Electronics: IT Is The Key Change Component

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By Rich Levin
Issue date: Sept. 9, 1996

roduct life cycles in the electronics industry were once measured in decades. Now, they're measured in months. Last year, electronics companies were operating at full capacity, with product life expectancies averaging a mere 10 months. Today, that's down even further--in some cases to six months --and shrinking fast.

Shrinking product life cycles hav e forced electronics companies to outsource key portions of their engineering, manufacturing, packaging, and delivery systems throughout the world. These companies also have become responsible for larger portions of their customers' finished products, requiring them to collaborate with customers on design and manufacturing issues.

The result: Electronics companies need to rethink their enterprise systems to better accommodate globally distributed operations. There's little choice but to wire office workers, sales personnel, engineers, factory floors, suppliers, customers--even competitors--to a common information system. Add to that a looming Year 2000 problem, and a blueprint for wholesale reengineering emerges.

Legacy systems built up over the course of 20 years are being dismantled and replaced by flexible client-server architectures. These globally distributed, decentralized systems must be online by 1998, the deadline for year 2000 compliance. This amou nts to a mere two-year window to supplant 20 years of trusted systems development--just the kind of tight delivery schedule the electronics industry seems suited to meet.

"The electronics industry is a game of leap-frog. There's constantly a new technology, whether it's a new disk drive, a new screen size, new battery technology, or a new Intel processor," says Dan Murphree, director of IT strategies and resources at Texas Instruments Inc., a $13.1 billion manufacturer of semiconductors, defense electronics, and PC hardware and software in Dallas. "Everybody is de-signing new stuff, driving it out to the market, and simultaneously designing the next generation. Some generations last less than six months these days."

Nevertheless, implementing globally distributed systems will be a challenge for companies across all industries, including electronics. "There are more things in play than there ever has been before," says Russell Craig, a partner with the electronics practice of Andersen Consulting in Chi cago. "Companies are finding that their traditional manufacturing competencies really don't have lots of value in today's environment."

This environment is one in which electronics manufacturers share design and manufacturing responsibilities for ever-larger portions of their customers' finished products. "We now have to support the network connectivity for sharing designs and working collaboratively with customers," says Patrick Horrigan, cor- porate VP and director of semiconductor information and computing systems at Motorola, a $27 billion semiconductor and electronics manufacturer in Tempe, Ariz.

In fact, for many finished electronic goods providers, such as computer makers, outsourcing is a key competitive weapon. "Many PC manufacturers really don't manufacture anymore; they configure to order," says Andersen's Craig. "A lot of that product structure flows directly from the electronics manufacturers."

It doesn't stop there. Electronics companies themselves subcontract component designs and m anufacturing, which, in turn, may be outsourced again. "Our customers are moving to low-cost countries, outsourcing manufacturing to various points around the world, and we're following that expansion worldwide," says Ron Vance, CIO of AMP Inc., a $5.2 billion maker of electrical and electronic connectors and interconnection systems in Harrisburg, Pa.

The end result: a trickle-down effect that is reconfiguring the traditional supply chain in ways that impose heavyweight demands for information processing. "[The seller] needs to electronically get data about sell-through, customer re-quirements, configurations, and units, and flow that information automatically to an electronics manufacturer, with the invoicing and financial transactions all being facilitated through shared systems," explains Andersen's Craig.

This virtual corporation concept has been around for years, but it's happening first--and fast--in the electronics sector. Unfortunately, creaky centralized legacy information systems can't handl e the rising need for open-platform, integrated data communications between builders and buyers.

Virtually all the leading electronics companies have operated global computer networks for decades. But outsourcing, customer involvement in designs, globalized manufacturing, and the resulting need for coordinated data communications caused "the complexity of taking orders and shipping material to grow dramatically," says TI's Murphree.

In response, electronics manufacturers "are embroiled in a core business system replacement," says David Rich, a partner with the electronics practice at Andersen Consulting. "Essentially, they're taking a mainframe-based environment grown over 20 years and replacing it in two or three years."

CIOs at electronics companies share a common dilemma with their counterparts in industries worldwide: the millennium. Millions of lines of legacy Cobol code, largely on mainframes, will become confused whenever the year 2000 is referenced in data or calculations. Because years ar e indicated by their last two digits only, legacy systems will interpret the year 2000 as 1900. "From an IT perspective," Rich says, "it's the year 2000 issue that drove them to the core business system replacement projects."

Displacing the venerable mainframes are Unix, AS/400, and PC systems that support modern data communications and open platforms. At Texas Instruments, this allows for "worldwide processing of orders, customer demands and designs, and capacities to accurately plan the load on our factories" and manage logistics, Murphree says. To that end, TI, once the proud owner of 35 mainframe data centers worldwide, now has just three.

Replacing TI's mainframes are powerful Unix servers that significantly improve flexibility, openness, and communications capabilities. Workgroup solutions are comprised of a mix of Novell and Windows NT on the server side, and conventional DOS/Windows applications on network clients.

Johnson Controls, an $8 billion manufacturer of electronic control systems in Milwaukee, is almost done with its mainframes. "We have just oneleft," says Subhash Valanju, Johnson Controls' CIO. "We'll be out of it by 1998, and with it will go the millennium problem." Like TI, Johnson Controls is moving to a decentralized client-server architecture, built around Unix servers, to address the millennium and other mainframe problems.

Problem Solved
Legacy hardware can't be replaced without replacing operating systems and application suites as well, says Rich. "It's the move to client-server--a move to a different hardware platform--which begs a different network, new application suites, and new development tools," Valanju says. "It's the whole ball of wax."

The massive scope of reengineering hardware, operating systems, applications, and tools--all within a two-year window--precludes the luxury of thorough implementations. "Trade-offs have to be made," Rich says. "Businesses may have to accept something less than a 100% solution to meet the accelerated time frames an d the Herculean tasks that lie in front of them. All of a sudden, this isn't just an IT issue; it's a business-integration issue."

Some electronics-sector leaders, while decentralizing hardware architectures, also are standardizing development tools and applications. "We're using [client-server applications] to replace most of our legacy core systems, including procurement, HR/payroll, financials, and so on," says Motorola's Horrigan. "Linking from our order-processing systems, through the factories, and tying in at the end to logistics: This gets product shipped where and when customers need it."

Others have found that online analytical processing (OLAP) provides the real-time data feeds legacy technology was unable to deliver and the new world order demands. "AMP has had a data warehouse for 15 years," says Vance. "Now with OLAP, we have much more flexibility and speed of information delivery, in terms of 'slicing and dicing;' looking at all the different views."

Slicing and dicing is an accurat e way to describe the power of OLAP applications. While the technology is still in its infancy, even early OLAP solutions provide multidimensional, real-time data feeds that monolithic reports and spreadsheets are incapable of delivering. Users can "surf" company information as it arrives online; they can drill down into aspects that require additional analysis. For globally distributed organizations with diversified information feeds, OLAP can prove indispensable.

Time Saver
AMP's OLAP model is just a year old, but "it has had a major impact in the management of our company," Vance says. "We can provide a P&L [profit and loss statement] by individual customer, by individual product, by region, or by industry, at the 10th working day. It used to take our analysts months to pull that stuff together on a worldwide, enterprise scale."

Of course, OLAP isn't a silver bullet. Problems with programmability and performance remain. AMP introduced quality metrics into its OLAP models at mid-year and plans to bring manufacturing performance data online at year's end. "Performance optimization and tuning is the challenge," Vance says. "And the toolset we're using is a simple, dashboard-type of push-button approach; it's limited in terms of programmability."

What's the key to near-unlimited programmability and universal connectivity? "We're moving toward a Web toolset for delivery that gives us optimum flexibility in terms of how we want to provide the information," Vance says. He is not alone. The Internet plays a crucial role in the rewiring plans of virtually all the leading electronics manufacturers.

Two years from now, when the smoke clears and their houses are rewired, the resultant systems may well be among the most advanced that client-server computing has witnessed. "The average executive wants to turn on the PC and see the gauges light up," says Andersen's Rich. "This starts with the CEO and trickles all the way down. That's what they all want, and it's going to get there in the next few years."

Or sooner. "Our No. 1 user, measured by hits on the database, is our CEO," says AMP's Vance. "Our data visualization has become instrumental to his view of how our globalization effort is working." With advocates like that, IT executives can rest assured their technology efforts will have longer life cycles than semiconductors and disk drives.

To view the IW 500 Electronics chart in PDF format click here

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