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Three case histories show that big IT projects do add to the bottom line.
I had the opportunity to moderate a June session on supply chain integration at the eProCom conference in Houston, Texas. The session featured Mark Mey, vice president and treasurer of Noble Drilling, and Steve Brady, chief information officer at National Oilwell, describing a joint e-commerce initiative that streamlined procurement for their companies and a freight company, Eagle Circle International. Mey said the Noble staff could never catch up with processing purchasing paperwork, especially after completing eight mergers. "We had a rough idea of where we wanted to go, and one of our biggest suppliers, National Oilwell, had some ideas on how to get there," Mey said.
National Oilwell also had gone through several mergers and was experiencing integration problems. Because both companies had implemented SAP, they formed teams to brainstorm ideas on how to automate the business processes.
Starting with a vision and management commitment, the project ended up implementing a back-end integration system that blurred the lines of the three companies. First the teams automated the individual pieces of the process to make them go faster. They then eliminated some of the documents generated along the way. Eventually they ended up with a system whereby order information is never rekeyed as it passes from company to company.
The project's success came down to the contents of the shared database. "Content is king," Brady said. "If every error goes to a manual process, you have to minimize that fallout by updating and correcting the content in the database."
The companies used Business Connector from SAP to hook the back-office systems together and integrated that with Experio Solutions' Broadvision One-to-One Enterprise software for the online catalog. The new system was piloted in the North Sea and went live the day before the eProCom conference.
"We realized a 22% savings in the first 3 months in the North Sea, and that's after 50% gain share was split with National Oilwell," Mey said. "The cost of freight decreased because we could use larger containers. We were able to reduce rig inventory, and product costs were reduced 8% in Europe and 20% in the US. Order processing went from 2 weeks to 15 minutes, and that makes a big difference for us."
Company A is a young producer based in Houston with production wells in Kazahkstan. Due to rapid growth and the need for information exchange among its Houston, Russia and Kazakhstan offices, the company was faced with the immediate need to get connected. The existing "sneaker net" (carrying floppy disks) was not working, and setting up a network was intimidating as the company's core competency was energy exploration, not IT.
I-Solutions (Houston-based InterMedia Solutions Inc.) was able to go beyond the normal capabilities of an application service provider (ASP) to solve this unique problem. Company A had been dealing with an oversubscribed dialup connection in Kazakhstan. The first challenge for I-Solutions was to locate and secure adequate broadband connectivity for Company A's Russian offices.
The next hurdle was to evaluate Company A's specific software requirements. Within a few short weeks, Microsoft Office (English and Russian versions), Roughneck (an accounting system) and Exchange were made available in ASP mode. I-Solutions also provided file, print, database and application servers from its central data centers. Company A now has helpdesk access and benefits from constant network monitoring. Its offices were connected to centralized, real-time data and a high-end IT support network in a relatively short time with very little capital outlay compared to setting up a costly wide-area network system. The most significant benefit was access to technology that would normally be out of the range for such a small company - all for a manageable monthly fee. Future expansion of offices and services can be seamlessly integrated into the system.
The books of Genesis
Houston-based Genesis Oil Co. dramatically reduced its annual accounting expenses by replacing expensive outsourced document management services with simple FormScape software. The result was an annual savings of US $100,000, more efficient workflow, improved customer service and a return on investment within 4 months.
Genesis gathers and markets crude oil in eight states and relies on a large customer base of property owners for access to oil and gas. In exchange for the rights to market the gas and oil on their property, Genesis compensates the property owners monthly with royalty checks. Each month, Genesis produces 12,000 royalty checks and 14,000 statements, and must generate numerous accounting reports, including thousands of annual 1099 IRS tax forms. The company's royalty accounting department uses FormScape Office suite to manage and output reports, checks and statements, eliminating the need to have a third-party vendor print the royalty checks.
Document storage had also become a nightmare. Genesis had been storing all documents, checks and financial statements on microfilm, which then was stored in filing cabinets for a 10-year period. Using expensive microfilm readers, Genesis employees would search the long reels of microfilm for the documents they sought, print a copy, then refile the microfilm in the appropriate storage cabinet. This system was fraught with errors. Using FormScape, Genesis no longer needs to archive the checks, financial statements and monthly reports on microfilm. Customer service representatives can quickly and easily view archived documents such as checks and statements on their computer monitors when responding to a customer inquiry.
"FormScape has enabled Genesis to upgrade to a better performing process and reduce expenses," said operations manager Stanley Swist. His company saves $4,000 per month because microfilm services are no longer needed, and $5,000 per month is saved by not having another company write the checks. Even though the cost of licensing FormScape was $36,000, Genesis stands to save more than $100,000 a year.
And that's music to any manager's ears.