Air Product And Chemicals, Inc.

Case Study: Air Products and Chemicals, Inc.

 

Table of Contents

Table of Contents 2

Background 3

Symptoms 3

Symptom 1 Ð'- Unable to retain valuable MIS staff 3

Symptom 2 Ð'- Low reliability and high maintenance of global networks 4

Symptom 3 Ð'- Difficulty on outsourcing IT projects 4

Causes of Symptoms 4

Cause of Symptom 1 4

Cause of Symptom 2 6

Cause of Symptom 3 7

Alternatives 7

Alternative 1 Ð'- Build a stronger central MIS team 7

Alternative 2 Ð'- Greater IT decentralization 9

Final Recommendation 9

Background

Air Products and Chemicals, Inc. (APCI) is a mid-sized company in the industrial gases and chemicals industry. In the 1990s, the industry was a mature market, highly competitive worldwide with excess manufacturing capacity and squeezing margins. APCI was the second in gases in the U.S., and the first or second in those international markets where the company chose to compete. APCI was not big enough to gain real economies of scale, but too large to be flexible as a small company. Facing these pressures, the company chose to combine creativity and technology to enable the businesses to compete with large companies.

During the 1990s, APCI had successfully implemented Project ICON to create global networks and Customera to provide competitive advantage through service differentiation. Information technology has moved to the very centre of the company's operations. Outsourcing, client/server architecture and a new MIS department structure are the new challenges in front of the company.

Symptoms

Symptom 1 Ð'- Unable to retain valuable MIS staff

APCI has a very high MIS staff turnover rate. The MIS department intends to hire people who have both business and IT backgrounds so that they can create multiply career paths within the company. For example, Project ICON was implemented in 1991; however, in 1994, only about 10% of the people involved in the project remain in this part of the organization. The company is facing fierce competition in employing top college graduates as they choose more frequently consulting jobs over company MIS positions. APCI's experienced MIS staff also leaves the company for better compensation in consulting firms.

Symptom 2 Ð'- Low reliability and high maintenance of global networks

Project ICON created APCI's global networks allowing information share between European and U.S. headquarters. The project also switched the company's European offices from mainframe computers to client/server architecture. The client/server networks are significantly less reliable compared to mainframes. The company stopped achieving the old mainframe level of reliability. Installing and updating software is extremely difficult because of a large number of different hardware and software configurations. Client/server architecture was supposed to reduce costs for system upgrades since PCs are cheaper than mainframes, but total spending on mainframes is less than half of it on PCs. As the systems become more and more mission-critical, backup and contingency planning also become a real headache.

Symptom 3 Ð'- Difficulty on outsourcing IT projects

Outsourcing and partnering with external firms for systems development is a future trend. It will be impossible in the future for a relatively large company like APCI to do all of its own system development work. APCI has not been successful in pursuing international outsourcing to lower wage countries such as India and the Philippines. 25% of the MIS positions at APCI are filled with outside contractors, who on occasion quit their contracting agreements on short notice for more secure positions with other companies.

Causes of Symptoms

Cause of Symptom 1

APCI requires its IT new hires have a combination of various disciplines in addition to their IT backgrounds so they can cover multiple assignments. Employees with many skill sets are not restricted to having a single career path in the company. MIS managers need to keep in mind of what this means for hiring, training, and retaining quality people.

MIS managers look for top college graduates with skills and backgrounds that match a computer consultant. However, the company often loses the competition over professional consulting firms because these firms provide better career development opportunities as well as better pay. Because of rapid change, reengineering, and the introduction of new technology, APCI always have to seek assistance from outside firms and to re-skill its staff. This allows the APCI's employees to develop relationships with other companies. The experience these employees are receiving has made them very marketable, and they realize the shortage of such talent in the marketplace. APCI's corporate policies do not allow the company to award large salary increases and bonuses that would keep compensation on par with the consulting firms.

More importantly, employees who started in MIS department do not see non-MIS career succession within the company. Employees invest their time where they can receive highest market value for their talent. This may not necessarily mean where they can receive the highest salary, but rather where they will receive the best training, or are given opportunities to grow and stay challenged. APCI intended to train employees so they can work in multiple areas. MIS employees are moved to other business units after two to three years. The new position often requires different skill sets and the knowledge developed from the previous job is not reused in the new job. Rather than moving MIS employees to new business areas, the company can train them to be facilitators and leaders who can contribute anywhere in the company at anytime.

The company should no longer expect long-term employment by all employees. The market, not a company, determines the movement