Importance of the Alcan Case
Alcan's continued revenue growth is the result of the combined success of increasing sales in four main business units, in addition to growth through acquisition. The cumulative effects of these two factors have served to create a profitable business and one where a highly decentralized organizational structure dominates (Chang, Wang, 2011). The catalyst of the organization becoming so decentralized is the continued revenue gains made across four businesses, each competing in market areas that face heavy pricing and commodity-like market conditions. Despite the heavily process-centric based approaches the industry takes to supply chain management, production and distribution, Alcan has been also able to profitably grow sales in the more mature markets they compete in. The senior management and IT departments credit the highly decentralized nature of the enterprise-wide systems that run the company.
During the time period of the case, Alcan generated $23.6B in sales in 2006, and has 68,000 employees throughout its global operations that span 61 countries. The four major groups include Primary Metal, Engineered Products, Packaging and Bauxite & Alumina. Each of these business groups have their own Enterprise Resource Planning (ERP) system and IT infrastructure. They each also have their own maintenance contracts with enterprise software vendors including SAP who the company pays approximately $100M a year in maintenance fees to. There are also the costs of operating over 400 different pricing systems, many of which duplicate functions across divisions as well. The new CIO of the company, Robert Ouellette, enters into a challenging situation and one that will require a completely different IT and organizational structure to succeed.
Organizational Environment
The Alcan organizational environment is highly decentralized to the point of there being four separate companies in the same corporation, each with its own entire value chain and supporting functions. As with the value chain concept, each of the four divisions has created its own main and supporting functions, and no two business units or divisions are the same. From the initial supply chain management and supplier quality management processes and systems to the supplier qualification, new product development, production and fulfillment including logistics, each business unit is significantly different than the other. When information systems and processes become unique to a given organizational business unit or division, the information and intelligence shared redefines the identity and over time, the core competencies of a business unit (Boh, Yellin, 2007). This is exactly what's happening in the four business units of Alcan during the time period of the case study.
The Primary Metal, Engineered Products, Packaging and Bauxite & Alumina have in effect become their own companies, each with its own ERP, Manufacturing Execution System (MES), Supply Chain Management (SCM) and myriad of pricing and distribution systems. The case states that there are over 400 different pricing systems in place across the four business units or divisions. CIO Robert Ouellette and other senior executives see the potential for consolidating all systems together and creating a centralized IT architecture. Creating a highly centralized IT architecture and framework would require the fundamental structure of the company to change significantly. It would also require an entirely new IT architecture, followed by redefinition of processes, systems and procedures throughout the company. As the information platforms or technologies of a business define not only the performance of divisions but the structure and performance of business models over time, Robert Ouellette and his staff must think strategically as to how they will modify the overall organizational structure.
Strategic Planning for Companies
Creating transformational change in companies by automating their most challenging processes, strategies and systems is what Cincom Systems excels at today. The company has five different product divisions, each selling enterprise software into various segments of the Customer Relationship Management (CRM) marketplace. Privately held with 700 employees employed across five continents, Cincom is also profitable and has had many customers on maintenance contracts for over two decades. The future of Cincom is predicated on how well strategic plans can be defined and executed with its major partners including IBM, Microsoft and SAP. Of these three, Microsoft offers the greatest potential for accelerating the product development plans of the Cincom Manufacturing Business Solution (CMBS) business unit. CMBS generates between $7M to $10M a year in revenue, both on maintenance contracts in addition to new software sales, and has created a line of CRM and Enterprise Resource Planning (ERP) systems that are designed for complex manufacturers. In order to stay competitive, Cincom must move these systems to the Software-as-a-Service (SaaS) platform, which is how they can be migrated quickly and easily to Cloud computing platforms Microsoft has including the well-known Azure platform. This migration from being purely a licensed application to being on the SaaS platform also needs to include greater support for analytics and business intelligence (BI) within the applications as well. With these new features, the CMBS enterprise suite would be able to generate 30 – 40% more sales. In addition, the costs of supporting customers would drastically be reduced as the SaaS platform would make it possible to streamline new product releases on a central application platform. At present Cincom CMBS struggles with getting its enterprise customers to upgrade their existing CRM and ERP systems as well. With a SaaS-based system the company could roll out entire versions without having to deal with timing and costly delay issues as customers procrastinate on releases. This approach will help to alleviate one of the greatest hidden costs of enterprise software development, having to support multiple versions of legacy applications (Lindley, Topping, Lindley, 2008). It is anticipated this strategy will save nearly $7M over the next five years in development costs alone. Moving to a SaaS-based CRM and ERP systems will also significantly open up the opportunity to integrate these systems to legacy applications customers have neglected to integrate with their existing on-premise applications. The greater the level of integration between legacy systems and CRM and ERP software suites, the higher the Return on Investment (ROI) and more effective analytics and financial reporting (Borch, Hartvigsen, 1991). Cincom sees the potential in their three year strategic plan to solve long-standing problems that their on-premise software strategies have slowed down sales of their highest-end and most profitable enterprise software. The intent of this analysis is to provide a description of the Cincom Manufacturing Business Solutions (CMBS) business unit, perform a SWOT analysis, define how the Web Services plan created with Microsoft will impact their business in the next three years and how this plan will be measured and analyzed for effectiveness.
HR Gms Cgms: A Case
In the face of economic downturn, many corporations have been forced to make difficult decisions concerning layoffs and downsizing. However, according to the case study here, CGMS is unwilling to take this step. Therefore, as an alternative, the discussion here offers recommendations on making improvements to company structure, to existing IT systems, to leadership organization and to internal training that are designed to preserve the company's considerable virtues until the economy returns to form.