Work as one
Can manufacturing and IT get along? For National Instruments and others, the answer lies in joint decisions; plant-savvy IT people
By Roberto Michel, senior contributing editor -- Manufacturing Business Technology, 8/1/2005 12:00:00 AM
When it comes down to which information technology (IT) projects get a green light, and which ones get delayed, Rob Porterfield is used to dealing with some tradeoffs. Porterfield—VP of manufacturing with National Instruments—adds that some of the tradeoffs involve putting projects for other departments or cross-functional core initiatives ahead of manufacturing-specific ones.
But such tradeoffs don't have to translate into tension between IT and manufacturing, says Porterfield—at least not when they are decided upon jointly as part of a high-level IT governance process. Porterfield says Austin, Texas-based National has such a process, which includes two IT steering committee meetings per year. At these meetings, IT and senior executives set aside departmental goals to decide which projects get assigned "core" IT resources.
"Basically, every business unit leader has a vote on what moves forward, but at this level, my expectation—and the expectation I'm sure my peers have of me—is that we are going to do what's right for the company," says Porterfield. "It might sound a bit 'Mom and apple pie' to say that, but the process wouldn't work if we didn't approach it this way."
Experts agree IT governance aids alignment between IT and business segment objectives, though it may not be the entire answer. "The governance term is widely tossed about, and even abused," says David Hurwitz, chief marketing officer with Niku Corp., an IT portfolio management software vendor being acquired by Computer Associates. "What it simply means is, heads of different business departments—including manufacturing —regularly sit down and have a fact-based discussion about how to allocate the IT budget."
Bobby Cameron, a VP with Cambridge, Mass.-based analyst firm Forrester Research,calls IT steering committees an "absolutely necessary step" to ensuring alignment, but adds that on their own, they aren't sufficient. Cameron, who heads up a Forrester program called The CIO Group, which focuses on the information needs of CIOs, says IT and business leaders need to share responsibility for IT projects.
The experts also point to other steps to keeping IT and business leaders playing nice in the sandbox, or at the very least, agreeing on what games to play in the sandbox. The creation of IT leadership positions specific to the interests of a business function are helpful, says Dave Folsom, president of EXAD Consulting, Minneapolis.
Folsom, who previously held a number of IT leadership positions, including within British Telecom, says more companies are creating the position of "business relationship manager" within the IT organization. These managers serve as lead researchers for applications-related projects, and as an ombudsman of sorts for all things IT, says Folsom. "They [represent] an interface between applications infrastructure and the business itself," he says.
Detroit-based automaker General Motors (GM) has taken the segment manager concept even further. Under CIO Ralph Szygenda, GM established the position of process information officers, or "PIOs," responsible for improvements in areas such as manufacturing and product development.
Cross-pollination benefits
In a sense then, a sure way to help IT and manufacturing get along is by bridging the gulf between them via positions that blend expertise from both worlds. At National Instruments, a business analyst group within the manufacturing organization helps with this aim.
This "BA" group, as Porterfield calls it, consists of several people with both IT and manufacturing knowledge. Some have IT backgrounds, but others are former manufacturing or process engineers. "What we see in the BA organization are people with a knack for systems, but also a strong interest in the business," says Porterfield. "They want to be more involved in the business decisions of why we are going to buy a tool or a package, and what the impact is."
The BA group is charged with assessing IT projects for manufacturing. "Because of their technology background, they know all the inter-connects needed to our other systems, but they also know the business and manufacturing issues," says Porterfield.
The BA group documents the expected project returns, says Porterfield, which gives the IT steering committee quantifiable information on which to base decisions. "The projects are specified by people who speak the same language as the IT programmers, which makes it easier to get at true costs and returns, and gives more credibility to the projects," he says.
Additionally, says Porterfield, the small pool of IT people assigned to each business function rotates between functions every few years. "It might seem like I'd want to grumble about losing one of my best IT people, but I know that in the long run it's good for the company," he says. "Over time, we end up with IT people who understand the whole business."
National—which makes measurement and test equipment, as well as supporting software—also benefits from resource flexibility in meeting its IT goals. These include leveraging interns, carrying out smaller projects using the pool of IT people assigned to manufacturing, and having the flexibility to pay for another IT position or two for a budget cycle. Additionally, some manufacturing-related projects are proposed as core initiatives.
"There is always some project that you want to work on, but there aren't enough resources to do all of them," says Porterfield. "The challenge is identifying projects that should move forward, and freeing up resources for them."
National has a long tradition of working closely with universities, first in Texas, and also in Debrecen, Hungary, where it has a manufacturing plant. In Debrecen, says Porterfield, a handful of doctoral students are collaborating with National on research projects at any given time. IT interns, he says, can likewise be used to free up more experienced IT staff for crucial projects. The end result of this long-standing partnership with academia, says Porterfield, is more technology projects get done than might otherwise be possible.
Sometimes, however, IT steering committee members must put other departments' projects ahead of their own, funding them as core projects. Many of these, says Porterfield, are large initiatives such as ERP upgrades that cross departmental boundaries, but others might be more departmentally focused, such as with an opportunity-tracking tool for sales.
There also are tradeoffs in deciding what smaller projects the manufacturing IT group tackles on its own. "If we take on a new project with the smaller group, then some other project, like report modifications, might get delayed," says Porterfield. "Like any organization, ultimately we have more potential projects than we have resources for."
Manage the portfolio
The best way to manage those precious IT resources, says Niku's Hurwitz, is within a portfolio, much like investors manage financial assets. Especially with more IT organizations managing assets like servers, networking, and storage centrally, a portfolio management system helps steering committee members "come to the table with an accurate presentation of how that shared budget is being allocated."
Armstrong—a Lancaster, Pa.-based manufacturer of flooring, ceiling tiles, and cabinets—has been using Niku's IT portfolio management solution for two years now, says Armstrong CIO Donald Martin.
"The goal with portfolio management is to conquer that elusive alignment of IT and the business by having a way of capturing and analyzing how our IT dollars are being spent, and the value we derive from that," says Martin. "We believe it's been a successful process for us, but it's the process, and not just the portfolio management application, that's the key to success."
Armstrong has a set of business relationship managers, or BRMs, as lead IT people for each business function. The BRMs report to Martin, though they focus on the needs of a specific business area, and ideally have experience in that area.
"It helps when they have that plant background, either through running IT for a plant, or from having worked in a business function at a plant," says Martin.
The BRMs are power users of Niku's portfolio management system, Martin adds, leveraging the information to help them plan projects and adjust recommendations. "Part of the credibility these people carry ties back to them being able to quantifiably discuss their projects and assets in the portfolio," he says.
Shared responsibility
While best practices like steering committees and people with dual skills help with alignment, the very structure of a company heavily influences the relationship between IT and business functions, says Forrester's Cameron. The more federated a company is in the way it runs its plants or divisions, he says, has much to do with the relationship between manufacturing and IT.
"If a company has a federated model in running its divisions or plants, then it's likely that each smaller organization will have a full-blown application support group for some or all of its processes," Cameron says. "But if it's a top-down organization, the smaller units or plants probably don't have much local autonomy."
Beyond structure, Cameron contends that the best alignment between the business segment and IT occurs when there are joint responsibilities for IT projects. In some companies, Cameron says, this even has extended into the business function getting budgetary credit for gains from successful deployments. "If a project truly reduced inventory by a given percent, my budget could shift to show that gain," says Cameron.
It would be rare, says EXAD Consulting's Folsom, for a company to move monetary gains such as inventory reductions to the department responsible for the project. However, more companies are breaking deployments into phases, and are rewarding successful phases by using part of the gains to fund the next phase, says Folsom. A track record for successful projects, he adds, also makes proposing future IT projects for a business segment "a little bit easier to sell."
Ultimately, some level of shared project responsibility between IT and business leaders is key. Too many companies still approach projects as a collection of requirements from the business side, followed by a hand-off to IT, Cameron says. But with shared responsibility, both business leaders and IT are held accountable. This doesn't guarantee a love fest between both sides, but as Cameron puts it, "If I'm an executive on the business side, that makes me want to ensure the project is done well. You can't afford not to hit the numbers."
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