The Most Exciting Project I NEVER Managed!

Lee Rizio

Rizio & Associates

June 21, 2011

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?

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!

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

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

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”

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!

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

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!”

Business Innovation Services

Engineering Consulting & Svcs

e-business Strategy & Design

Consulting

Digital Marketing & Branding

e-commerce Services

Security & Privacy Services

Customer Relationship

Management

Enterprise Resource Planning

Supply Chain Management

Business Intelligence Services

Procurement Services

Web Application Development

e-business Skills Development

Custom Systems Integration

Knowledge Management Services

e-business Hosting Services

Application Management

Services

Network Outsourcing Services

Data Center Outsourcing

Services

Desktop Outsourcing Services

e-business Infrastructure Services

IT Consulting

Total Systems Management

Infrastructure & Systems Management Services

Networking & Connectivity Services

Business Consulting & Recovery Services

Technical Support Services

IT Consolidation

Midrange Express Services

IT Product Training Services

Strategic

Outsourcing

Services

Integrated Technology Services

Why IBM is First in ServicesWhy IBM is First in ServicesIBM Global Services...delivering industry-focused

e-business solutions

IBM has conducted extensive market research which indicates that ERP customers are looking to out task their ERP applications support.

25%

14%

21%

9%13%

7% 8%

3%

56%54%

47%

39%36%

28% 27%

13%

0%

10%

20%

30%

40%

50%

60%

70%Primary Reasons for Outsourcing

Access to

leading edge

ERP tools/

methods

Access to

Scarce

Resources

Capacity FlexibilityImproved

Service

Levels

Lower Cost

relative to

current/

expected

internal

spending

Predictability of

Cost

Access to leading

edge skills/

capabilities for

HW/infrastructure

Outsourcing

Access to leading

edge skills/

capabilities for

mgmt. of apps.

integrated with

ERP app.

= Somewhat Important

= Extremely Important

Sample Size = 190 customers

Source: Mercer Phase II Quantitative Survey

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.

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

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

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

HONEYWELL – IBM Governance Model

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

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!!

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!!!!!!

The Desire for Adventure@

• 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

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???

Outsourcing in General

• History

• Present

• Potential Scenarios

• ISSUES TO CONSIDER CAREFULLY

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!

Offshoring – Potential Issues

• Cultural Issues

• Language

• Communications

• Infrastructure Issues

• Time Differences

• Shared knowledge – transition

• Disengagement Peril

• Etc. Etc. Etc.

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!

Offshoring – Where- You Name IT!• India

• Mexico

• Canada

• Brazil

• Ireland

• China

• Belarus

• Singapore

• Poland

• Romania

• Australia

• Shanghai

• Africa

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!

Offshoring – China and India

• The Rise

of the

“New Super Country”

China

• Brief History of India and China

• Why China First?

• Did India Catch Up?

• The “New-er” Super Employers!

• The Dynamic Changes Today

The Rise of the “New Super Country”

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!!

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!”

• Deng learns “Roadmap by genius!”

• USSR (Old Russia) was a scary Example to Deng. He did not want a repeat!

China

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!

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

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 2020. 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.

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.”

Outsourcing in General

• History

• Present

• Potential Scenarios

• THE FUTURE?

• Bright

• Cloudy

• CHANGING!! CONSIDER CAREFULLY