He needs to make sure the group’s engineers have the IT tools they need, that the company’s 17,500 worldwide employees can communicate and share information easily and that BorgWarner’s information and intellectual property is protected everywhere and at all times.
Farhat, who has been in his current position since 2004, needed to make radical cuts in his IT budgets when BorgWarner's business - along with the rest of the industry - plunged 42 pc in the crisis of 2009. But, now that the company is back in investment mode and growing, Farhat also has to make sure he can support that growth.
BorgWarner is investing in IT to boost efficiency and support its global expansion, but Farhat says he will continue to run a tight ship.
"My goal it to take the leverage that we've been able to achieve during the downturn and try to maintain that as we grow," he said in an interview with automotiveIT at BorgWarner headquarters in Auburn Hills outside Detroit this summer.
automotiveIT: Where does IT fit into the BorgWarner business?
Jamal Farhat: Our goal is to provide IT tools to the business so it can be run more efficiently. A second target is to see how IT can help achieve the company’s strategic goals. And because we are a product-innovation based company, it’s important that we protect our intellectual property.
automotiveIT: What priorities do you set?
Farhat: First, we need to give our engineers the tools they need. Second, we need to create an environment where people can collaborate on a global basis. Third, we focus a lot on the protection of information and intellectual property, so it stays secure within BorgWarner and is easy to access and can be managed.
automotiveIT: How does the global nature of the company affect your life?
Farhat: Seventy percent of our sales come from outside the US. A lot of our expansion is overseas. We have to develop IT organizations in new markets, put systems and infrastructures in place, establish footprints so we can quickly provide the services needed and do so without an undue cost burden. The costs need to be manageable for plants and businesses that start very small and then grow. You also have to be careful how you fine-tune the organization. What are global services, which ones are regional and which ones are local. If you spread your services too wide, you can lose efficiency. If you make everything too centralized, you lose effectiveness and speed of execution. How to keep everything and everybody connected is a challenge with 62 locations around the world.
automotiveIT: BorgWarner sales dropped 40 pc in 2009 and then rose by 42 pc again in 2010. What did that do to your IT budget?
Farhat: When we went through the downturn, we took it upon ourselves to take necessary measures to scale back on IT investment and the run rate for IT. That was necessary to help meet the profitability and cash-flow goals of the company. A lot of investment ended up being delayed. We scaled back on staffing and we tried to manage cash flows and spread them out.
automotiveIT: And what about the situation today?
Farhat: Today we are back in investment mode from an IT point of view. But my goal is take the leverage that we achieved during the downturn and maintain that as we grow. That means that our target for IT spending as a percentage of sales continues to be near the number we had during the downturn.
automotiveIT: So what is IT spend as a percentage of sales
Farhat: In the last five years, independent of the downturn, we’ve reduced IT costs as a percentage of sales by about 25 percent. Obviously we’ve grown, but in relation to sales it has declined.
automotiveIT: How did you achieve that?
Farhat: One of the things we’ve done to reduce costs is take a highly centralized IT organization and turn it into a more global IT organization. In the past two years, we’ve redesigned a lot of functions, taken out redundancies across the company and have reduced a lot of the waste. We’ve also introduced large enterprise systems, so that almost 75 pc of our business goes through a single ERP system. And we’ve done a lot of work on storage and server consolidation and data lifecycle management. By understanding our data better, we can put tools around them and reduce the cost of storage. A lot of what we’ve been doing is aimed at improving efficiency, which helps reduce costs.
automotiveIT: And where are you investing?
Farhat: When it comes to enabling the business side, we’re doing it for new locations. We’re also investing in the revamping of our ERP and PLM software. We’re supporting our supply chain management and we’re streamlining business processes overall to reduce the cost of IT to the business. But I will honestly say that I'm the toughest person on myself. We purposely run a lean shop.
automotiveIT: Please explain how you make IT investment decisions?
Farhat: We treat IT investment like any other investment you make. That means you have to have a 15 percent return before it proceeds. Most of the time, anything you bring to the business lives within that criterion. Second, some investments fall under the header risk mitigation, which is like insurance. The question there is: are you willing to live with the risk or rather mitigate it? And third, there are what I would call soft savings that come with an investment. Examples are time-saving new applications. At the end of the day, you present these to the business and see if they want it.
automotiveIT: What does your global organizational structure look like?
Farhat: We have 230 full-time people. Seventy percent are outside the US, in line with our sales. All IT managers worldwide report to me. I work with presidents and plant managers to make sure IT continues to be part of strategic business processes. Every business unit also has a business relationship manager who is responsible for and accountable to a particular part of the business. That gives us a chance to gain efficiencies from a single global organization while keeping the IT operations aligned with the business goals.
automotiveIT: A lot of automakers have changed or are in the process of changing their PLM software. How does that affect your business as an automotive supplier?
Farhat: In the interaction with customers, you need to be part of their extended supply chain and their engineering organization. So you need to have something that is an extension of their PLM software. What you do independently depends on the type of product you have in your business. If you do injection-molded plastics for external and internal parts, you need to be a lot more tightly integrated with your carmaker. So you use the PLM systems they use. If you have products that don’t need that tight integration, you can have your own.
automotiveIT: How big a role has virtualization played in your restructuring efforts?
Farhat: In 2004 , when I joined BorgWarner, we had 900 servers. I made it a priority to reduce costs by going down the virtual road in terms of servers and storage. We have eliminated 600 out of the 900 servers. Now the servers are all part of a virtual-machine environment. We’ve done similar things in the data-storage space. We’ve put some lifecycle management tools in so you can put in the right type of data storage depending on the access needs.
automotiveIT: And where does Cloud computing come into the picture?
Farhat: When it comes to infrastructure, I believe we have sufficient critical mass within the company to be our own internal cloud provider. I don’t need to go outside to gain efficiency or get value. I can do it internally with my own little cloud, my own virtual servers. In the area of infrastructure, what you’re looking for when you go outside is agility. You need to be able to move fast. Also, you need to be able to deal with fluctuations in demand. You don’t want to size your infrastructure to the peaks. We size our own infrastructure to the average demand and rent in the Cloud when we need it. In the application domain, we have gone outside, but that has been for very unique functionality.
automotiveIT: And what about the longer term prospects for the Cloud?
Farhat: Over time, we'll be thinking about outsourcing more and more. But right now, as a big enough company, you have to ask yourself why you wouldn’t be able to achieve something on your own and keep the money, rather than share it with somebody else.
automotiveIT: Data security is a growing issue. How do you protect BorgWarner data?
Farhat: We get bombarded with attempts to access our data from the outside, but so far we have been able to deny them. Now we’re moving into markets such as China and India, where the threat is considerably higher. We’re doing a lot of work on security keys and rights managements so that, if someone does walks out the door with a document, that document becomes useless unless the person is authorized to see it and we can validate this. On a factory floor, you may be able to look at a document, but we can prevent you from forwarding, copying or printing it. We have a rights management system in place and its deployment is growing We’re not entirely there yet.
automotiveIT: What is your policy with regard to people’s using their own PCs and smartphones for business purposes?
Farhat: We are slowly expanding the kind of tools people can use in our environment. For our board of directors, we’ve put information on iPads, which we can later zap again. The documents are in the Cloud and we can reach into the devices and wipe them out in case of loss or theft. Typically, every quarter we wipe out the previous quarter’s data.
automotiveIT: What do you spend most of your time on?
Farhat: Every year has a slightly different flavor. This year we have a barrage of projects - more than 1,000 of them - we have to deliver on now that we’re back in investment mode.
automotiveIT: A big-picture question: What are the biggest issues in IT in coming years?
Farhat: No doubt in my mind that one of the big issues is the Cloud. You’ll continue to see offerings that make a strong business case. The challenge will be to see why you should have something within the bounds of your four walls. You need to be flexible enough to find the right opportunity to jump on the Cloud or onto cloud-based services. Another big trend is consumerization. Consumers want to bring the devices they use in their everyday lives into work. You have to be careful here not to jeopardize security.
-Interview by Arjen Bongard, editor, automotiveIT.com, photos by Larry Peplin