The Most Exciting Project I NEVER Managed! Lee Rizio Rizio & Associates June 21, 2011

Transcription

1 The Most Exciting Project I NEVER Managed! Lee Rizio Rizio & Associates June 21, 2011

2 Key Topics to Cover The Perils of Mergers and Acquisitions - Honeywell IT Strategies How to Cope! Honeywell - Challenge and Plan IBM Grand Proposal(s) Steps Governance Implementation Methodology and Challenges We Won - RIGHT?

3 So what use is this to Me? Mergers and Acquisitions How Can IT deal with them? IT Strategies Planning Outsourcing - Generalities IBM Grand Proposal Governance Project Management Numerous Lessons!

4 For The Love of Mergers A major Objective Drive out duplication and seek synergies, SAVE MONEY and THRIVE! Honeywell Merger History- $ 35 B Honeywell - Instruments and Control Engine Services and Systems Bendix Aerospace Instrumentation Allied Chemical Extractive Signal Jeep Turbochargers and Components

5 Honeywell Major Businesses Aerospace - Engines, Auxiliary Power Units, Avionics, Landing Systems- 12 businesses Automation and Control Solutions Environmental, 5 total Specialty Materials Nuclear, Fibers, Semiconductors, 15 total Transportation Systems Cars, Thermal, Brakes, Turbochargers

6 Honeywell s IT Scenario Legacy Systems Systems purchased with the merged companies Some obsolete no longer supported by IT ERP Systems SAP, Oracle, BPCS, AMS, LOTS more over 20 systems Literally hundreds of names and titles

7 Honeywell s IT Scenario Legacy Systems Systems purchased with the merged companies Some obsolete no longer supported by IT ERP Systems SAP, Oracle, BPCS, AMS, LOTS more over 20 systems Literally hundreds of names and titles Estimated IT Development and Maintenance Costs - $ 330 Million per year!

8 So What Can Honeywell Do? Do nothing continue to live with it! Ask each unit to convert by themselves and choose whatever system they want Set up a lottery let each business develop their own strategy and then decide what the best approach is LET S MANAGE the environment and set up a new system for business units and Corporate

9 IBM s Grand Strategy IBM is outsourcing Honeywell s Hardware and Infrastructure. We are meeting every SLA! IBM has a huge Services Consulting Business and especially AMS and SAP! IBM is global and can harness and leverage global resources! IBM has Outsourced Services in India and numerous other places! For over 10 years!! Propose an offer Honeywell cannot refuse!

10 WhyIBMisFirst inservices WhyIBMisFirst inservices IBMGlobal Services.deliveringindustry-focused e-businessolutions BusinesInovationServices EngineringConsulting&Svcs e-businesstrategy&design Consulting Digital Marketing&Branding e-comerceservices Security&PrivacyServices Customer Relationship Management EnterpriseResourcePlaning SuplyChainManagement BusinesInteligenceServices Procurement Services WebAplicationDevelopment e-businesskilsdevelopment CustomSystemsIntegration KnowledgeManagement Services IntegratedTechnologyServices e-businesinfrastructureservices ITConsulting Total SystemsManagement Infrastructure&SystemsManagement Services Networking&ConectivityServices BusinesConsulting&RecoveryServices Technical Suport Services ITConsolidation MidrangeExpresServices ITProduct TrainingServices Strategic Outsourcing Services e-busineshostingservices AplicationManagement Services NetworkOutsourcingServices DataCenter Outsourcing Services DesktopOutsourcingServices

11 IBM has conducted extensive market research which indicates that ERP customers are looking to out task their ERP applications support. 70% 56% 54% Primary Reasons for Outsourcing 60% 47% = Somewhat Important 50% 39% 36% = Extremely Important 40% 28% 27% 30% 20% 10% 25% 14% 21% 9% 13% 7% 8% 3% 13% 0% Access to Scarce Resources Improved Service Levels Lower Cost relative to current/ expected internal spending Capacity Flexibility Access to leading edge ERP tools/ methods Predictability of Access to leading Cost edge skills/ capabilities for mgmt. of apps. integrated with ERP app. Access to leading edge skills/ capabilities for HW/infrastructure Outsourcing Sample Size = 190 customers Source: Mercer Phase II Quantitative Survey

12 Let s Make a DEAL!!! IBM proposed an offer that Honeywell could not refuse! Sit down right now and write us a check for $ 300 Million and we will take over your Maintenance work. That will save you $30 Million right away and allow you to do SAP unencumbered. OR write us a check for $ 330 Million and we will take over your Maintenance Business and also take you to SAP throughout Honeywell for free! We will figure out how many years the contract as to be for us to recover our investment.

13 What is Necessary to Pull off this Business and Contract? What is IBM s Application Management Service? What Governance Rules and Environment must IBM set up with Honeywell? How does Outsourcing Play into this? How does anyone do something like this? PROJECT MANAGEMENT enters in!!!! HEY! THAT S US! DON T Forget! Explored at end Slide 18

14 So REALLY What IS AMS?? Applications Management Services is: Portfolio Analysis and Management Identify Applications for Consolidation Upgrade Identify Applications for Remote and On-line -Grow by Web Enablement (B2B, B2C) Applications for Decommissioning Sunset Project Plan Definition into Business Case Legacy Transformation Identify Legacy Applications for Transformation Project Plan Definition into Business Case

15 Implementing IBM AMS Services Management of Legacy Systems Day one nothing has changed Learn the applications Little documentation Ship what we can Off shore Cost and retirement Development of a Total Development Application Portfolio Management New Systems in SAP that have new features Legacy Transformation Systems that replace Legacy Services outright Other services needed to add

16 HONEYWELL IBM Governance Model

17 IBM OUTSOURCING/OFFSHORING IBM had used India- Bangalore to support its own SAP, Siebel and Maintenance applications (SAP alone - the largest in the world!) IBM had a large communications resources and capacity for Honeywell global applications IBM had re-engineered their own applications a few years before IBM was supporting all of Honeywell s hardware and networking infrastructure

18 OK- ISN T IT TIME FOR PM?? YES!! And so WHAT? 1. Integration and Planning! 2. Scope You d better believe it! 3. Time, Cost, Procurement Management 4. Human Resources and Communications Thousands of employees, languages, time zones, etc. etc. etc. 5. Project Quality Determined by whom? 6. Project RISK? RISK? RISK!!!! 7. And I was the one who would do this!!

19 We Won RIGHT? WRONG! NO WAY!!!!! WHY? The Human Factor IBM Outsourcing The Human Factor Real CIOs do REAL projects! The Mystery Factor Too good to Believe! If it is that easy we can do it ourselves! Why? WHY? WHY!!!!!!

20 The Desire for CIOs wanted the opportunity to do this! They would NEVER have the chance to do anything like this again! The project was RISKY!! Governance would be a BIG challenge ERPs change the whole scenario Too many businesses DIFFERENT BUSINESSES Yada, Yada, YADA

21 SO?? Honeywell developed a separate IT Section to plan and implement the project They went out to bid The selected one Big 6 Consultancy The CIO left now CIO of a large California Company Two years later, Honeywell re-organized And now???

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23 Outsourcing in General History Present Potential Scenarios ISSUES TO CONSIDER CAREFULLY

24 Offshoring Observations If you plan to outsource just to save money, You will NEVER get there! Do not bet on any one solution or location. You MUST Explore them all! Do not think these will stop Either Global Sourcing growth or competition Core Competencies NO!

25 Offshoring Potential Issues Cultural Issues Language Communications Infrastructure Issues Time Differences Shared knowledge transition Disengagement Peril Etc. Etc. Etc.

26 Managing into the IT Future! Determine Business Strategy Align IT Strategy Determine Critical Success Factors to succeed Business Management 101 Plan What? Organize How? Staff Where do I get my best resources Control ruthlessly and ruthlessly Follow up!

27 Offshoring Where- You Name IT! India Mexico Canada Brazil Ireland China Belarus Singapore Poland Romania Australia Shanghai Africa

28 So what does this all mean? The Future Most companies will not do good planning- they usually don t! The stars will do a GREAT job at planning strategically It all comes down to GOOD MANAGEMENT! If you think that education is costly, consider the cost of incompetence!

29 Offshoring China and India The Rise of the China New Super Country

30 The Rise of the New Super Country Brief History of India and China Why China First? Did India Catch Up? The New-er Super Employers! The Dynamic Changes Today

31 China vs. India India should have been first! Training in Technology Language Elite Class China Rushes in Management by Trial and Error Don t laugh It Works! -And it was Necessary!!

32 China Mao and The Cultural Revolution Corruption in the Provinces Leads to Starvation The Workers Revolt by Silence The Management overlooks the trespass China transforms from the bottom up! China Deng learns Roadmap by genius! USSR (Old Russia) was a scary Example to Deng. He did not want a repeat!

33 India Prime Minister Vajpayee 2003 visit ten years after his last visit Cannot believe the Changes! Vows to follow Returns to India faces the challenges Government Bureaucracy Invigorate the Higher Caste Their strength Technology THE REST IS HISTORY!

34 Offshoring Who?? Manufacturing China IT Offshoring India and now MANY! CHINA??? At first, everybody and anybody! Then, as expected A Shakeout! Tier One - Indian based companies Tata Consultancy, Infosys, Wipro, Satyam (No More!), IntelliGroup Near Tier One - IBM, Accenture, HP, SAP Tier Two - Others Companies have their own- Sony Electronics

35 Offshoring Some Facts McKinsey Quarterly August 24, 2009 India leads the world in providing offshore services in business and technology, with revenues of $ 58 Bil in 2008, out of a global total of $ 80 Billion. McKinsey estimates this is just the beginning: the global market for offshore business and technology services could grow to about $ 500 Billion by Yet even with this growth, the industry will still serve less than 1/3 of the potential market for these services, which McKinsey estimates at $1.65 Trillion to $1.8 Trillion in 2020.

36 Offshoring Some Quotes Immigration Victory, Wall Street Journal, Op- Ed - June 29,2007 Either the US will accept more of these workers, especially from American graduate schools, or more companies will outsource more high-tech jobs to Ireland and India.

37 Outsourcing in General History Present Potential Scenarios THE FUTURE? Bright Cloudy CHANGING!! CONSIDER CAREFULLY