Tackling the integration via acquisition challenge

When one of Australia's oldest manufacturing companies, Melbourne-based Greer Industries, was sold to Epic Holdings of New Zealand, IT manager Shane Gray began looking at how to implement a unified IT infrastructure that could help slash operating expenses.

After the acquisition, Greer - a $20 million wire and tubing business - saw branch offices of Epic's wire and tubing company, Faulkner Collins, open in Brisbane and Sydney.

"At that time it was a priority to keep each business unit autonomous," Gray said. "But since Sydney was a bare manufacturing plant with no real information systems and Brisbane had grown to the size of running a LAN and Attache accounting systems, the business had reached a size for us to start thinking about putting ERP everywhere."

Gray was adamant that the businesses couldn't remain autonomous at the IT level as that would mean "cutting off its nose to spite its face".

"We need to reduce costs wherever possible," he said. Queensland might be the first interstate ERP site if it comes online to Melbourne, Gray said. "It would gain far greater functionality for less as it would face lower maintenance fees.

"Other cost savings would come with communications because there are so many good deals around now, possibly cutting 10 percent off [those] expenses."

Gray hopes that Queensland will be integrated by the end of this year or early next year and that Sydney will follow online in another six months. Finally, it is anticipated that the New Zealand business units will then be integrated, but Gray says "it takes a fair amount of convincing to get a leopard to change its spots".

"An added bonus of integrated systems is that eventually we could have all businesses on the same general ledger," he said.

With an IT budget for its Melbourne operations of between $300,000 and $400,000, Greer has about 50 screens, but that number could be expanded to 85 with the addition of the external business units. And with both Brisbane and Sydney growing, Gray says, their screen count could number 10 to 20 in years to come.

Greer's IT infrastructure consists of an iSeries running Interbiz's KBM ERP application along with computer aided design and manufacturing software.

"The iSeries is the most open system available today as it will run everything, comfortably gives five nines uptime and its TCO is lower than anything else we have," Graye said.

"Stage two will be to consolidate two Windows systems onto the iSeries and implement a unified directory to overcome the need for each user to be in three separate directories."

Gray said Greer's biggest challenge will be to "undevelop" a lot of the custom-developed functionality in its ERP system to allow the other companies to be integrated into it.

Gray estimates that as a result of a central IT department in Melbourne, expenditure can be reduced as much as 35 to 40 per cent in the long term.

Artistic outlook

System integration consumes big bucks, according to IDC Australia services analyst Phillip Allen who said Australian businesses will spend more than $2.3 billion on it during 2004, or about one dollar in every $10 they spend on technology - including hardware, software and services

He said mergers and acquisitions hold many integration challenges for which implementations are "an art, not a science".

"Each situation is unique and presents its own set of problems and potential solutions," Allen said. "However, most approach this in a 'cost minimization' mindset. Companies want solutions which offer a clear link between spending and improved business results, as well as solutions that can bring about cost efficiencies from existing investments."

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