Industrialization: Going Global

Outlook Special Edition, May 2004

From cars to CD players, toys to tennis shoes, we all take today's manufactured goods—inexpensive, consistent in quality, available in abundance—largely for granted. Rarely, if ever, does it occur to us that the success of manufacturing rests on a two-stage industrial transformation spanning more than two centuries. Manufacturing moved first from the craft shop to the factory floor, where products were created to standardized specifications, in greater number and at lower cost. More recently, manufacturing became a global endeavor as the complete process was segmented into stages that could be carried out wherever it was most geo-graphically advantageous.

The same basic phenomena are currently transforming information technology. Until recently, IT solutions have been "built at home," within geographic boundaries, often within corporate firewalls. Today, however, organizations have an opportunity to standardize IT work processes, segment the work and disperse work globally for greatest efficiency—in short, to industrialize information technology.

Mastering this approach will result in efficiencies that go well beyond simple cost cutting, enabling IT to generate savings that can be reinvested in technology. Rather than being a function whose costs need to be managed, information technology can take on a broader role as a force for value creation.

Application and Process Delivery
Let's look more closely at the idea of industrialization in the context of IT. It means much more than what is traditionally called "outsourcing" or "going offshore." Without doubt, many organizations have achieved real benefit from turning over basic business processes and IT to outside providers. Likewise, many organizations have found it advantageous to send IT work to low-labor-cost countries such as India, the Philippines or China. But the industrialization of IT is a broader, longer-term concept that goes beyond outsourcing or subcontracting work offshore.

The industrialization of IT rests on three pillars that parallel those underlying the success of modern manufacturing. Each signifies a fundamentally new approach to application and process delivery, and each is a component that high-performance businesses need to master.

1. Work Processes are Replicable and Measurable
   Industrialized manufacturing is based on processes that can be repeated to produce goods of reliably high quality again and again. Of course there is room for variation and customization, but the goods must ultimately conform to a proven and standardized model.  

   Yet in technology, development projects have long been treated as one-off creative endeavors. Now, though, information technology can benefit from reusable application and technical architectures. Tools are being developed to essentially automate much of the delivery process. Delivery processes and methodologies are being codified so they are repeatable. These changes greatly increase productivity.

   And productivity can continue to improve, because rigorous metrics capture real, quantitative feedback across multiple projects. By learning what works best and where improvement is possible, an organization can continuously enhance its processes and tools as they mature. Productivity, quality and speed can all improve over time.

2. Work is Performed by Capable, Technology-connected Teams
   In an automobile manufacturing plant, no one individual builds the entire vehicle. Work is segmented so that various parts of the assembly process are performed by those with the right specialized skills, up and down the line.

   The parallel concept in information technology is the development of different groups of people with deep skills in technology, business processes and project management, who collaborate as a team. Technology helps team members to communicate seamlessly, even when they are not working side by side, and to develop a strong common corporate culture and set of values so that they are all committed to delivering a high-quality, technology-based business solution.

3. Work is Located Wherever it's Most Efficiently Performed
   In manufacturing, work was first concentrated in factories. Then, as products became easier to transport by rail, truck and air, portions of the business were relocated around the country, then around the globe.

   Much the same is happening in technology, with one key difference: The product here is not a tangible object like a shoe or a car—it is information itself. Technology delivery centers, like factories, bring together individuals with shared responsibilities or skill sets. But these individuals are networked through technology and communications channels like the Internet, which enables easy knowledge transfer and the rapid movement of information around the globe.

   That smooth global flow of information means work can be strategically and economically segmented and dispersed geographically, for scale and flexibility. Having delivery centers around the world offers a number of clear benefits. One is security based on redundancy, which lowers the risk that disruption of any one center from external events such as political turmoil or natural catastrophe will affect the entire company.Another benefit is speed: Work can be handed off as the sun sets; round-the-clock activity shortens the delivery cycle. Finally, each set of responsibilities can be carried out wherever it is best performed for strategic or economic reasons.

Work Transformation
Adopting this strategy for the design and delivery of technology solutions means more than simply transferring work outside the central IT organization (whether this is across town or halfway around the globe). Skill centers and multiple locations are just components of a new overall approach to applications development and maintenance.

There are a number of ways this approach transforms how work is done.

It matches teams and experience to the complexity of the project and work.
Chief information officers often complain that their best resources are tied up in lower-value projects. This happens because resources often trade in a kind of gray market, where assignments are made in office corridors, usually based on personal, often geographically focused, relationships. This means that the best resources are not always matched to the most complex and potentially most profitable projects. The CIO of a major North American retailer, for example, discovered that his head of supply chain systems would often keep the best talent occupied with basic maintenance work until a large project was approved.

It optimizes scarce business and technical skills across geographies, service providers and departments.
As companies embrace the discipline of industrialization, tapping into the best experts in the company and across service providers will be vital to ensuring consistently high performance. The best architects and designers will produce the best designs, which will lessen the need for integration and rework. If those architects and designers are available to all the delivery teams, they will ultimately benefit the majority of a company's projects.

Executives at a major global manufacturer of appliances, for example, noticed that the company had maintained a strong skill base in its Brazilian forecasting unit. As a result, the unit had consistently exceeded corporate inventory turn targets. Currently, the global CIO team is determining how to set up a global delivery model to take advantage of this unit worldwide.

It leverages the best tools available to eliminate repetitive and error-prone work activities.
Emerging software tools promise to do for information technology what robotics has done for manufacturing. Requirements and design tools not only help clarify what an IT system should do to support business processes, but also lay the foundation for consistent documentation and methods to be followed by everyone who works on the application.

Transition and collaboration tools help teams coordinate their work across geographies and time zones, and ease the transfer of work from one individual to the next. Project management tools track work activity and resource utilization against major tasks and milestones. In aggregate, these tools reduce the amount of low-value, redundant work.

It develops advanced manufacturing-style metrics that focus on cycle time and the elimination of rework and low-value work.
Most metrics available to CIOs focus on the cost of inputs, with little measurement of the outputs or results. Labor costs per day, for example, are much more readily available than figures for employee productivity. Mastery in this area means focusing on a complete set of metrics that record both inputs and outputs. Monitoring productivity and cycle-time differences between teams and individuals, for example, can be more critical than tracking labor costs.

Global Delivery Networks
A number of organizations have followed the industrialization model for building global technology-delivery networks. Take, for example, Infineon Technologies, headquartered in Munich and one of the world's largest semiconductor manufacturers. To stay competitive in a volatile industry, Infineon set out to streamline the management of its SAP applications suite and to better align IT solutions delivery with its overall corporate strategy. The company worked with a partner, which assumed worldwide responsibility for SAP application maintenance and services. The partner was able to draw on the resources of three of its global delivery centers—in the United States (Wilmington, Delaware), Slovakia (Bratislava) and the Philippines (Manila), one delivery center for each major region of Infineon's operations—to stay within aggressive time and cost parameters.

And Paris-based Rhodia, a major global manufacturer of specialty chemicals, took an industrialized approach to improve the efficiency of its finance function, which had been scattered across more than 60 locations in seven countries. By transferring the function to a shared services center in Prague, the company was able to reduce the unit's costs by 30 percent. (For a more detailed account of the project, see "Rhodia makes its move," Outlook, January 2003.)

Taking an industrialized approach to IT can provide some unexpected benefits. Most organizations have been focused on the obvious savings that come from replacing one component of cost with a less expensive one. And in most instances, although they have taken this approach as far as it can go, they are still under pressure to deliver IT solutions for less money.

An industrialized approach to IT gets at costs that most organizations now don't even see. It does this by focusing more broadly on how the work itself can be performed differently and better so that IT can become not just more efficient but also a source of value by delivering superior, often innovative, solutions.

Sidebar: Moving Knowledge
Even though information can shoot around the world instantaneously, the process of transferring knowledge among human teams, and keeping information current for all users, continues to be a challenge. This hurdle, with its potential for high costs and process breakdowns, daunts many organizations. But technology can help.

Transferring knowledge work offshore, for example, has meant that key people have to come to company headquarters for extensive training. A typical four-month transition can cost $25,000 to $40,000 per person in international travel and extended stays, as well as in related issues associated with visas, family separation and more. Much of this transition period is taken up by knowledge transfer.

Can the necessary knowledge be exchanged without so much direct personal interaction? Accenture believes so. We have developed an approach that can transfer knowledge across multiple locations. Called the Accenture Rapid Transition Suite, it allows users in multiple locations to exchange information and retrieve knowledge whether working concurrently or in round-the-clock shifts.

Knowledge is captured in context and organized logically, and the status of knowledge transfer is continuously plotted for individuals and groups. Apprentices can be half a world away yet coming up to speed in a fast-paced but orderly way.

The Accenture Rapid Transition Suite is an example of one of the pillars of an industrialized approach: the value of replicable processes and repeatable tools. Before, Accenture client teams were creating knowledge-transfer plans from scratch every time a new project was initiated. By creating a methodology by which teams could ensure a successful transition in each necessary instance, Accenture has infused rigor and discipline into the transition process, reducing risk and cost while improving quality of outcome—and building team rapport.

Large teams on complex projects face another problem, too, especially when they are geographically dispersed. Teams are dealing with enormous volumes of data. That makes gathering knowledge about a specific business application time-consuming and costly, especially when the application includes legacy components, when multiple teams have worked on the application, or when a previous application development team is no longer in place.

Accenture Technology Labs has developed a Repository
Navigation Tool that works with information in the formats that people actually use with text documents and spreadsheets, for example, rather than formal design templates and software code. The tool identifies documents with common threads, then splits the documents into meaningful pieces that can be categorized for future reference and use. This means that finding a relevant set of documents can take seconds instead of hours, and that the search will be of higher quality, because all relevant documents will be found. And when any document is changed, all related documents are automatically updated.

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