Sunday, December 25, 2011

Enterprise Governance - The Importance of Information Technology

 

If a shared services centre is to successfully deliver all its promised benefits, then the right IT strategy is imperative. The move to a shared services culture will often involve either an adjustment or extension of an organisation's IT arrangements, or even further implementation. The aim is to combine the various and frequently incompatible systems operated by different business

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units into a common system platform. It may not be possible to switch from multiple systems to a single system overnight, but an initial target of a reduction to no more than five systems should be achievable. Therefore any move to a shared services environment must incorporate a clear understanding of an organisation's IT strategy. The shared services unit must not only be able to interact with other business units' IT systems, but be in a position to take advantage of new IT solutions while carrying out its services, which can lead to cost reductions and improved performance (Figure 9.2).

 

Mark Adams, CFO of STA Travel, on the benefits of single instance implementation

'STA is a complex company. We operate in 18 countries, have 450 branches and employ more than 3,000 staff. We are a very high volume business with an average turnover of $1.2bn a year. However, the profit margins are very tight. If we can make a 3 per cent return we are doing very well.

We are also in a highly crowded and competitive market. It's therefore key to manage the business in real-time terms. For example, a product could normally have a margin of14 per cent, but if for any number of reasons that drops to 12 per cent, you need to know straight away. In order to react to that cut you need to have the right information at your fingertips. You need these types of systems, however complicated they may seem.

'Initially we did look at ERP, but felt it did not provide the information we wanted without a lot of work. Buying financial accounting software is a big decision, there is no doubt about that, and there are no guarantees. STA's IT spend on systems will be $25m over the next five years. Our total IT spend will cost around $50m. But it is a means to an end when striving for long-term sustainability.'

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