The Standardization DownsideBy John McCormick | Posted 2002-10-11 Print
Alcoa can't dictate the prices of the aluminum it sells. So it's relying on software to help control costs.
The Standardization Downside
Despite the potential benefits, there's a downside to standardizing on a single software platform, according to Andrew Bartels, a research leader at Giga Information Group. He says a corporation gives up a degree of flexibility by going with one suite and runs the very real risk of being stuck with one or more pieces of second-tier software. "It's hard for any vendor to be best-of-breed with everything," he says.
Other risks include the possibility that a vendor may be slow to develop a needed application, or that its software products may be deficient in some area. "These are all concerns that need to be factored into these decisions," he says. And, indeed, Alcoa's software savings come at a price.
Alcoa looked at other suites, including one from SAP, before deciding to go with 11i from Oracle. Huber says both vendors' products were strong, but there was already a sprinkling of Oracle database and applications software through the organization. "Since we had some experience with Oracle, that was probably the deciding vote," Huber says.
But Alcoa ran into problems as it rolled out Oracle 11i.
"There were defects with the product," admits Gary Pola, a strategic account manager with Oracle Consulting, who has been working with Alcoa. Those involved with the EBS project declined to detail the 11i faults Alcoa encountered, although Pola did say the glitches experienced by the aluminum maker were similar to those faced by other early Oracle 11i customers. When it was first released, 11i buyers found the package to be plagued by bugs. A study last year by Forrester Research found more than 5,000 separate problems in the suite, with some applications, such as order management, being especially problematic. Other early users complained some modules were light on features. Oracle today maintains it has eliminated the bugs and bolstered the suite's modules.
Still, people involved in the Alcoa project agree the Oracle problems held the project back a couple of weeks. While not an extensive delay, Alcoa has a rapid rollout schedule and the Oracle setback put pressure on the team.
"We spent a lot of time and effort getting through that process," Crooks says of the effort made by KPMG, Alcoa and Oracle to fix the problems.
While dealing with its technical difficulties, the company also had to address cultural issues surrounding the change.
To get broad buy-in, Alcoa set up a process that begins with each unit assessing itself, to see how ready it may be for a software switch. A change-management specialist is brought in to prepare the unit for the new software and procedures. And then pilot tests are run to make sure the operation runs smoothly on the new applications.
The information-technology group also is sensitive to business needs and, Huber says, will continue to support some non-Oracle applications that perform functions particularly well—including Hyperion's financial performance management software and Plumtree's Internet portal software.
Initiatives such as EBS are so difficult to pull off that it's rare for any corporate giant to standardize on just one software package, according to Jennifer Chew, an analyst with Forrester Research. In addition to the risks laid out by Giga's Bartels, Chew says it takes years for a global, multibillion-dollar company to implement software end-to-end. And, she says, there are any number of business variables—including shifts in corporate strategy, acquisitions, and market shocks—that could throw an enterprise software project off track.
In the end, when it comes to deploying a common software applications set, Chew says, "it's not unusual for a company to have it as a strategy, but it's very unusual for a company to put it into practice."
Another reason companies may shy away from these projects is the expense. Alcoa refused to say how much it spent, but Chew says a project as extensive as EBS—including software, support and training—could run more than $100 million.
Alcoa , however, expects a significant and long-lasting payback. As EBS project manager Horner points out, the real savings will come when the Oracle software is fully deployed across Alcoa at the end of next year. As promising as the EBS results have been to date, Horner says, "you'll see the major contributions of EBS in 2003-2004."
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