About 18 months ago, Smiths Group, a U.K-based specialist engineering and manufacturing company, recognized its investment in IT and telecommunications (IT&T) did not provide any real business value to the company, and was hindering its performance. IT&T was struggling to manage the network and was becoming a scapegoat for the business' failures. Smiths Group has 30,000 employees worldwide and operates four main lines of business: detection, medical, aerospace, and specialty engineering (the divisions consist of 350 businesses), which are highly independent with minimal interdivisional communication. The Group is heavily decentralized-each line of business and subdivision makes its own management and budgetary decisions, including the purchase of IT and telecommunications services. This approach made the divisions highly autonomous but rendered the IT&T platforms unable to support the corporate-level business needs.
The wide-area network was predominantly hub and spoke, with mostly point-to-point frame relay but included a mix of ISDN, PSTN and an early version of MPLS. Although hybrid networks can be efficient, this network had become outdated and insufficient for transporting traffic among different users. Often a department's traffic would need to pass through several hops on a frame-relay network before reaching the main corporate hub. Although some departments made sufficient investment in bandwidth capacity, others were more frugal and used their budget elsewhere. Exacerbating the problem of a highly disparate network architecture, Smiths Group merged with a company whose network suppliers were unwilling to integrate the networks. Following the merger, the Group had 178 Internet connections, which were not economical or even necessary.
The Solution and Best Practice
The IT&T department needed to develop a strategy whereby real business demands drove its investments, rather than letting technology dictate its decisions. The team also wanted to move away from a highly dispersed model, and focus on standardizing and consolidating the network and systems to support the four main lines of business. The goal was to improve efficiency-which would drive the profitability of the business-and make the company's systems and platforms a competitive advantage. Although the IT&T plan aimed to reduce business autonomy, it still needed to support the differences at a divisional as well as group level. For instance, the aerospace division focuses on highly customizable solutions that may have a 10-year life cycle; the medical division serves a single use market, with made-to-stock products and much shorter life cycles. The IT plan therefore includes two types of standards: Smiths Group and divisional. IT&T has developed regional help desks at the divisional level to best meet the needs of the various parts of the organization; on the other hand, network security is consistent across the entire Group.
The company centralized all control and purchasing decisions and also initiated an IT council to control the changes. Each of the four main divisions has an IT director, who leads a team of specialists (e.g., security, individual applications, etc.). The initial phase of the IT plan involved standardizing desktop PC hardware and software. The next phase focused on infrastructure consolidation, and the company decided to rip out its existing WAN infrastructure and replace it with an IP VPN. The company chose a private MPLS IP VPN from MCI, and supported any off-net locations using a public VPN, managed by Vanco, which handles the tail circuit purchasing. Although the IP VPNs are physically separate, the private and public WANs are logically linked to create a closed user group for each of the four main divisions. This enables Smiths Group to benefit from any-to-any connectivity between different departments, which reduces network delays and enhances application availability. The company also migrated a number of its connections from leased lines to ADSL and other broadband technologies and consolidated the 178 Internet connections to two access points via collocation centers. These changes and others, such as reducing the number of IT suppliers, have improved efficiency and reduced costs.
The next challenge for Smiths Group is standardizing its business processes to benefit from shared resources, such as the creation of procurement and HR service centers. The final IT&T migration phase aims to further improve efficiency levels by integrating systems and databases. The Group's long-term strategy includes consolidating its IT team through increased outsourcing of various business functions to specialist providers.
Critical Success Factors
The IT&T changes have enabled Smiths Group to reduce costs by 50 percent through standardization, consolidation and improvements in its infrastructure investments. Its focus on business-led investments has led IT&T to develop platforms that match the requirements of the company, enhancing its competitive edge. Smiths Group has taken advantage of Vanco's active negotiation process, which involves regular negotiations regarding price and technology changes to ensure ongoing cost savings.