There can be few more contrasting landscapes than the Long Mile road — in the armpit of Dublin’s industrial suburbia — and the lush rolling hillsides around Ballyragget in the rural idyll of Kilkenny. What both places have in common is that each has been home in the past five years to the IT headquarters of Glanbia, the EUR2.3bn food company formed by the merger of the Avonmore and Waterford co-operatives.
The Group IT Services office of Glanbia is to be found in a secluded Georgian mansion close to the company’s large processing plant in Ballyragget. In a sense, it has come home as the building housed Avonmore’s IT department prior to 1990 when it was moved to Dublin.
While in the capital the IT personnel were hard at work developing a SAP installation that would help to consolidate the infrastructure of a company that had grown by acquisition and had a large variety of systems in its constituent parts.
CIO Tony Minogue explains: ‘at the time, staff retention was an issue so we needed to be in Dublin. We knew we were going to come back to Kilkenny and so we recruited people on the basis that we would be returning. We still lost about a third of our staff when we moved back. They had all been trained to a high degree on SAP and so a lot moved on. But people either want to live in Kilkenny or they don’t’.
Minogue, a Kilkenny native, certainly counts among the former and is rewarded in part by an office with a view that puts the Long Mile road in the ha’penny place. There was no great difficulty in recruiting other staff either; there are 55 people in total in the Group IT Services office which comprises half the total IT staff of the company, as most business units around the world have their own IT staff on site.
The company has undergone a period of consolidation and refocussing on its core business which is dairy products and ingredients. Both its main constituents, Avonmore and Waterford Co-Op had diversified from their original core dairy activities into other areas of food production, in particular meat. The businesses also had several subsidiaries outside of Ireland.
As this interview was taking place, the company had just sold off its British meat business and had entered into a joint venture with a farmer’s co-operative in the USA to build a new cheese plant in Texas with two American farmers’ cooperatives that would be one of the biggest of its kind in America.
Central role
The IT department has played a central role in this process of consolidation and standardisation. Minogue explains: ‘after the merger we had 23 different businesses, eight different mail systems, and I don’t know how many network protocols. So really, what we had was a bag of spaghetti’.
At the time of the merger Glanbia had what Minogue describes as a ‘mixed bag of applications’ that had been grown internally. ‘We had Coda, MSA and packages from Omicron in some of the plants,’ he says.
At that time back in 1998 the company decided that it needed to consolidate its IT infrastructure, and so it started the process of selecting the best business systems and deploying them throughout the company.
The company’s strategy was and is to standardise and consolidate. It is spread around a vast number of premises, comprising one-man depots up to 1200-employee plants like Ballyragget. ‘We have 50 major sites and then maybe 100 minor branches and offices all over the place,’ says Minogue.
For desktop systems, the company chose to standardise on Microsoft Windows and Office. On the network side it opted for Cisco and TCP/IP, and for its main critical business applications it chose to standardise on a suite of applications based on the SAP R/3 ERP system.
According to Minogue: ‘we bought SAP to deliver world class business processes and it has brought a level of process infrastructure to the organisation which we didn’t have before. We introduce new business processes either to improve efficiency or to improve products and services in terms of higher quality’. The issue for people like Minogue who manage IT is to relate IT costs and projects back to business services and that’s a big challenge. So instead of talking about SAP internally, they talk about running a finance service or a purchasing service.
Glanbia looks at the business from three aspects: finance, operations and logistics. Minogue says: ‘we call the people who run each of those areas the “module owners” because their roles associate to the modules in SAP. Each module owner comes from the business itself and is not primarily a technical person at all’.
For example, the finance module owner was a financial controller in one of Glanbia’s businesses. The operations module owner was a plant manager. The logistics person was recruited from outside, but had experience putting in logistics systems elsewhere. All of the module owners are senior positions within the company in IT. But they’re all business focused.
‘All of these people are trained to academy level in SAP’s certification program,’ says Minogue, ‘so they know both the business and technical capabilities of SAP. Their role is to map Glanbia’s requirements into technical requirements and to oversee their implementation’.
Module owners
The module owners are all based in Kilkenny and they have business analysts working for them who all come from a business rather than a technical background.
Glanbia’s SAP installation is run out of a single data centre in Reading, England and the management of the operation has been outsourced to Hewlett Packard.
Glanbia chose the outsourcing option because it realised that SAP was going to be a critical system and it did not have the expertise inhouse to manage such a system.
‘We decided that the management of SAP was not core to what we do, so we went to the market leaders to manage it for us,’ says Minogue. ‘We went live with the first implementation in 1999 and we’re still rolling it out now.’
The SAP R3 application covers finance, purchasing, stock management, sales and distribution, quality management, production planning and plant maintenance.
SAP has allowed Glanbia to centralise some business functions that it would not have been possible to do before it was installed. For example, says Minogue, it has allowed the establishment of a shared-services centre in Dungarvan, Co Waterford which takes care of all the group’s accounts payable, accounts received, payroll, pensions and purchasing operations. ‘It has brought a new level of standardisation to business processes to enable us to deliver shared services. There are fewer people here supporting more services than there would have been five years ago,’ he says.
It also makes trading between the various business units more transparent and easy to manage. ‘In a company the size of Glanbia there’s a lot of inter office trading,’ says Minogue. ‘Before we had SAP we had a lot of manual issuing of invoices and purchase orders, with people printing off invoices and sending them to sister companies who would then type them into their separate financial systems. Now that all happens seamlessly thanks to the R3 application.’
‘On the purchasing side we have enabled group purchasing to consolidate contracts,’ he adds, ‘so now we can easily manage contracts from a central office whereas before, although you could do it in theory, in practice it was extremely difficult without a standardised software system. You were relying on a lot of people coming together to give you the full picture’. SAP has enabled Glanbia to move from a ten-day accounting cycle to six days.
Categories
Glanbia categorises its IT systems as mission-critical, meaning that the business cannot function without them; business dependent, meaning that their function is vital but not requiring the same degree or resilience or availability as a mission-critical system; and standard which is a nuts and bolts system such as a desktop PC running standard Office software.
The mission critical systems, such as SAP, are managed with Service Level Agreements with big industry partners like HP. Business dependent systems are handled with SLAs operating internally between Group IT and the various business units, whereas standard functions are typically of a type that does not require service level agreements.
Once a function is defined as mission critical it automatically gets assigned a different level of resources, especially regarding backup and standby servers. The SAP environment for example, has a SAN which is mirrored, clustered database servers and four application servers.
For added measure, says Minogue, the entire system is replicated in a separate room at the Reading facility ‘not far enough away for my comfort yet’, where the same configuration runs up to three hours behind the main system. ‘That’s what mission critical means and because it’s very expensive it’s important not to define something as mission critical when it isn’t,’ he says. ‘So if somebody comes in and says he wants something to be defined as mission critical I say: “Fine. It’s going to cost you an extra four hundred grand a year,” at which point they usually decide that their requirements are not so mission critical after all.’
Minogue says it’s important to watch as systems’ statuses change from standard status to business dependant status, to mission critical. ‘For example,’ he says, ‘we bought a fax server which allowed people to send and receive faxes from their desktops. Then at one stage we started sending out purchase orders over fax and then it went from standard to business dependent. E-mail too moved from standard to business dependent’.
Glanbia outsources many of its key systems to service partners. As always with such arrangements, management of the relationship is crucial. For Minogue, the important thing is to keep the overall design and direction of a vital application in house, leaving partners to take care of the day to day operations.
‘The important thing is that you own the design and driving of the functions,’ he says, ‘and for me that’s the business side rather than technology. The technology infrastructure is becoming a commodity. It’s not there yet but there are already commodity type services and that’s the way I would like to see it going’.
Going out for IT
Glanbia has outsourced several of its key business processes and IT applications, ranging from those classified as ‘mission critical’ to those meeting the lower classification of ‘business dependent’.
The key to outsourcing, according to Minogue, is to remain in charge of the design and driving force behind the application. Having a service-level agreement (SLA) is one thing. Depending on the strength of a relationship with a service supplier when things go wrong is quite another and requires continuous close co-operation and effort.
System and service: SAP R/3: various key business modules
Status: Mission critical
Service provider: Hewlett-Packard
Glanbia’s entire business runs on a series of SAP R/3 modules which the company took charge of customising itself with the help of an army of consultants and specialists. The installation is hosted in a Class A data centre in Reading, England by Hewlett-Packard which provides a managed service to Glanbia remotely.
The initial outsourcing deal was completed with Digital, which was then taken over by Compaq and subsequently sold to Hewlett-Packard.
The business could not run now without its SAP infrastructure. It is as clear an example of a ‘mission-critical’ application as exists. It covers finance, purchasing, stock management, sales and distribution, quality management, production planning and plant maintenance. As Minogue says: ‘if our SAP infrastructure goes down we can’t take orders or dispatch goods.’
Therefore the relationship with Hewlett-Packard is something more than a mere ‘hosting’ service. ‘There’s a difference between hosting and managing,’ says Minogue. ‘Hosting is just sticking a server into a data centre, but managing the system is a different thing and you need to know how to do that. We pay a lot to HP to manage the service and lots of people say that they could host our system for a fraction of the cost, but all they really do is stop the rain falling on it.’
SAP is the application, the design and development of which is managed by Glanbia itself. The underlying infrastructure, however, is all Hewlett-Packard’s. ‘They look after the basic administration,’ says Minogue. ‘They keep the system going, do capacity planning and daily housekeeping, and also upgrade it. What it means for us is that we have a different way of managing that service. Instead of technical people looking after it, we have a contract manager looking after it for us.’
The key to successful outsourcing is managing the relationship between service provider and customer and knowing where the conflicts are likely to lie. Minogue admits that he has learned a lot of lessons since the SAP application was first outsourced.
‘When we started off I was a little naïve about it all,’ he says. ‘I thought: “We’ve outsourced it all. Digital [as was] can look after it all and I don’t have to worry about it”. But it didn’t work out that way.’
‘We have to manage the service provider,’ he continues. ‘They have expectations and so do we. My expectations were way too high. We started off with an SLA which guaranteed a service availability rating of 99.95 per cent which is about 9hr downtime a quarter. At the start, Digital said that we didn’t have to worry about anything. But you do have to worry, if they don’t meet the rating.’
There is no substitute for experience when working to an SLA. ‘When you outsource a managed service like this, the first thing that happens is you go in with your demands, which for us was high availability,’ says Minogue. ‘The provider then comes back with a list of things he’s going to do to manage the service to meet that rating. And you think that’s reasonable and sign up for it. If he omits something from that list, and you’re not smart enough to include it, then you get caught. We have to think of our own contingency plans.’
Managing an enterprise application like SAP involves a very close partnership arrangement. ‘We had to increase the number of people on our own team to manage that relationship which I didn’t appreciate at the start,’ says Minogue. ‘HP is doing a very good job for us but the lesson we learned from outsourcing a project like that is you can’t outsource your problems. Unless you know exactly what you’re outsourcing and can measure and manage it you’re going to have a bumpy ride.’
Service: Bulk invoice printing
Status: Business dependent
Service provider: PrintPost
Glanbia outsources its bulk printing of invoices and payment documentation to PrintPost, a subsidiary of An Post, in Port Laoise. ‘It’s very simple,’ says Minogue. ‘We give them a load of documents and say: “print that”; they charge us for everything they print.’
Describing the arrangement as ‘a numbers game’ Minogue says that the management of the relationship with PrintPost is a much simpler task than managing the operation of the mission-critical SAP application.
Glanbia typically needs to print about 20,000 invoices a week. ‘It’s a pain for us to do inhouse,’ says Minogue, making it all the more attractive to outsource. If Glanbia were to perform the function itself it would have to organise resources for a series of peak batch processes. ‘If you send out invoices every Tuesday night or Wednesday morning, you have to have staff in place to put everything into envelopes, and you have to have all the printers allocated to print a large batch. PrintPost do all that for us,’ he said.
Other advantages that PrintPost offers is the ability, as part of the postal service, to pre-sort all the envelopes by county so that it usually provides next-day delivery. The ability of PrintPost to react to problems was also evident when it was found that some customers in England were not getting mail within the maximum two-day timeframe specified by the service level agreement.
‘PrintPost put trackers into the envelopes which allowed them to isolate the problem,’ says Minogue. ‘They managed to identify a sorting office just outside Birmingham where mail was being held up. That’s something we just couldn’t do ourselves.’
Outsourcing the printing function also meant that Glanbia could get rid of its big 1200 page/min printers that it used to have inhouse to print its bulk mail.
System and Service: Corporate wide-area network (WAN)
Status: Mission critical
Service provider: Allnet (Cable & Wireless)
Management of Glanbia’s corporate network is handled by Allnet, a subsidiary of Cable & Wireless.
After the merger Glanbia found that it had inherited a variety of networks with several different protocols and a large number of problems regarding the speed at which it was operating. ‘We were getting lots of complaints about things like slow delivery of internal e-mail and so on,’ says Minogue. ‘Also as our offices are on many sites we had some people trying to manage things from Ballyragget and others from Dublin. We decided we needed someone to manage the network and gave the job to Cable & Wireless.’
Glanbia took a decision to standardise as much as possible on Cisco equipment, especially for routers and has noticed a change in overall speed and reliability since it handed the management of the network to a specialist.
Allnet has a console in its Dublin office which displays Glanbia’s network on a map with colour-coded lines. It allows Allnet to identify problems as soon as they happen and fix them. ‘It’s a 24 x 7 operation so that’s another outsourced service that has worked well for us,’ says Minogue.
15/08/2003
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