How Australia's Treasury Wine Estates went back to basics with its IT overhaul
Treasury Wine Estates (TWE) is an Australian-based global winemaking and distribution business, and until a demerger in May 2011, was the wine division of international brewing company Foster's Group.
In 2014, TWE found itself in a bit of a hole, company global solution director David Jones told journalists at the recent Red Rock Leadership Forum in Sydney.
According to Jones, the company undertook a "massive" AU$130 million write-down of its inventory which also resulted in its share price on the ASX "tank" before the company's eyes.
At the same time, TWE's chief information officer, chief finance officer, chief sales officer, and chairman of the board were all dismissed within six months.
"We were coming off a really low base," Jones explained.
"New management came in, IT budgets got cut, and our situation was we couldn't afford to keep all of the very big, very expensive, very siloed, very customised software that we had."
Jones explained the troubled company also couldn't afford to fix its IT if the business was going to continue to operate the same way it always had.
"So if we didn't do something dramatically different, our IT was going to be relegated to just keeping the lights on and trying to not make it fall over," he added.
The global solutions director -- who joined TWE from Ernst & Young after consulting for some time to TWE on various IT strategy challenges -- and his team were then charged with a whole-of-business turnaround and transformation to get the company back on track.
"For the first time for us, and for the first time for Red Rock, we effectively engaged Red Rock to deliver us an ERP-as-a-service," Jones explained. "Everything from the tin through microprocessors and networks, right through to software delivery."
Jones said his teams managed to decommission six ERPs, four warehouse management systems that were all siloed around the world, and about 25 other little systems -- at the same time as kicking off a business intelligence (BI) project.
TWE wrote-off over AU$100 million of IT infrastructure and replaced it with something that was a fraction of the cost, Jones explained.
"We reduced the balance sheet. It was the only time I've ever seen a major IT project get delivered and not write to the balance sheet," he said. "We reduced IT costs by about 50 percent."
Jones said his organisation went from data entered multiple times into multiple systems, to a single ERP solution that runs the entire company.
The JD Edwards ERP solution even records information from grape testing in the Napa Valley, such as sugar content, expected harvest date, and what wine it's supposed to go into, Jones said.
From an architecture perspective, Jones said TWE essentially implemented an "old-school big-honking ERP, big-honking BI platform", replacing everything that was going on in the business, while dramatically reducing costs.
"We effectively went from saying, 'this all needs to be very siloed and very special and on-premises and controlled by IT' to 'that's not what we're about anymore'," he said.
"That's not what IT departments should be about anymore; we want somebody else to do that, and we want something simple and standard we can just buy, and we'll focus on stuff where we can add value.
"We are a brand management and a wine making company -- we shouldn't be spending a lot of money on IT."
The digital transformation saw TWE reduce its headcount by about 30 percent, but Jones said the restructure went deeper than simply culling staff.
"We brought different types of people on; fewer people to plug in cables and more people who know how to go out and engage with the business and understand how to leverage the platform to improve processes," he explained.
"Now that we've done the job of fixing the core and getting our platform right, rather than plugging bits and pieces together to keep the business rolling, we've got now a whole bunch of capacity and capability to invest in.
"We're looking more at best practice solutions that leverage off that platform."
One example is tying in TWE's field automation platform.
With staff out in the vineyards carrying tablets, as well as sensors peppered around the grape fields, Jones said TWE is now able to tie in data feeds from mobile, the Internet of Things, and the cloud.
"We're getting that data in now and putting that directly into our ERP and into our BI platform as well, we're also able to get standardised market data in," he said, noting that Salesforce is another thing being plugged into its systems.
"Our differentiator is in the wine, not the ERP."
Most importantly, Jones said his organisation didn't do anything to change the quality of the wine throughout its IT overhaul.