Diamonds in the rough
De Beers, the world`s dominant diamond mining and marketing group, is planning to shell out in a big way on a massive ERP standardisation project. Though it won`t disclose any detailed strategy or justification for this level of IT expenditure, discussions with those tasked with a preparatory business intelligence and data integration project reveal that opinions within the group are divided on the subject.By all accounts, IT spending remains depressed, as companies shy away from big IT implementations in favour of smaller, more manageable projects that enable them to do more with what they have already.But strategic imperatives at some companies won`t be denied, as the De Beers project illustrates. Though labouring under substantial debt after being bought off the stock exchange, it is quietly busy rejigging both its operational and decision-support systems to achieve hoped-for cost savings through sheer scale. Insiders estimate the eventual value of the project to top R500 million, though Kevin Burford, group manager: financial services at the mine`s corporate headquarters, declines to confirm or deny this estimate.In a depressed market where large IT budgets are hard to come by, the internal debates are controversial and heated.The ERP project is still in its initial phases, but as a first step, the company has undertaken a R10 million data management exercise. This is the biggest such contract ever handled by the diamond giant`s specialist business intelligence partner, Global Technology Business Intelligence. GBI was selected after a process that whittled 14 vendors down to a shortlist of five, over a period of more than 18 months.Most of the De Beers mining sites are located in Africa, but it has a few important mining and exploration operations elsewhere around the globe. The aim is to overhaul and standardise systems throughout the group.Eric van den Top, business solutions architect at the company`s Crown Mines headquarters, explains that the overall project involves the commercial systems (ERP) as well as the business intelligence (BI) applications sitting on top of that. Van den Top and Penny Prinsloo, business information manager at the “shared services” division in Kimberley, were tasked with a sub-project, the scope of which was to consider, specify and implement the BI layer. Mining a strategyDescribing the big picture, Van den Top says: “At the moment, we`ve got a bit of everything in our organisation, like most organisations, including two SAP sites. We`re trying to pull them together and standardise across the group.”A decision on an ERP supplier is expected in the first quarter of next year, according to Chris Botha, acting GM for IT1. Botha says that to underlie the BI layers, the company`s stated desire is to roll out a standard ERP implementation, in a phased approach, throughout its operations. It has determined three likely contenders, but he isn`t willing to pre-judge the decision, which will be made in the first quarter of 2003.The size of the project alone, estimated by one source as equivalent to ERP software vendor SAP`s entire annual revenue in South Africa, makes it easy to take a stab at who the eventual beneficiary of the deal will be.Availability of skills in South Africa for such a big project came up as one of the risks, according to Prinsloo, but Van den Top points out that it won`t be the only deciding factor. Further questions on the larger project are initially deflected by Prinsloo, saying that ERP isn`t within their mandate.But why, when so many companies are holding back on spending, is De Beers planning to shell out this kind of investment?“That`s an interesting one, because we`re in a major cost-cutting phase right now,” admits Van den Top. “But we`re still not closing the purse on areas where the business believes it can gain a lot of benefit. Previously, when De Beers cut costs, it cut heads and closed everything. This time the view is a bigger picture. Certain projects have been stopped or postponed. But if it`s of strategic importance, we need to do it.”Adds Prinsloo: “De Beers has embarked on a balanced scorecard strategy, and your strategy needs to be supported by your operations. It is important to make our large volumes of data available and put other things on top of it, instead of trying to source data from transactional systems directly – as we did in the past. Now, all our data goes through the same transformation, into a single integration area.”Strategic imperatives for Van den Top and Prinsloo were a common toolset across all platforms, which was flexible enough to change as business strategy changed. HeresyThe fact that GBI`s data management product, ACTA1, gives them a single, integrated layer of data – irrespective of the transaction systems from which it is sourced – leads Prinsloo to a startling but intriguing view.GBI`s representative at this meeting, Di King, suggested that the requirement of data integration is becoming obvious only now, because people have gone through the ERP era. “Until the organisation was disciplined and standardised, there was no need for [data integration].”She adds: “Now that everybody has ERP, the competitive advantage has been moved.”Botha doesn`t believe that a good data integration layer might avoid the need to standardise on enterprise applications. In fact, he says, “BI and ERP are almost mutually exclusive – they have very little to do with each other.”Prinsloo, however, agrees with GBI`s opinion.“Ten years ago,” she says, “everyone thought ERP was going to get them [to a clean, consistent view of data]. And it didn`t. It did integrate the business, but it merely exposed the underlying problem of data integration,” she says.“If you look at the financial outlay required to implement something like SAP, it`s equivalent to starting a new mine!” Prinsloo quips, exaggerating only mildly. “SAP projects consume cash,” she notes.“My personal opinion is, if you take ACTA and you use it as your integration tool as well, then why do you need to make that [ERP] investment?” asks Prinsloo. “We`ve got legacy systems. They`re old systems, but they are working for us in the commercial environment. There are gaps, but these gaps are in the same places that you`d have with SAP. SAP won`t give you better data quality. You need a system that gives you that data quality. So ACTA could protect your investment in legacy systems.”Michael Kupowitz, a solution manager at SAP working with its business intelligence products says that while SAP`s data warehouse is built to be open to SAP and non-SAP systems, both at the back and front ends, “you`re probably going to miss out on a whole bunch of functionality” without a standard ERP system across the organisation.Describing the potential value of the deal as “astronomical”, he says that this would make a full business case a certain prerequisite. “SAP is particularly strong in mining,” he adds.“They`ve obviously considered what SAP can offer. If you plug BI on top of SAP, there`s much more you can offer. That`s the [functionality] gap they need to consider.”Van den Top says Prinsloo`s view isn`t widespread, but adds, “There are pockets of people who believe that if you don`t have ERP now, why go ERP at all?”Qualifying her view, Prinsloo says: “Make no mistake: we need to look at that transactional layer. There`s no disputing that. But why not go for a whole lot of best-of-breed applications, at a fraction of the cost, and use ACTA as your integration layer? That`s where your opportunity lies. The integration layer is protective – between existing and legacy, existing and future.”Kevin Burford declined to explain the reasoning behind the huge IT spend De Beers is planning, despite repeated attempts to secure a formal interview.But when internal discussions on IT strategies lead people to express views that the ERP establishment would call heresy, it is clear that they are putting more effort into fully exploring alternatives and justifying whatever decisions are made in the end. Chances are this represents huge opportunity for South African IT companies who can deliver smart ways of keeping costs down.
11 December 2002
De Beers, the world`s dominant diamond mining and marketing group, is planning to shell out in a big way on a massive ERP standardisation project. Though it won`t disclose any detailed strategy or justification for this level of IT expenditure, discussions with those tasked with a preparatory business intelligence and data integration project reveal that opinions within the group are divided on the subject.
But strategic imperatives at some companies won`t be denied, as the De Beers project illustrates. Though labouring under substantial debt after being bought off the stock exchange, it is quietly busy rejigging both its operational and decision-support systems to achieve hoped-for cost savings through sheer scale. Insiders estimate the eventual value of the project to top R500 million, though Kevin Burford, group manager: financial services at the mine`s corporate headquarters, declines to confirm or deny this estimate.
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