February 2002
Leadership comes naturally to The Siam Cement Group. Chartered by King Rama VI in 1913, Siam Cement helped build modern Thailand, becoming, along the way, a sprawling conglomerate and the biggest company on the Thai bourse. After the 1997 Asian financial crisis rocked the region, Siam Cement showed other companies the way forward as president Chumpol Na Lamlieng refocused the company on core businesses and paid off hard-currency debt.
In February 2001 Siam Cement made another pacesetting move, this one in the realm of information technology. It became the first company in Thailand, and one of the first in Asia, to outsource its IT services. The new provider is IT One, a 50-50 joint venture between Siam Cement and Accenture. IT One is a cost-effective way of tying information technology to business needs at Siam Cement, but its mission goes far beyond efficiency. The joint venture is also Siam Cement’s vehicle for creating world-class capabilities in customer relationship management, supply chain management and other vital applications.
A world-class effort is what’s needed in the aftermath of the Asian financial crisis. Once it might have been enough for Siam Cement to be the best in Thailand. But in exchange for support from the International Monetary Fund and the World Bank, Thailand has opened its economy to foreign competition as never before. In 1998 Siam Cement’s largest competitor was bought by Switzerland’s Holderbank, one of the world’s biggest cement companies. Now known as Holcim, the Swiss giant is locked in a struggle with Mexico’s Cemex and Siam Cement for market share in Asia.
For Chumpol, slimming down and concentrating on core businesses—cement, paper and petrochemicals—was a strategic as well as a financial decision. He sold off more than 30 sideline businesses, such as sheet glass and automotive products, determined that the company should do fewer things, better.
Such was the context in which IT One was born. Before the joint venture was set up, information technology at Siam Cement was a centrally managed, top-down affair, not well suited to meeting the needs of individual business units in a new, faster-paced environment. “We needed to be more leading edge—and more service-oriented,” says Chumpol, a Harvard MBA who has worked at Siam Cement since the early 1970s.
The company considered proposals from several leading outsourcing vendors before deciding to team with Accenture, which it had worked with in installing an enterprise resource planning system. Along with his duties at Siam Cement, Chumpol is now chairman of IT One (the six-member board has two other representatives from Siam Cement and three from Accenture).
The CEO of IT One, Allan Ziirsen, came from Accenture, as did a few other executives. But most of the 230 or so staffers at the joint venture—including two of the three top managers reporting to Ziirsen—hail from Siam Cement.
People, in fact, were Siam Cement’s most important contribution to the new business. The blue-chip company—which still counts the government’s Crown Property Bureau as its biggest shareholder—is Thailand’s most prestigious employer, and it was known for running the biggest IT operation of any industrial company in the country.
Persuading people to leave such a setting to join IT One wasn’t always easy. “We’ve done a lot of communicating,” says Ziirsen. The message is one of growth and opportunity—the products of IT One’s heavy investment in training and its big ambitions for the future.
“Both [venture partners] see this as a starting point,” says Ziirsen. “They want to grow the company by hiring more people and taking on more work, [from] both within Siam Cement and from outside.” Still, the cultural shift for IT One staffers is a significant one. “They’ve worked alongside IT users at Siam Cement as colleagues,” says Accenture client partner Raja Thuraisingham, who is an IT One director. “Now they have to look at those people as customers.”
Yet if change is important, so is continuity. IT One currently supports some 4,500 Siam Cement users—as many as 2,500 of them concurrently—handling such essential tasks as financial accounting and materials management. “We’re balancing the need for stability within the new organization with the need for quick, noticeable change,” explains Ziirsen.
The mix is working. Though IT One is less than one year old, it can already cite a major success. A new, Web-based distribution system ties the cement unit into its 1,000 dealers around the country. Since few of these building-products distributors were even computerized, bringing them online was something of a challenge. “We had to install the equipment, train them, everything,” recalls Chumpol.
But it was well worth the effort. Siam Cement has now bound this crucial distribution channel more tightly to itself—a significant competitive advantage. And the new system offers tremendous efficiencies. Direct-to-dealer shipment has enabled the company to eliminate nearly all of its building-products warehouses and to cut delivery times on many products from two weeks or more to a day or two.
The dealers’ eCommerce system is the first in a series of initiatives spanning all of Siam Cement’s business units. “Before we launched IT One,” explains Thuraisingham, “we formed a team which had people from all over the world—some of our best industry guys and technology guys—and we conducted a significant IT strategy study, which looked at Siam Cement’s position.” The team’s findings are the basis for ongoing projects in supply chain management, CRM, customer segmentation and performance management.
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But not all business units are being transformed at the same pace, or with the same priorities. “When we did the strategy study,” says Ziirsen, “the initiatives identified for each of the businesses were the same. But the importance to each of the business units of each of these initiatives is different. For example, supply chain management matters more to the petrochemical unit up front, whereas for some of the others, customer relationship management is the priority.”
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It looks as if other companies may soon be following suit. “This venture has generated a lot of interest in the Thai business community,” says Ziirsen. “A lot of big companies are looking at their IT spending and saying, ‘Maybe this is a model we ought to replicate.’”
Thuraisingham expects IT One to add customers both inside Thailand—where discussions with several companies are ongoing—and eventually, perhaps, outside the country. “IT One is well timed; the outsourcing wave that swept the US and Europe is just now arriving in Asia,” he says. “And there’s no reason why IT One couldn’t support a customer in Singapore, Malaysia or another neighboring country.”
The timing also looks good to Chumpol Na Lamlieng. Though the Siam Cement president says that “restructuring is a continuing process,” he has clearly turned a corner with Siam Cement, putting the crisis behind it. The slimmed-down conglomerate has now become a major player in Thailand’s information technology industry—and has added a powerful engine of change to its competitive arsenal. “We’ve always been several steps ahead,” says Chumpol. “IT One will keep us several steps ahead.”
Kenneth Klee is a New Jersey-based business writer.
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