German carmakers have opened offices and car plants all over the world. And in the process, they left their far-flung operations a high degree of local control over their operations ”“ including IT.
Now CIOs are rethinking that approach.
For years, top suppliers followed their key clients to new markets ”“ eastern Europe, South America, Asia. Production facilities were built, new offices were established, local companies were acquired and joint ventures were established. Many family businesses grew quickly into big global companies.
Most company operations far from home were allowed to operate independently. They had their own purchasing, handled their own accounting and ran their own controlling operations. At headquarters, everyone was happy when the numbers came in on time and profits were transferred to Europe.
But a change is underway and, gradually, companies are pulling in the reins. In interviews with automotiveIT, CIOs are having difficulties to pinpoint the exact moment that change began. But fact is that IT strategies are moving rapidly toward centralization.
Some attribute the change to the Sarbanes Oxley legislation in the US, which stipulated that all divisions of a company need to be connected through a central controlling system. Once that happened, a rethink may have been triggered by the greater transparency that revealed to top management that many divisions were actually competing with each other.
But it wasn’t just internal competition, which could, in some cases, actually be beneficial. Top managers also realized that different plants operated with completely different cost bases. Moreover, they were charging different prices for products sold to other divisions of the same company.
The Brose example
Many IT managers in the German auto industry look at supplier Brose as an example of a company that successfully adopted a global IT strategy. As Brose expanded internationally, its management decided early on to standardize and centralize its global ERP systems. In 1999, Brose produced a blueprint ”“ or “ERP footprint” that has provided guidance to all its operations worldwide.
About four or five years ago, many IT chiefs in the auto industry also started similar projects to centralize their global IT systems.The aim was to standardize systems and key processes such as controlling, scheduling, purchasing, accounting and development. A data center in Germany would pull everything together.
The thinking was that plants that operate according to set standards are more tightly connected to each other and can, thus, cooperate better, says Christian Ley, Brose CIO.
He explains the other advantages of his centralized IT approach. “At Brose, all employees speak the same language because they work off the same process template.”And he continues: “Everyone uses the same processes and the same core data. In every Brose facility, everyone will know his way around because he will find exactly the same ERP footprint.”
That is likely the way it will soon be at other automotive suppliers as well. If the computer is not yet the dominant business tool, it will be in coming years.
With the rise of the computer, paper is likely to disappear from many processes. Data, processes and language will be the same around the world. Top management can compare plants and people through data available at the click of a mouse.
Critics see risks
But the centralization of IT systems also has some downsides. One is the sheer mass of data that is being generated. It can be managed only through far-reaching automation and industrialization of processes. And the company will only function properly when one digital cog fits exactly into another.
Another problem is the increasing dependence on one IT supplier. A complete global network of factories, offices and joint ventures can be dependent on SAP, IBM, Oracle or Microsoft. “Some competition is good for business,” say the critics of uniformity in IT.
They also warn that a company-wide IT provider can only be replaced with a lot of difficulty and at a high price. CIOs often need many years to change over from one IT monoculture to another.
-By Christian Raum