fell from $1.65 to $0.53; a decline in price of approximately 68%. Since 2000 there has been rapid expansion in some countries resulting in an increase in the demand for aluminum in emerging economies of Asia and Western Europe. This is in addition to general market recovery which has resulted in a major turnaround in the industry. Between 1999 and 2005 there was a growth of over 35% in the industry. Additionally, the company’s operations are based more on being an efficient producer rather than differentiation. There is not much difference in the quality of the products and so production cost has to be kept at a minimum in order for Alcan to compete successfully. Part 2 The five decision areas of the Weill and Ross model are: IT principles; IT architecture; IT infrastructure; Business application needs; and Prioritization and investment decisions. In the area of IT principles the governance style adopted was that of a feudal system where each business unit makes separate decisions on the basis of the unit or process needs. Each unit had their own strategic plan and every business group was independent. Each group had its own IT organization that pursued its objectives based on the needs and orientation of the group. IT Architecture adopted a feudal system to the extent that there was no architecture in place for finance which is a very important aspect of the company’s operations. The operations and structure of the business units remained the same after the operations were acquired or merged. Each operating unit had its own IT organization. The needs and activities of each group was highly diversified and the organization chart which indicates that the Executive Vice-President and Chief Financial Official is at the top of the Corporate IT function is not quite so as the operations of Alcan are spread over several countries. In relation to IT Infrastructure the governance style employed was also that of a feudal system where each business unit makes their own decisions in relation the infrastructure they required to carry out specific areas of its operations. The different operations only shared a few services. However, the accounting infrastructure varied across the different business units and in different locations. In relation to the business application needs, it is much decentralized and fits closely with that of anarchy. According to Robert Ouelette this has resulted in over 1,000 different applications with over 400 relating to finance. In terms of prioritization and investment decisions the IT governance system in place was feudalism as in most of the other decision areas. The business representatives for the operating groups decided on the requirements. Each operating group had their own strategic IT plans and so the decisions were made on that basis. Part 3 Governance is structured in this way at Alcan because there have been many acquisitions and mergers. Each business unit that was acquired or added through merger operated as a separate entity. The advantages of this kind of structure are as follows: The business units are able to make decisions quickly without having to wait on head office. This means that implementation is not affected by inefficiencies associated with bureaucracy which is normally associated with centralization. The head of IT is able to pay attention to major aspects of IT decision-making The business representatives of the operating groups understand the needs of their operating groups best The disadvantages of this structure are as follows: Each business unit does it own thing without any kind of consultation to determine whether there are persons inside the organization. No internal consultations are done and therefore bad decisions are made Duplication of services and costs as is the case where three separate implementation of SAP was taking place at the same time Little or no communication between operating groups There is no coordination in terms of information systems support in various operating groups As the CIO of Alcan there are a number of changes that I would make to governance styles in the five decision areas at Alcan. The changes that are necessary are those that would allow for an effective and efficient functioning IT department. This would be advantageous for Alcan as it would lead to an overall improvement in operations as IT is vital to the company’s success. IT Principles would have to be left to my office as the CIO with the Executive Vice President and Chief Financial Officer and the Chief Executive Officer making an input. These principles would be based on the strategic goals of the organizations. Based on these goals the strategic IT goals of the various operating units in the organization will be determined. This approach is a business monarchy in which the senior business executives including myself makes the IT related decisions of the company. IT architecture would be led by me as the CIO. An IT monarchy approach would be taken and the top levels of the Corporate IT function. In addition to me, the Executive VP and CFO and heads of other corporate functions would be apart. This is so because the IT Architecture should serve the mission of each functional department in Alcan. IT Infrastructure would be governed as a duopoly. In this way the business leaders representing of the operating groups would collaborate with Corporate IT. Corporate IT will be central to all of the operating units in the organization. Therefore, Corporate IT would work with the business units to ensure that the decisions that are made are consistent with the strategic goals of the organization. In this way I will ensure that any new IT infrastructure is in keeping with the company’s current and future needs as determined by the IT Architecture and has the potential to allow for future changes. Business application needs have to be properly identified. The governance style adopted would be that of the federal system where Corporate IT and the business representatives of all the operating groups collaborate. This will ensure that the applications that are purchased are suitable for the needs of the organization and are able to interface with the existing infrastructure. Prioritization and investment decisions would be governed as an IT duopoly. In this way Corporate IT and the business leaders representing the operating units will work together to determine the priorities based on the strategic goals of the organization. Any request for IT investment will be checked against the strategic priorities of the organization and this will determine whether or not the investment takes place. Part 5 (a) In terms of other IT projects I would recommend that Alcan merge the operations of similar business units. In so doing the company can benefit from synergies in various aspects of its Corporate IT functions. The CIO has indicated that there are over 1,000 different applications with over 400 in finance making it a very heroic task of obtaining information. This suggests a lot of mismatches in the applications. It appears that it would cost the company less if it were to do a complete revamping of its business applications. This would allow the company to choose the best of what it currently has, that is, those that can be adequately interfaced with its IT infrastructure and that are in keeping with its IT architecture. In terms of finance only a few applications may be necessary. Those that are chosen should be able to adequately capture the business specific information of a particular business unit. Units with similar business operations should be using the same applications. This would result in a more efficient and effective operation. This would lead to a reduction in the cost of producing information. It would also reduce the time taken to produce information as well reduce the amount spent on outsourcing IT functions. This recommendation fits in with Ouelette’s plans because he wants IT to be managed as a coordinated function across the entire company. This recommendation represents a vital part of the coordination process in that it is important to assess what is currently in the organization, what works well and what doesn’t. The fact that all the separate business units are minding their own business is one of the major problems facing Alcan. Similar departments in the various operating units should be working together as far as the coordination of IT business applications is concerned. I would recommend that IT human resources report to the same IT unit. In doing so it will be easier to manage and coordinate the resources. This is something that Ouelette would deal with since it was listed as a problem. Part 5 (b) Ouelette’s plan is to basically centralize IT decision making. While that may be a good idea on the face of it, it will prove a difficult task. This is because the organizations are fairly large and have not been effectively merged into Alcan’s operations. Additionally some of the operating groups represents different kinds of businesses and so have to be managed as such and the one centralized management approach does not fit. According to the Accenture Governance Model a hybrid governance model should be adopted with business units accountable for solution delivery (p.5). Additionally, the Accenture model requires that Responsive Solution Providers “define technology standards and select reliable IT vendors for mature components of the architecture and provide directional guidance for evolving components” (p. 5). This is in keeping with the plans that Ouelette has for the organization. Some aspects of the organizations IT functions will be centralized and the areas that are decentralized will be properly coordinated and monitored to ensure that the IT function is effectively managed. Works Cited Dube, Line, Carmen Bernier and Vital 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) Read More