Module 2 – Case
Hardware

Assignment Overview
The case that you will use for this is a case that is coincidentally
also Canadian in origin but in a very different business environment—the
aluminum business (spelled here “aluminium” in the British fashion—you
may use whichever spelling you choose.) It describes the analysis of the
company’s IT systems and management performed by a new vice president
of corporate information technologies, in all its complexity and
magnificent variety. Throughout this case, issues of hardware, software,
and management are intertwined, just as they are in real corporate
life. One of your tasks will be to disentangle some of these issues for
separate consideration in light of what you know and need to know. As we
noted in our course overview, it’s taken for granted that hardware,
software, and management (sometimes referred to as “wetware”) are all
involved in a complex sociotechnical dance in which changes in any one
element inevitably call forth changes in the others—preferably planned,
but often unplanned, and not infrequently unanticipated. Thus, while
your focus in this module will be primarily on hardware and networking,
you will inevitably find yourself thinking about other dimensions of the
problems as well. That is all to the good, but try to keep a focus on
the primary issues in each of these three modules. There is plenty of
time to concentrate on issues of integration as the course wraps up.
Case Assignment
Please read the Alcan case; it is in two parts:
Dube, L., Bernier, C. and Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part A. International Journal of Case Studies in Management. 7(2):May. HEC020.
Dube, L., Bernier, C. and Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part B. International Journal of Case Studies in Management. 7(2):May. HEC021.
Use information from the course background readings as well as any
good quality resource you can find. Please cite all sources and provide a
reference list (use APA format) at the end of your paper.
Your answer to the following will be assessed:
What are the pros and cons of the current Alcan technology infrastructure?What are the pros and cons of the new Alcan technology infrastructure proposed by Robert Ouelette?Please suggest additional improvements of infrastructure for this case and justify your suggestions.
Assignment Expectations
Length: Minimum 3–5 pages excluding cover page and references (since a page is about 300 words, this is approximately 900 –1,500 words).
Assignment-driven criteria (25 points): Demonstrates clear understanding of the subject and addresses all key elements of the assignment.
Critical thinking (10 points): Demonstrates mastery conceptualizing the problem. Shows analysis, synthesis, and evaluation of required material.
Scholarly writing (5 points): Demonstrates writing proficiency at the academic level of the course; addresses the Learning Outcomes of the assignment.
Quality of references (4 points) and assignment organization (3 points):
Uses relevant and credible sources to support assertions. Assignment is
well organized and follows the structure of a well-written paper.
Citing sources (3 points): Uses in-text citations and properly formats references in APA style.

Module 2 – Background
Hardware

Dube, L., Bernier, C., & Roy, V. (2007) Information Resource Management At Hydro-Quebec. International Journal of Case Studies in Management. 5(2):September. HEC023.
Dube, L., Bernier, C., & Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part A. International Journal of Case Studies in Management. 7(2):May. HEC020.
Dube, L., Bernier, C., & Roy, V. (2009) Taking on the Challenge of IT Management in a Global Business Context: The Alcan Case – Part B. International Journal of Case Studies in Management. 7(2):May. HEC021.
Bernier, C., Roy, V., & Brunelle, E. (2006) An ERP Story: Background (A). International Journal of Case Studies in Management. 4(1):March.
Bernier, C., Roy, V., & Brunelle, E. (2006) An ERP Story: Troubles Ahead (C). International Journal of Case Studies in Management. 4(1):March.
Bernier, C., Roy, V., & Brunelle, E. (2006) An ERP Story: Epilogue (D). International Journal of Case Studies in Management. 4(1):March.
Broderick, A. (2013, January). The Veterans Health Administration:
Taking home Telehealth services to scale nationally. The Commonwealth
Fund. Retrieved from http://www.commonwealthfund.org/~/media/Files/Publications/Case%20Study/2013/Jan/1657_Broderick_telehealth_adoption_VHA_case_study.pdf
Scacchi, W. (2003). Socio-Technical-Design. Institute for Software Research, Univ. of Wisconsin. Retrieved July 26, 2010 from http://www.ics.uci.edu/~wscacchi/Papers/SE-Encyc/Socio-Technical-Design.pdf
Sommerville, I. (2010). Socio-technical Systems Retrieved on July 26, 2010, from http://archive.cs.st-andrews.ac.uk/STSE-Handbook/Papers/SociotechnicalsystemsFromdesignmethodstosystemsengineering-BaxterSommerville.pdf
Torogoon, A., Jetton, P., Vlasic, A., & Spiller, J. (2004). Raise your glasses – the water’s magic! Strategic IT at SA Water: a case study in alignment, outsourcing and governance. Journal of Information Technology. 19, 130–139.
Balloni, A. (2010). Challenges and Reflections on Knowledge Society
and Sociotechnical Systems, The International Journal of Managing
Information Technology (IJMIT) 2, 1, February 2010. Retrieved on July
26, 2010, from http://airccse.org/journal/ijmit/papers/0210ijmit3.pdf
University of Missouri – St. Louis. Why General Managers Need to
Understand Information Systems. Working Paper. Retrieved November 27,
2013, from http://tralvex.com/pub/edu/ism/zip/whygm-is.pdf
Ricotta, F. J. (1993, July 19). The six immutable laws of information. Retrieved from http://seclists.org/interesting-people/1993/Jul/61

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the_alcan_case_____part_a.pdfthe_alcan_case_____part_b.pdfVolume 7
Issue 2
May 2009
Taking on the Challenge of IT Management in a Global Business
Context: The Alcan1 Case – Part A2, 3
Case prepared by Professors Line DUBÉ,4 Carmen BERNIER5 and Vital ROY6, 7
Montreal, March 2006. Robert Ouellette, an IT consultant and engineer by training in his early
forties, has just accepted the position of Vice-President8 of Corporate Information Technologies
(IT) at Alcan. His first mandate is to prepare a full report on IT management methods at Alcan.
The IT governance model has not been reviewed in several years, despite Alcan’s many
acquisitions and diversified worldwide activities.
Alcan: A Truly Global Enterprise
Alcan,9 whose head office is in Montreal (the Maison Alcan is located on the corner of
Sherbrooke and Stanley streets), has 68,000 employees and operating facilities in 61 countries.
The enterprise has four major business groups (Primary Metal, Engineered Products, Packaging
and Bauxite & Alumina) that generated annual revenues of the order of US$23.6 billion in 2006.
The groups contribute fairly equally to revenues,10 except for the Bauxite & Alumina group,
whose contribution is much greater (see Figure 1).
1
This case reflects the situation at Alcan in the summer of 2007.
Translation from French of “Relever le défi de la gestion des TI dans un contexte d’affaires mondial : Le cas d’Alcan –
Partie A,” case deposited under number 9 65 2009 004.
3
This project was made possible thanks to funding from the CGI Professorship.
4
Line Dubé is a Full Professor in the Department of Information Technologies at HEC Montréal.
5
Carmen Bernier is an Associate Professor and Director of the Department of Information Technologies at HEC Montréal.
6
Vital Roy is an Associate Professor in the Department of Information Technologies at HEC Montréal. He is also Director of the
HEC Montréal Case Centre.
7
The authors wish to thank Robert Ouellette for his generous availability and invaluable cooperation throughout the entire
preparation of this case. All quotes used here are translations of excerpts of interviews with Mr. Ouellette during the summer of
2007. We also thank HEC Montréal for its support through its Strategic case-writing workshop designed to encourage the
production of major case studies for teaching purposes. We are also grateful to all workshop participants, whose judicious input
helped us to prepare a better teaching resource tool.
8
Title used by Alcan
9
Data are taken from: Alcan (2007). Alcan Corporate Overview, www.alcan.com
10
Source: Alcan (2006). Annual Review, www.alcan.com
2
© HEC Montréal 2010
All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited.
The International Journal of Case Studies in Management is published on-line (www.hec.ca/revuedecas/en), ISSN 1911-2599.
This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the
administrative situation presented. Deposited under the number 9 65 2010 007 with the HEC Montréal Centre for Case Studies,
3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7.
Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Alcan creates and sells a wide variety of products, including bauxite, smelter-grade alumina,
sheet ingot, extrusion billet, wire ingot, forging stock, beverage can sheet, automobile iron,
aluminium recycling services, fabricated products such as wire and cable, and flexible and
speciality packaging, just to name a few. Like all major players in its sector (see Appendix 1).
Alcan is highly vertically integrated. The company owns eight mines and deposits, seven alumina
refineries and seven speciality alumina plants, a transport network that includes port and rail
facilities, 26 aluminium smelters, 12 electric power plants, 17 laminated product plants,
49 engineered product plants and 180 packaging material plants (see Appendix 2).
Figure 1
Income Distribution by Business Group
7%
29%
34%
Primary Metal
Engineered Products
Packaging
Bauxite and Alumina
30%
IT Management: The Current Situation
The position of Director – Corporate IT has been vacant for almost a year (since April 2005).
During that time, pressure has been mounting to improve corporate leadership in the area of IT
management and to participate in a significant cost-cutting exercise across the company’s support
functions. This situation has pushed Alcan’s senior management to give greater priority to
information technologies: the company has therefore decided to create the position of VicePresident – Corporate IT reporting to Michael Hanley, Executive Vice-President and Chief
Financial Officer (see the organization chart in Appendix 3).
Thus it was that Robert Ouellette joined Alcan in January 2006 as Vice-President – Corporate IT.
He was no stranger to Alcan, as he had done various consulting jobs for the company as part of a
large international consulting firm. He knew he would be facing a serious challenge.
During the interview process, I realized that the role hadn’t really been clearly defined. I explained to
my future superior that I was less interested in the solely corporate aspect of IT, since the bulk of IT
activities were carried out within the business groups. I explained that I intended to get involved in all
the IT files I judged to be important, at both the business group and corporate levels. We agreed on
that right away. The way I see it, the IT function should be managed as a coordinated function across
the entire company.
In the past, based on a culture of decentralization, responsibility for IT at Alcan had always been
shared among the various business groups. Apart from certain basic services like networking and
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
message handling, Alcan’s IT management system was highly decentralized. Every business
group was completely independent, with its own strategic IT plan, infrastructure choices based on
its specific needs, and IT applications and services. Each group had its own IT organization that
pursued its objectives based on the group’s needs and orientation. Groups’ needs, like their
activities, were highly diversified. Over the years, this culture of autonomy had been reinforced
by mergers and acquisitions.
Our IT people have never been asked to agree or cooperate with each other: their mandate has always
been to meet the specific needs of their own business group.
Robert was fully aware that this context was not propitious to his vision of IT management and
the way he intended to carry out his new role, but he had the advantage of being on a first-name
basis with many of the people who managed IT services within each of the business groups.
The day I took the position, I called each of the IT managers in all of the business groups. Thanks to
my consulting work, I had become pretty good friends with some of them over the years. I knew
them all well, except for the IT leader of the Packaging group, who had just joined the team.
Administratively speaking, none of these IT resources reported to him. So, in the beginning, he
acted like an internal consultant, getting involved in all the important and/or problematic IT files.
He took advantage of the fact that his role wasn’t clearly defined to create one for himself and
take it from there.
If push came to shove, I knew that the CFO had a lot of credibility in the organization, and that I
could count on his support if drastic measures had to be taken.
So he got moving.
One of the first things Robert did was to analyze IT costs. He actually had already questioned his
boss, Michael Hanley, on the total amount invested in IT services at Alcan. Since IT activities
were so decentralized, he expected a very approximate figure; instead, he received a very precise
answer:
“Alcan spends $200 million on IT.” I was surprised that he could give me an answer so quickly, but I
told him that, unfortunately, that was impossible given the lack of a global cost overview. I was sure
that it was closer to somewhere between $275 and $300 million. After all those years of consulting
for Alcan, I knew that if costs really were in the order of $200 million, the system would have come
down around our ears long ago. The phone would have rung off the hook! Because of the
fragmentation of systems, infrastructure and resources, we would never have had sufficient capacity.
But when I told him that, he immediately said, “That’s impossible! There’s no way we spend
$300 million on IT.” So that’s when I said, “Look, I can’t prove it to you today, but I’m going to do a
detailed analysis.” I knew it was important that his perception of things be realigned before I could
move on to do what I wanted to do.
Shortly thereafter, Robert came back with the amount he had verified: about $295 million
annually! An in-depth analysis showed that IT costs were documented in several places at the
local level. Within a single business group, for example, since IT human resources did not all
report to the same IT unit, the result was a wide variety of methods of recording those costs. In
certain cases, Robert noticed that IT costs were included in the groups’ operating expenses, thus
ending up in cost of goods sold. These disparate practices were keeping head office from getting
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
a complete picture of the real IT expenses. The $200 million figure from the CFO was accurate…
in terms of what made its way to senior management. But there was another $100 million that
was flying under the radar. Robert and his boss agreed that “whether we like it not, that money’s
spent!”
Robert reflected on the issues underlying the current situation. Not only was it virtually
impossible to identify the actual amount the organization was investing in IT, it was equally
impossible for IT governance at head office to set and monitor priorities. His first task would be
to put IT management in order at every level across the entire organization.
A 360° diagnosis
Robert observed that the management and use of information technologies at Alcan was
excessively complex. Over the years – particularly the last five – the company’s multiple
acquisitions had created a diversified, fragmented IT environment that had had a negative effect
on the effectiveness and efficiency of business processes. For example, Alcan had to work with
over 1,000 information systems, over 400 of which handled financial data. “To tell you the truth,
we’re still counting!” In addition to the heroic manual effort required to produce financial and
management information, this technological mish-mash made the management and application of
government regulations (like the Sarbanes-Oxley Act, for example) much more costly. Many
major IT initiatives were underway in the various business groups, including several projects to
implement the SAP integrated software package, without any apparent intergroup coordination.
When I arrived, we realized that there were three major SAP implementation projects going on in
various places throughout the organization. When you look at them separately, it doesn’t seem like a
big deal, but together they represented an investment of $500 million. Three mega-projects like that
put enormous pressure on resources. There’s a limit to SAP expertise, after all.
In addition, IT projects and initiatives that affected processes that were common to the four
business groups (finance and procurement, for example) were inadequately coordinated.
Evaluation of project risk, including planned transformations, seemed insufficient. And, finally,
internal expertise (including SAP, project management and management of service level
agreements) appeared inadequate, given the scope of the projects currently underway in the four
business groups and at head office.
The Corporate IT1 function: an overview
At the time of Robert Ouellette’s hiring, about 900 people worked in IT at Alcan, both in the
business units and at head office. Since the company was also a major consumer of IT services,
however, about 80% of its total annual IT budget was spent on outside services from consulting
and outsourcing firms, as well as on equipment and software. In March 2006, the Corporate IT
function, in whose organization Robert was particularly interested, was made up of a total of
136 resources spread over 12 different sites (see Appendix 4).
The structure of this group (see Figure 2) was based on five sectors of responsibility: the groups
in charge of corporate applications (financial and other), the Architecture Planning group, the
1
Term used by Alcan.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Information Systems Solution group, the Infrastructure Planning group and the Shared
Infrastructure Services group.
Figure 2
Organization Structure of the Corporate IT Function
(Source: Corporate IT – 1st Month Assessment, April 2006, acetate 21)
Executive Vice-President
and
Chief
M.Financial
Hanley Officer
VPVice-President
Corporate IT –
R.Corporate
Ouellette IT
Assistant
M -F.
Financial Applications
P. B
Montreal
Architecture
K. Taylor
IT Controller
Information
IS Solutions
Systems
K. Taylor
Solutions
Infrastructure
Infrastr
. Planning
C. Fraser
Planning
Infrastructure
Infrastr
. Shared
Shared Services
.
Financial Applications
Finance
– Paris
Paris
Financial Applications
FFinance
– Zurich
ZurichW. Thiers
Other corporate
Other
Corp
applications
S. Robert
The groups concerned with the development and support of corporate applications
(financial and other) included 14 resources divided among Montreal, Paris, Singen and Zurich.
These resources were extremely disparate with no centralized management. According to
Robert’s analysis, this group showed no sign of any form of coordinated leadership for corporate
financial applications. Consequently, there existed no overall architecture for those applications.
Various supply strategies were used for project delivery and application management, and there
was no consolidated overview of needs and requests. Since the competencies of this group were
not aligned with current projects, there was no option but to resort to outside expertise.
The Architecture group consisted of three resources with highly technical skills (Web
technologies and middleware) that corresponded to those of the Infrastructure Planning and
Shared Infrastructure Services groups. This group was therefore not equipped to take full
responsibility for all the layers of architecture of applications and information management.
The Information Systems Solutions group was made up of 60 resources distributed among five
different cities: Voreppe, Paris, Warmley, Neuf Brisach and Issoire. Primarily SAP-oriented
(project delivery and application management), this group focused mainly on the needs of the
former Pechiney and the major SAP implementation project in the Engineered Products group.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
The Infrastructure Planning group had 16 resources in six different sites: Montreal, Chicago,
Voreppe, Kingston, Warmley and Saguenay. This group was primarily involved in planning
improvements to the technological infrastructure and the technical architecture design for new
applications. This group’s skills corresponded to those of the Architecture and Shared
Infrastructure Services groups.
The Infrastructure Shared Services group had 40 resources located in six different sites:
Montreal, Chicago, Voreppe, Paris, Warmley and Singen. This group was responsible for the
operation of the common infrastructure components, such as global network, e-mail and data
processing centres. It also provided workstation support and collaboration tools.
This fairly convoluted structure clearly illustrated the challenges of IT management in a context
of multiple acquisitions and incomplete integrations over the previous decade. Following the
acquisition of Pechiney, for example, Alcan found itself with two infrastructure groups. Since the
groups had not been integrated at that time, the situation still existed. Because of their recognized
skill in operations, Pechiney resources were assigned to that area; Alcan resources were
redirected towards infrastructure planning. The result was that former Alcan people did the
planning and former Pechiney people put those plans into execution – which led to difficulties in
coordinating efforts, a lack of skill and knowledge (particularly in the area of planning), and a lot
of generalized frustration for IT management within each of the business groups. So Robert
decided to complete the integration process, letting five people go, some of whom had been with
Alcan for 20 years. This daring move provided convincing evidence that senior management was
fully committed to the new orientations of IT management, marking the beginning of the
definition of the new global organizational structure of IT management at Alcan.
First results
A few months after his arrival, Robert noticed the first signs of some promising developments.
The first was that IT services, as well as the institution of shared services, were now on senior
management’s list of priorities. Also, a few business groups were making efforts to reduce
system diversity: the Engineered Products and Packaging groups had adopted an SAP strategy.
Significant progress was also being made in standardizing and consolidating the IT infrastructure,
particularly with respect to global network and e-mail.
A more in-depth analysis of IT management processes revealed, however, that a major
transformation was called for. Despite Alcan’s many acquisitions, the IT governance model had
not been revised in several years, with the result that IT services were still being managed like
separate fiefs. For the same reason, the funds allocated to IT were systematically underevaluated, with little indication of their business value. How could an accurate picture of IT costs
within the organization be obtained? Without being able to track real costs, how could Alcan
know if it was getting a fair return on its IT investments? Moreover, since certain infrastructure
costs (premises, for example) were not charged to IT, how could an accurate idea of the costs of
services offered internally be obtained for the purposes of comparative analysis? This type of
under-evaluation was also preventing management from making informed, fair decisions on the
outsourcing of certain services.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
There also seemed to be a problem with respect to internally available skills, which were
sometimes insufficient and poorly aligned with needs. IT competencies were not identified,
evaluated or compensated in the same way by the various business groups, and competency
deficiencies were palliated by outside resources, consultants or contract workers. Robert also
noticed that, in the case of several projects, Alcan had abdicated its leadership responsibility –
and control – of its IT resources:
There were outside people who did it for us – to the point that when we wanted to understand what
was happening at Alcan, we were dependent on outside consultants to tell us. It didn’t make any
sense.
Finally, Robert’s evaluation showed that the management of IT projects lacked rigour. Several
projects had been delivered late or over budget.
In this context, what would be the ideal characteristics and advantages of a new IT organization
and governance model at Alcan?
2010-06-21
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Appendix 1
Some Background on the Aluminium Industry
In 1889, Charles Martin Hall had just discovered and patented a new, inexpensive procedure for
extracting aluminium from bauxite and alumina. With a group of industrialists, he founded the
Pittsburgh Reduction Company, which was renamed the Aluminum Company of America in
1907 (Alcoa, 2002). Alcoa’s operations took off during the Second World War, when the demand
for aluminium for aircraft skyrocketed. To support the war effort, the American government
constructed a series of aluminium smelters whose operation it entrusted to Alcoa. By the end of
the war, the company had a virtual monopoly, accounting for 60% of all the aluminium produced
in the United States.
Alcan appeared on the scene in 1902 as a Canadian subsidiary of the Pittsburgh Reduction
Company. Initially called the Aluminum Company of Canada (ACOC), it became a wholly
independent company in the early 1950s (Alcan, 2003). This transformation was the result of a
decision by Manhattan’s Federal Judge John C. Knox on a celebrated antitrust case that pitted
Alcoa against the U.S. Justice Department (Time Magazine, 1950). In the post-war period, the
sale of government-owned excess production capacities of aluminium sparked heated debate,
which led to the U.S. market being split among three major players: Alcoa (50.9% of total
production), Reynolds (30.9%) and Kaiser Aluminum & Chemical Corporation (18.2%). In his
judgement, satisfied with the level of competition, Judge Knox refused to allow Alcoa to be
broken up, but ordered it to dispose of its Canadian holdings in the sector, as its Canadian
subsidiary had become the second-largest company in the sector. Alcoa thus relinquished its title
of ownership to Aluminum Limited, which became the parent company of Alcan, the name it had
taken in 1944.
The years that followed saw strong growth in Alcan’s processing capacity as the company
pursued aggressive expansion in many countries, including Australia, Britain, Brazil and India.
During this period, Alcan targeted vertical integration by investing in bauxite mines and alumina
plants in Africa, Brazil and Australia. During the 1980s, Alcan merged with British Aluminium
and made a series of acquisitions, including the Alusuisse Group Ltd., and created Alcan Taihan
Aluminum Limited in Korea to serve the vigorously expanding Asian market. In 1987, Alcan
merged with its parent company and chief operating unit Aluminium Limited to become Alcan
Inc.
The collapse of the Soviet Union in the 1990s had a disastrous effect on the global aluminium
market. To compensate for a perilous financial position, the annual production of the former
Soviet Union went from about 250,000 metric tonnes to 1.2 million tonnes. The market was
glutted, resulting in an enormous downward pressure on prices, which plummeted from $1.65 a
pound in 1988 to as low as 53¢ a pound in 1993 (Binet, Guiard and Jaclot, 2000). To make
matters worse, the global recession seriously depressed the entire aluminium industry.
In reaction to this major market decline, all of the industry’s major players were forced to revise
their growth strategies, which sparked a spate of consolidation and restructuring as each tried to
trim its operating costs and boost their plants’ energy production (Funding Universe, 2007). The
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
first major transaction was the absorption of the independent producer Alumax by Alcoa in 1998,
followed by buyout of Reynolds in 1999. At almost the same time, Alcan acquired Alusuisse,
VAW Flexible Packaging (FlexPac), Baltek and Uniwood/Fome Cor. In 2001, Alcan joined a
Chinese joint venture and acquired France’s Pechiney, thereby gaining access to an electrolytic
process reputed to be the best in the industry.
The aluminium sector is highly vertically integrated. This is primarily because, at a technical
level, the processing of bauxite (aluminium ore) and alumina is very sensitive to the chemical
properties of the raw material, requiring case-by-case adjustment. Since very high production
capacities are needed to reach a break-even point and electrolytic processes are extremely energyconsuming, companies must have access to stable, abundant, inexpensive supplies of energy
(Binet, Guiard and Jaclot, 2000).
The beginning of the new millennium saw a major market recovery with rapid economic
expansion (and increased demand for aluminium), particularly in Asia and Western Europe.
Since then, global production of primary aluminium has risen steadily at an annual rate of 4.5%,
reaching 31.8 million tonnes in 2005, for a production increase of over 35% since 1999.
World consumption of aluminium exceeded 44 million metric tonnes in 2005, representing an
annual economic activity in the order of US$300 billion. Aluminium is lightweight, strong, heat
conducive, corrosion resistant and infinitely recyclable, making it indispensable to a wide range
of semi-finished goods – laminated, rolled, extruded, drawn, cast and forged products – that are
subsequently transformed into finished products (consumer goods) for such markets as
transportation, construction, packaging, electricity, engineering, machinery and equipment.
In this new business context, North America has to import close to 975,000 tonnes of aluminium
every year to satisfy domestic demand. Quebec aluminium smelters are highly competitive,
however: at $1,090/tonne, it is more economical to produce aluminium in Quebec than elsewhere
in the world, where the average cost is US$1,370. In August 2007, the global market price of
aluminium reached US$2,520 per tonne, its highest level in the previous ten years (Industry
Canada, 2005).
Bibliography
ALCAN (2003). “Jalons de l’histoire,” www.alcan.com.
ALCOA (2002). “It all starts with dirt: The making of aluminum at Alcoa,”
http://www.alcoa.com/global/en/about_alcoa/dirt/pdf/startswithdirt.pdf, ( Consulted
November 5, 2007).
BINET, E., R. GUIARD and E. JACLOT (2000). “Les fusions Alcan-Péchiney-Algroup et
Alcoa-Reynolds,” École nationale supérieure des mines de Paris.
FUNDING UNIVERSE (2007). “Alcan Aluminium Limited,”
http://www.fundinguniverse.com/company-histories/Alcan-Aluminium-LimitedCompany-History.html. Consulted November 5, 2007.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
INDUSTRY CANADA (2005). “Canadian aluminum industry technology roadmap: The
Canadian aluminum industry,”
http://www.ic.gc.ca/eic/site/pm-mp.nsf/eng/mm01826.html, (Consulted November 5,
2007).
TIME MAGAZINE (June 12, 1950). “Victory for Alcoa.”
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Appendix 2
Alcan’s Global Activities
(Adapted from presentation at the CIO Executive Summit – December 2006, acetate 6)
Legend
Bauxite & Alumina
Primary Metal
Laminated Products – America and Asia
Laminated Products – Europe
Engineered Products
Packaging
Head Office and other offices
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Appendix 3
Alcan Organization Chart – 2007
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Taking on the challenge of IT management in a global business context: The Alcan case – Part A
Appendix 4
Personnel by Location – Corporate IT function
(Source of data: Corporate IT – 1st Month Assessment, April 2006, acetate 22)
Location
Management*
Financial
applications
(Montreal,
Paris and
Zurich)
Montreal
Chicago
Voreppe,
France
Paris
Warmley,
England
Neuf
Brisach,
France
Issoire,
France
Kingston,
Ontario
Saguenay
Singen,
Germany
Zurich,
Switzerland
3
Grand total
3
3
Other
corporate
applications
Architecture
IS
Solutions
Infrastructure
planning
Infrastructure
shared
services
Total
23
9
2
2
6
1
21
27
3
49
30
1
1
4
7
35
9
6
3
1
5
5
1
1
1
1
1
2
1
2
6
1
3
2
8
3
60
16
40
136
*The Management group includes the Executive Vice-President and Chief Financial Officer (Michael Hanley), the
Corporate Vice-President, IT (Robert Ouellette) and the IT Controller.
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Volume 7
Issue 2
May 2009
Taking on the Challenge of IT Management in a Global Business
Context: The Alcan1 Case – Part B2, 3
Case prepared by Professors Line DUBÉ,4 Carmen BERNIER5 and Vital ROY6, 7
Montreal, January 2007 – After ten months as Vice-President of Corporate Information
Technologies (IT),8 Robert Ouellette was appointed Chief Information Officer at Alcan. After he
assumed his new function in March 2006, he conducted a detailed analysis of the IT situation at
Alcan and proposed a major shift in the way the company managed its IT services. The current IT
governance model, which had not been revised for several years, was now totally outdated. IT
services were managed like separate fiefs: each business group had its own IT strategy and its
own model for financing initiatives.
IT Management in a Global Business Context: A Plan for Alcan
“We need to move from a culture of decentralization to a culture of distributed collaboration.”
As Vice-President, Corporate IT, Robert Ouellette had begun outlining the future of IT
management at Alcan. His priority was to build a solid, competent team that could give him the
support he needed. In the absence of clear direction and a specific mandate, the IT management
team was floundering. He identified the key people within the organization, and then added some
new collaborators from very different backgrounds. Of the eight people on his IT management
1
2
This case reflects the situation at Alcan in the summer of 2007.
Translation from French of “Relever le défi de la gestion des TI dans un contexte d’affaires mondial : Le cas d’Alcan –
Partie B,” case deposited under number 9 65 2009 005.
3
This project was made possible thanks to funding from the CGI Professorship.
4
Line Dubé is a Full Professor in the Department of Information Technologies at HEC Montréal.
5
Carmen Bernier is an Associate Professor and Director of the Department of Information Technologies at HEC Montréal.
6
Vital Roy is an Associate Professor in the Department of Information Technologies at HEC Montréal. He is also Director of the
HEC Montréal Case Centre.
7
The authors wish to thank Robert Ouellette for his generous availability and invaluable cooperation throughout the entire
preparation of this case. All quotes used here are translations of excerpts of interviews with Mr. Ouellette during the summer of
2007. We also thank HEC Montréal for its support through its Strategic case-writing workshop designed to encourage the
production of major case studies for teaching purposes. We are also grateful to all workshop participants, whose judicious input
helped us to prepare a better teaching resource tool.
Term used by Alcan.
8
© HEC Montréal 2010
All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited.
The International Journal of Case Studies in Management is published on-line (www.hec.ca/revuedecas/en), ISSN 1911-2599.
This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the
administrative situation presented. Deposited under the number 9 65 2010 008 with the HEC Montréal Centre for Case Studies,
3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7.
Taking on the challenge of IT management in a global business context: The Alcan case – Part B
team, four were new recruits to Alcan. The team’s first challenge was to build cohesion, develop
a common vision and find effective ways of working together. This groundwork was needed to
set up a solid management team that would be able to provide support for the major projects that
would transform the organization.
Robert decided that the next step would be to identify and formulate the main management
principles that would guide the entire reorganization of the IT function at Alcan (see Figure 1).
The management team established principles based on value added (business value), the
importance of human resource development, reduced diversity in the technological park,
economies of scale, reuse, purchase of software packages, and infrastructure management. These
principles were integrated into strategic planning and coloured all decisions and actions taken.
Figure 1
Alcan IT Principles
(Source: Alcan IT Strategic Plan 2008-2010, v1.1b, June 11, 2007, acetates 39-40)
1.
We are innovative and proactive in the use of technology to enable, deliver and
sustain business value.
2.
We continually develop our people, our skills and our competencies.
3.
We reduce diversity, complexity and leverage economies of scale.
4.
We make information reusable, shared, protected, consistent and compliant.
5.
We reuse before we buy; we buy and integrate before we build.
6.
We manage infrastructure like a utility: secure, reliable, standard, available and
at best cost.
The IT management team then prepared a blueprint for the new orientations in IT management.
This first strategic general IT plan was focused on a tight alignment between IT and the business
strategy and the creation of a shared service centre. This plan, which was submitted in the spring
of 2007 and developed in cooperation with all business groups, including the IT group at head
office, established and communicated a common vision of IT management enterprise-wide.
Equally important, this new plan laid the foundations for applying the shared-services philosophy
that was endorsed by Alcan but never fully implemented. According to this new method, the
management of services that were common to all business groups would be done by a central
organizational unit supported by internal billing mechanisms. In the case of IT services, as well
as financial services and human resources, this centralization of shared services would promote
economies of scale, shared competencies, consolidation, standardization, reuse and low-cost
access to expertise. Before such services could be set up, the activities to be integrated first had to
be determined and the roles and responsibilities of the various stakeholders (the central IT
function, the shared service centre and the business groups) in managing IT services redefined.
In addition to creating shared service centres, the new strategic plan demonstrated IT senior
management’s desire to better integrate IT services with corporate strategies. The plan proposed
to set up a governance structure that would clearly identify the stakeholders’ role in IT
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
management, reduce technological diversity and complexity, develop preferred partnerships with
global service suppliers, and continuously improve information security. In concrete terms, it
would define and develop an effective corporate architecture and technological infrastructure
capable of meeting the changing needs of each of the business groups while continuing to support
legacy systems. The strategic IT plan formalized Alcan’s desire to repatriate the management of
its IT services and obtain the necessary tools to manage them on a global basis.
Alcan senior management, satisfied with the proposed IT orientations and the results obtained in
such a short period of time, recognized the need to coordinate the activities of the various
stakeholders affected by the implementation of shared services (IT, finances and human
resources). It was for that reason that, in January 2007, the new Vice-President IT was appointed
Alcan’s Chief Information Officer, making him responsible for global IT management and the
coordination of shared-service activities.
The governance model for IT management and implementation
The new distributed collaboration model that Alcan wanted to implement would put an end to the
unchallenged autonomy of the business groups and require a new governance structure (see
Figure 2). This new structure clearly defined the roles and responsibilities of each stakeholder, in
particular, the role of the central IT group and of the business groups in achieving the objective of
global IT management.
In this model, the CIO was directly responsible for his management team (at the top of the
organization chart in Figure 2) and shared services (at the bottom). Senior IT management thus
consisted of the CIO and his four main associates: the Enterprise Architecture Director, Chief
Information Security Officer Director, Performance Management Director, and Strategic IT
Programs Director. The Corporate IT Director reported directly to the new CIO. At the bottom of
the chart are the two shared service centres (one for Infrastructure and the other, for Application)
that also reported directly to senior IT management.
In the centre are the IT Directors of the various business groups. Under Alcan’s usual
decentralization policy, each group had its own IT director/VP (the titles varied depending on the
group) who was responsible for IT management within his group and accountable solely to his
group’s head management. Under the new governance model, the four IT directors/VPs report to
the head management of their group (75%) and also to the CIO (25%). This change alone
constituted a veritable revolution in IT management at Alcan. It meant that, in addition to the
mandate of their business group, IT directors were now responsible for achieving the company’s
global objectives. IT directors/VPs retained control of local IT management, but used shared
services for delivery of common services. The shared service centres now acted as outsourcers or
internal consultants for the business groups.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
Figure 2
New IT Governance Structure
(Source: IT Shared Services Overview, September 19, 2007, acetate 3)
Chief Information
Officer
Bauxite &
Alumina and
Global IT –
Pacific Region
IT Director
Enterprise
Architecture
Director
Strategic IT
Investment
Programs Director
Chief Information
Security Officer
Director
Performance
Management
Director
Primary Metal
Engineered
Products
IT Director
IT Director
Packaging
Corporate
IT VicePresident
IT Director
Directeur TI
Application Shared Competency Centre
Infrastructure Shared Services
In addition to establishing internal functioning, it was also necessary to redefine the authority
structure that connected the various groups within the IT function as well as outside of it in order
to create greater cohesion between Alcan’s business objectives and the strategic technological
objectives (See Figure 3).
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
Figure 3
New Governance Structure for IT Management at Alcan – Decision-Making Bodies
(Source: Adapted from Alcan IT, The Power of Partnership, IT Governance, v1.2, August 13, 2007, slide 20)
IT Leadership
Committee (ITLC)
IT Council
(ITC)
Audit
Committee
Executive Committee
Members
President and Chief Executive Officer of Alcan
Executive Vice-President and Chief Financial Officer
Executive Vice-President – Corporate Development and Chief Legal
Officer
Senior Vice-President – Human Resources
Senior Vice-President – Investor and Corporate Relations
President and Chief Operating Officer – Engineered Products
President and Chief Operating Officer – Primary Metal
President and Chief Operating Officer – Packaging
President and Chief Operating Officer – Bauxite & Alumina
Made up of a number of members of the Board of Directors
Frequency
Annually
Semiannually
President and Chief Operating Officer – Engineered Products
Executive Vice-President and Chief Financial Officer
Chief Information Officer
Chief Information Officer
Director – Infrastructure Shared Services
Director – Application Shared Competency Centre
IT Director – Bauxite & Alumina
IT Director – Primary Metal
IT Vice-President – Packaging
IT Vice-President – Engineered Products
IT Director – Corporate
Quarterly
Bi-monthly
The CIO is ultimately accountable to the CFO. At least once a year, the CIO met with the Alcan
Executive Committee to report on his operations. To support him at the senior management level,
an IT Council was created, made up of the CIO, a President representing the business groups
(currently the President of Engineered Products) and the Chief Financial Officer. All ideas
advanced by the CIO were discussed by this council before being presented to the Executive
Committee. The IT Council met four times a year.
To ensure the business groups had a platform and hear what they had to say, Robert also created
the IT Leadership Committee, which brought together the IT Directors of the business groups and
shared services twice a month in order to take stock of current initiatives and better plan for
future projects. All irritants were duly noted, solutions identified and, when possible,
implemented. Finally, twice a year, IT senior management met with the company’s internal Audit
Committee, the group with the final say on rules and processes governing the production and
presentation of financial information. This committee assessed IT risk management, particularly
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
with respect to best internal control practices dictated by legislation and regulatory bodies (such
as the Sarbanes-Oxley Act, for example), and those ensuring business sustainability and
continuity (backup plans for critical applications, for example). The committee drafted
recommendations as needed and monitored their implementation.
The major orientations of the IT strategic plan
It’s always the same debate; there’s no such thing as the perfect model. It’s a question of balance: if
you’re too centralized, you lose contact with the day-to-day reality of your operations. If you’re too
decentralized, you gain in terms of operational performance, but you lose in global efficiency.
Effective management is a balancing act.
In addition to developing management principles and instituting a new governance structure, the
strategic plan defined priorities for the coming period.
So, in accordance with the shared service vision, services used by all the business groups would
be centralized and provided by shared service centres. According to Alcan executives, this
strategy would promote the development of expertise, connections among projects, optimal use
of specialists, reuse, negotiations with suppliers, standardization of practices and norms, and
generalized economies of scale. While supporting the individual and ongoing development of the
business groups without disrupting their activities, the implementation strategy was aimed at
progressively shifting responsibilities, applications, infrastructure, personnel and processes to the
shared service centres.
At the core of the plan was senior management’s desire to regain control of its outsourcing
strategy, which was monopolizing a large part of its budget. In the past, faced with mismatched
and poorly managed internal teams, large consulting and tech firms simply assumed leadership.
A new IT management team and major restructuring of activities combined with global skills
development encouraged Alcan to take back control in this area. Internal teams would now be
mandated to reflect, plan and make important choices affecting IT organization. Suppliers would
work with an internal team that was more experienced, more demanding and more competent –
not just in terms of content, but partnership management as well. In order to disrupt daily
operations as little as possible, these changes were implemented progressively as service
contracts were renewed, new people were hired and employees’ competencies improved through
training.
The first strategic IT plan affected four priority areas: (1) creation of an enterprise architecture,
(2) management of the technological infrastructure, (3) management of applications, and
(4) management of IT investments.
1. Creation of an enterprise architecture
One of the new Vice-President’s first mandates was to organize the enterprise technology
architects. “It was total chaos. There was no coordination between the near/offshore groups
whose operations significantly affected the others. The whole thing needed to be reorganized.” So
Robert hired a new Enterprise Architecture Director with the mandate to design the standardized
technologies and practices on which all new development within the company would be based.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
The new director identified the enterprise architects currently working for the company, analyzed
their competencies, and created seven new positions to be filled on his team. Three high-potential
architects were identified and transferred to the team.
The new team’s first task was to identify the common technological objectives of the major
projects that were currently underway. Then, based on its findings, the team drew up a list of
fourteen priority foundation blocks. With a view to reducing technological diversity and
standardizing methods, these blocks represented elements used by more than two business groups
that were pertinent to the uniformity of future applications and those currently being developed ‒
in other words, common platforms or applications on which future technological developments
would be based. These blocks included, for example, Information Exchange Infrastructure,
Enterprise Portal, Document Management, Identification and Access Management, Business
Intelligence, Knowledge Management, and Web Services Platform. The team began by focusing
on the blocks that IT Management considered to be the most urgent: Exchange Infrastructure and
Enterprise Portal. In addition to outlining the main concepts with respect to technologies,
standards and norms, and determining prices and responsibilities, the team was also mandated to
provide the technological solution for each block.
An example: one of the important aspects of the Information Exchange Infrastructure block was
data exchange in an SAP environment. Due to the ever-growing number of independent SAP
implementations in the various business groups, there was already extensive diversity in the ways
the groups organized data transfers (in-house products, various supplier platforms and SAP
platforms) between modules, between modules and the outside, and between modules and other
Alcan systems. This exponential increase in work methods required a growing number of
skills… and suppliers. After analyzing the problem, the architecture team selected one platform
(the original SAP product) and developed the necessary standard tools for data transfer. All future
applications and those currently being developed would then be required to integrate the standard
tools into their interfaces.
The leadership of this team, reporting to IT senior management, was located in Montreal. Team
members based in Montreal and Voreppe (France) worked closely with Infrastructure Shared
Services and the new Application Shared Competency Centre. Once a block had been defined,
developed, tested and was ready to be used by the groups, its management would be transferred
to one of the two shared-service centres, depending on the domain it most directly affected.
2. Technology infrastructure management
Alcan’s technology infrastructure was imposing, to say the least. With an annual budget of close
to $76 million, there were 400 sites to be linked, six major data processing centres to be
managed, 3,000 servers and 31,500 PCs (including almost 9,000 laptops) to be maintained,
almost 30,000 voicemail boxes to be managed and 3,700 support calls/month to be answered!
The result was unprecedented diversity and an overabundance of partners.
Although the vocations of the business groups were different, their needs in terms of technology
infrastructure were relatively comparable. According to the Chief Information Officer:
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
The infrastructure was the easiest thing to repatriate to a shared-service centre because the groups’
needs were very similar. Everyone wanted a network, a message handling system, data processing
centres, servers and workstations. And they wanted them to perform well, be reliable and not cost
much to run.
In 2003, following the Pechiney acquisition, Alcan had already started to implement an
infrastructure standardization plan, but the strategic plan wanted to go farther. “From an
infrastructure point of view, it was easy. We just had to consolidate and standardize what we’d
started.” The objective was to reduce the diversity and complexity of the technological
installations by standardizing the networks, servers and workstations. To do that, we created
Infrastructure Shared Services.
Naturally, we had to sell the idea to the business groups, but once Primary Metal, one of the major
groups, finally agreed, everyone else didn’t have much choice but to get onboard. As far as we were
concerned, Primary Metal was our point of no return. Once they were in, we were committed.
They started with the network, which was extremely complex. Successive acquisitions had left
the company with clusters of interdependent sites. For access purposes, several sites were linked
to the master site, which was linked to another master site, which finally provided access to a
core network. Service on these networks was provided by various suppliers: although big names
in the sector (MCI, Bell, Equant and Vidéotron) played a major role, there was a plethora of
small, local suppliers as well. As acquisitions and sales multiplied, so did the clusters ‒ to such
an extent that the company was forced to deal with major network instabilities. The removal of
even one of the links in the network could have unpredictable consequences that were difficult to
control: “It was like trying to manage a game of pick-up sticks!”
Less diversity affected not only technology, but also the suppliers with whom the company did
business. IT senior management started by negotiating a contract with a single supplier for the
network: Orange Business Services (part of the France Télécom group), that offered services
worldwide through various partnerships. Since nothing is ever simple, however, Alcan also had
to negotiate with Telstra, which had virtual monopoly in Australian telecommunications, in order
to provide service in that territory, which was not served by Orange Business Services. Once
these agreements had been reached, Alcan progressively transferred all its sites to the new
network. Based on the same line of reasoning, the message management contract was awarded to
IBM, which managed the system from its sites in Toronto and Montpellier (France).
The data processing centre situation was even more complex. Alcan’s six data processing centres
were operated by as many companies: CGI in Saguenay, IBM in Toronto, CGI in Montreal, TSystems in Paris, and T-Systems and HP in Germany. Even if Robert wanted to move quickly to
consolidate some of these centres, contractual obligations prevented him from doing so without
paying heavy indemnities. The agreements, which remained in effect until 2009, had to be
respected.
As far as the data processing centres were concerned, there was no point in rushing into things.
Waiting until 2009 to do the changeover gave us time to plan a global strategy, find the best partner
and prepare a solid transition plan. Everything had to be done without affecting the groups’
operations, which was no easy task.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
According to the CIO, the ideal solution would be to use only two data processing centres for the
entire organization. This would reduce complexity without overly increasing system
vulnerability, as each centre could be the mirror site of the other.
With the aim of regaining control of activities (even outsourced activities), a team was set up
within the Infrastructure Shared Services group in Voreppe, France. The 78 people in the group
were basically repatriated from the business groups. To better meet local needs, IT senior
management also set up regional groups in Voreppe, Montreal, Saguenay, Shanghai and,
eventually, Brisbane (in Australia).
Before, we were just managing contracts. It didn’t take long, however, before things exceeded our
people’s technological expertise and they no longer had the capacity to understand what they were
managing. So we rebuilt a team of specialists. Now, not only could we manage our contracts, but we
could also plan our needs, better evaluate performance, solve problems with our partners, and work
toward the global development of our infrastructure. Once again, we were running the show.
To effectively manage all its activities, the Infrastructure Shared Service group set up the
Information Technology Infrastructure Library (ITIL), which it then used to identify best
practices in IT infrastructure management and operations. Drawing its inspiration from ITIL, the
centre managed its support services by technical domain and its service delivery by process. The
result was improved performance and better control of service quality. In France, the group took
first prize at the 2006 IT Service Management Forum for the excellence of its ITIL process
implementation, coming in ahead of such industry giants as Airbus, Carrefour and GE Capital.
3. Application management
Like everything else, all the information systems were planned, created and maintained within
each of the business groups. Several SAP platform initiatives were going on at the same time:
these parallel operations on the same technological platform created enormous pressure on the
organization’s competencies in this area. Each of the projects used SAP variants, which increased
the complexity, required wider expertise, and complicated transfers and information reuse, as
well as updates and future implementation of new versions. This problematic diversity was not
limited to these specific projects, but found its way into almost all the applications used at Alcan.
There were, for example, over 400 different applications for financial management alone. Apart
from making it virtually impossible to access information easily, this diversity significantly
increased application management costs (in terms of maintenance, operations, training, updates,
etc.). Technological diversity also entailed the management of multiple partnerships.
In order to reorganize global application management, IT senior management created the
Application Shared Competency Centre with the aim of consolidating everything related to the
development, creation, delivery, maintenance and monitoring of applications under one
management. According to this model, everything connected to the management, planning and
analysis of needs remained under the auspices of the business groups (all administrative
applications, including generic SAP applications). Then, when they were ready for technological
development, the Application Shared Competency Centre took over. The idea was to repatriate
critical mass applications to the Application Shared Competency Centre and leave those used for
the specific needs of one group with that group (MES applications). “It had to make economic
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
sense.” Given the diversity of the business groups, it was considered preferable to let each one
consolidate the management of its MES applications.
While the transfer of the infrastructure to Infrastructure Shared Services was relatively
uncomplicated, the same could not be said for the applications.
The infrastructure was seen as a commodity. As far as the groups were concerned, if someone could
provide them with the same service at a lower cost and they didn’t have to worry about it, great.
Applications were another story altogether. The groups reacted immediately, afraid that if they
relinquished the development of their applications, they would lose control of their systems. This
phase entailed a lot of very long discussions with group senior managements.
Instead of playing the heavy and imposing the change by decree of senior management, Robert
decided that it would be wiser to proceed by increments. He gradually organized the central
management of applications until it became indispensable. This strategy worked well with the
business groups: since they were quite independent at a technological level, they grew to
appreciate the opinion and expertise that centralized management could give them.
You have to remember that I was relatively new to the scene as well; I didn’t have answers to all the
questions. It wasn’t as if the applications centre was completely functional. The basic principles were
easy to establish, but in terms of day-to-day operations, we had to start from the ground up.
Proceeding step by step allowed us to develop and implement methods so that we could test and
refine them.
After negotiating with the business groups, it was agreed that the maintenance of several
applications, including those being developed on the SAP platform, would be repatriated to the
shared application centre.
Although many people thought this was an odd decision, I personally believe that we tend to
underestimate the importance of maintenance in organizations. To achieve effective maintenance,
you have to know your systems and business processes inside out. You have to build relationships
with all your key people.
The central group thus began to assume control of maintenance, quickly adding the supervision
of all new SAP initiatives. As the legacy applications were integrated into the SAP platform, new
applications were placed under the responsibility of the shared competency centre. “It was a
gradual, painless transfer.”
The Application Shared Competency Centre was a centre that used the services of offshore
resources. Service in the Americas was provided out of major centres in Montreal and Chicago,
where there were 17 internal people and 55 outside consultants and contract workers. A similar
group based in Voreppe and Gennevillier (close to Paris) provided services for the rest of the
world. This group consisted of 73 internal people and 53 outside consultants and contract
workers. Finally, as for infrastructure, several tasks related to development, testing, maintenance
and surveillance were outsourced. IT senior management opted for a hybrid model: “nearshore”
(neighbouring countries) and “offshore” (overseas countries). Thus, a great deal of work was
done in Accenture centres in Bratislava (the capital of Slovakia) and Hyderabad (in India). The
company had chosen to maintain a site in Europe to facilitate communication with the Europeans,
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
who were often less comfortable working in English, and to work in a common (or similar) time
zone, all based on an attractive cost structure. Accenture decided where the work would be done.
Alcan started by making an agreement that promised a certain result at a given price. As far as I was
concerned, Accenture could have part of the work done in China if they felt like it. I just wanted to
make sure that users could be served in English, French or German.
The purpose of this shared competency centre was to obtain a global overview of the company’s
information systems, make the most use of people’s competencies and encourage reuse.
We just finished a project! We took an SAP model that contained basic modules that came from
Tomago1 Aluminium in Australia. Then we transferred it to Voreppe2 so we could migrate to a new
version of SAP using a mixed team from Voreppe and Accenture consultants in France and India.
The model was then implemented at Sohar Aluminium, in the Sultanate of Oman,3 by a mixed team
from Sohar, Voreppe and Accenture in Bombay. Alcan owns 20% of Sohar Aluminium. Finally,
through our Application Shared Competency Centre, we signed a five-year contract with Sohar to
support their new system. An Accenture centre in Hyderabad, India, actually that looks after that. To
get that contract we had to bid on the support project just like any other outside supplier.
Even if Alcan’s IT function did not identify itself as a service supplier for outside companies, this
collaboration underlined Alcan’s interest in the affairs of Sohar Aluminium.
Since Alcan had chosen SAP for its basic technological platform, this meant that, over the long
term, all new initiatives would be managed like an SAP integrated development project. Alcan
wanted to migrate to a global template that could standardize architecture while proving the
necessary flexibility to meet the needs of all of the business groups.
When companies say that they run on SAP, you’d think that they would be integrated and be able to
exchange information easily. Nothing could be further from the truth! Generally speaking, the SAP
instances they’ve implemented are so different that it’s as if, at the central level, they had installed
completely different systems.
The plan therefore provided for the migration of all current SAP instances, as well as all the old
legacy systems, to this new platform. A team of specialists would look after the new
implementations and could work in collaboration with local teams. This migration would have to
be carried out without disrupting any of the business groups’ activities. A detailed
implementation plan for this objective had yet to be drawn up.
4. IT investment management
There was no doubt that all this reorganization of IT management stemmed from Alcan’s need
for greater IT management visibility. All major projects that affected more than one entity or
concerning central services in one way or another could no longer be carried out independently.
Under the direction of strategic investment programs, therefore, IT senior management set up a
1
Tomago is a city on the east coast of Australia, about 164 km north of Sydney.
2
Voreppe is a city in southwestern France, just north of Grenoble.
3
The Sultanate of Oman is a small country (population 2.3 million) in the Middle East, on the southeast coast of the Arabian
Peninsula. It borders the United Arab Emirates on the northwest, Saudi Arabia on the west and Yemen on the southwest. It is
the site of large oil reserves that provide energy for Sohar’s aluminium smelters.
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Taking on the challenge of IT management in a global business context: The Alcan case – Part B
strategic project office to closely monitor all IT projects valued at $2 million and over. The office
would evaluate project proposals to ensure that methodologies (planning, risk management,
control and follow-up plan, etc.) were respected. Although the operational management of these
projects would remain under the responsibility of the business groups, the project office would
keep a very close eye on all major projects.
To orchestrate the management of IT projects, the plan also made provisions for global
management of IT human resources. Alcan wanted to harmonize position titles, competencies
and roles, and to establish global succession plans, etc. in order to make the best use of the
competencies of the teams already established worldwide.

Robert reflected on his accomplishments. He had covered a lot of ground in just over a year! The
plan was ambitious, but the objectives were sound and the potential benefits, significant. He had
the ear and the support of the Executive Committee. The shared-services concept had gotten off
to a good start in the area of infrastructure management and integrated application development
management. The good relationships between the CIO and the business groups (the result of
Robert’s ten years as a consultant), the credibility and experience of the new central IT team, and
the results obtained to date convinced the business groups to get onboard. When Robert arrived,
the central IT group had often been the last to find out about IT initiatives in the business groups.
Now, the groups were more proactive, asking the competence centres for assistance in planning
their IT projects. It must be said, however, that the changes to date had affected only the least
controversial aspects (of IT services). The global implementation of the new IT management
philosophy would entail even greater changes in uncharted territories. The transformation of the
former Pechiney IT group had raised a great deal of concern because of the requirements of
French labour laws. How would the organization and senior management react? What about the
business groups? Ever the skilful strategist, Robert was planning the next steps. What new
challenges awaited the CIO in implementing his new IT management model?
2010-06-21
© HEC Montréal
12

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