The Control Devolution

1

• The Control Devolution
• ERP (Enterprise Resource Packaged)
• and Side-effects of Globalization

Ole Hanseth, Claudio U. Ciborra, Kristin Braa
2
Introduction

• Established 1907

• Fertilizer, light metals, oil and gas

• Make the operations in Europe into one unit

• Rapid expansion 75 86

• Crisis in 1992 fertilizer prices crashed

• Independent national companies

3
Hydro case - Strategy

• Was a multinational company
• Their value chains were duplicated across
  countries, and the local units had strong degree
  of autonomy.
• Wanted to become close to a global corporation
• Closely co-ordinate world-wide activities
  through central control from headquarters,
  gaining benefits from a standard product design,
  global scale manufacturing and centralized
  control of world-wide operations.

4
Hydro case - Main objectives I

• Reengineer the division into one profit center
• Have customer focus and a powerful market
  organization
• Establishing common work processes enabling the
  above.

5
Hydro case - Main objectives II

• These change plans raised very strong resistance
  at all levels of the organization.
• No significant changes took place

6
Hydro case new key strategy

• They wanted to consist organizational integration
  
• Improve the integrated IS systems and
  infrastructure.
• By accident, they turned to SAP

7
Hydro case Project I

• Started early 1995, and planed to finish by mid
  99.
• The project was split into three phases
• 1. Development of a pilot, and its
  implementation in one factory and sales
  office in Germany
• 2. Validate the pilot and developing the final
  version.
• 3. Implementing the final version in the whole
  division

8
Hydro case Project II

• During the project, links between groups
  influenced the project in different ways from
  what the management wanted.
• The SAP implementation became out of control.
• The consequence was that the SAP solution was
  customized for each individual site

9
Hydro case Project problem

• The SAP solution had changed from one coherent
  common system to a complex heterogeneous
  infrastructure.
• Another problem was that the integration of SAP
  with the Bridge infrastructure used at Hydro was
  taken for granted.

10
Hydro case Domino effect

• SAP had a strategic partnership with Microsoft
• Hydro replaced their Lotus applications, except
  Notes, with Microsoft Office

11
Hydro case self-destructive processes I

• One integrated system costs less to maintain than
  several separate systems. However, an integrated
  system creates problems in case of changes.

12
Hydro case self-destructive processes II

• Both the SAP and Bridge were integrated on one
  hand, and with the SAP processing and site
  management were integrated on the other, the
  outsourcing of SAP processing reflexively turned
  back on itself and caused the overall quality of
  the IT services to be rather poor.

13
Hydro case - finished

• Hydro found out that they needed to upgrade their
  SAP application with hot-packages, which comes
  out twice a year. This upgrade could make the
  system go down for up to 9 days. Sometimes these
  hot-packages also contained faults, which made
  the employees skeptical to the functionality of
  the SAP applications.