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May 8, 2000

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A Company Merges Its Many Units-Successfully

Ingersoll-Rand restructuring centralizes key administrative data-management functions

By Steve Konicki

TechEncyclopedia

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anufacturing heavyweight Ingersoll-Rand Co. faced a problem not uncommon in today's lightning-fast industrial age. The Woodcliff Lake, N.J., company's worldwide manufacturing operations-highlighted by steady growth and acquisitions over the years-were operated as eight autonomous companies, with about 100 facilities around the globe relying on a mishmash of often-aging information systems unable to communicate with one another.

Company executives decided last year to restructure the organization into a single company with 13 business units. That meant centralizing key administrative data-management functions previously handled at the facility or individual company level, including finance, procurement, accounts receivable, accounts payable, fixed-asset management, and human resources.

The initiative began in February 1999, with the first installations of Oracle 11i enterprise resource planning applications at the corporation's Huntersville, N.C., data center. As part of the initiative, Ingersoll-Rand selected enterprise application integration vendor CrossWorlds Software Inc. to integrate its ERP applications with other legacy systems worldwide, many of which were inherited by the company in the acquisitions that contributed to its growth over the years.

"We're basically remaking the corporation," says Don Janson, director of Ingersoll-Rand's Common Administrative Resources implementations. "We asked ourselves, 'How can we take this stodgy company that's part of the old economy and make it part of the new economy?'"

Janson declined comment on the cost of the CAR initiative, but John E. Mann, senior analyst at the Patricia Seybold Group, estimates the cost for a project the size of Ingersoll-Rand's can be "in the range of $50 million." Other analysts agree.

The initiative, which is expected to be complete in about a year, divides the company's information structure into three parts:

Headquarters: Oracle ERP applications installed at the company's data center will aggregate information from all 13 business units and make that information available to decision makers at headquarters in real time.

Business units: Oracle ERP applications installed at the business-unit level will collect information from factories and other operations, then make it available in real time to decision makers at the business-unit level, as well as to the corporate ERP systems.

Facility or operations: Legacy applications installed at Ingersoll-Rand's facilities will continue to be used to manage manufacturing, sales, marketing, order management, distribution, quality control, engineering, customer service, procurement, and other customer-related business activities. CrossWorlds' EAI connectors will link these systems to Oracle's ERP apps.

By centralizing key administrative data-management functions at headquarters, Ingersoll-Rand, which manufactures a diverse range of products from construction and mining equipment to road pavers and golf carts, expects to recover the cost of the initiative within three years, Janson says.

"Probably the most important impact to the company is improved strategic planning due to the ability to see real-time data from each business unit," says Steve Carrington, manager of Ingersoll-Rand's program management office. "We'll see transactions immediately, and we will see demand in real time. For example, a large sale can be seen immediately at headquarters," he says. Since managers at headquarters and in the business units will be able to track inventory levels and how many items need to be manufactured, they can increase manufacturing output as needed-immediately, rather than days or weeks later.

"The ability to provide integrated, real-time information is crucial to a global company," Carrington says. "If we didn't achieve that, we'd be in trouble from a competitive standpoint. Companies that can't make decisions based on real-time data will be left in the dust."

At the headquarters level, the ERP applications, which run on HP-UX Unix servers, are replacing a proprietary accounting package, CODA-Financials accounting package, a proprietary HR package, and other proprietary apps running on a range of platforms, from PCs and IBM AS/400s to mainframes from various manufacturers.