2 case studies due tonight

116

CASE STUDY I-1

IMT Custom Machine Company,

Inc.: Selection of an Information

Technology Platform

June Page watched an October rainstorm coming out of the

west from her second-story executive office. Turning to a

growing stack of paperwork, she also thought of the dark

cloud hanging over her information systems (IS) area.

Something had to be done. Committee after commit-

tee had analyzed urgent systems problems and proposed

incremental solutions. And Page’s faith in her staff usually

led her to approve the recommendations. But soon another

“glitch” always seemed to develop, and another committee

would have to be appointed. “Something fundamental was

missing,” she thought to herself. “We don’t have a strategic

direction for IS—we don’t know where we want to be or

how to get there. We have to get our arms around where we

want to go with our information systems once and for all.”

Page was a vice president and the division manager

of a subsidiary within the International Machine and

Tool—USA (IMT-USA) Company. The IMT Customer

Machine Company built multimillion-dollar, large custom-

made production machines. These machines were used in

the manufacturing of various parts for large items such as

automobiles. As division head, Page was responsible for

two factories, which built about 150 machines per year,

and a third factory that made smaller machined parts for

the two factories. A service and spare parts group within

the division supported the repair and maintenance business

for any custom machine, including those built by IMT’s

competition. The Fort Wayne, Indiana, plant, where Page

worked, was the largest custom machine factory in North

America. (See the organization chart in Exhibit 1).

In early September, Page had decided to ask an expe-

rienced engineer to learn about the IS activities, investigate

all the issues, and develop a recommendation, or at least

some options for her to consider for getting IS on track for

good. While she recognized she had undertaken an uncon-

ventional approach, she knew Charles Browning was the

right person for the task. Browning was a staff engineer with

an extensive scientific computing background, finishing his

MBA at a major Midwestern university. He reported to the

development engineering manager at the Fort Wayne plant.

At a meeting on September 3, 2002, Page had given

the charge to Browning:

I need you to survey the total IS picture and give me

three or four basic directional options which will

satisfy our IS needs over the next several years. I want

you to report your findings in six weeks. Plan on giv-

ing it to me straight. I will review the findings with you

and then incorporate one of the alternatives into my

business plan for 2003. There should be no limits on

the type of recommendations you provide, Charlie.

By using Browning, Page hoped to cut through the

layers of management that might have been filtering out

the root causes of IMT’s IS problems.

She heard the knock on her office door and assumed

that Browning was ready with his report.

The Custom Machine Industry

Exhibit 2 summarizes the additions to production capacity

for U.S. suppliers of custom production machines. Until

the mid-1970s, there had been a clear upward trend of pro-

duction capacity additions. But the growth in worldwide

demand for the machines began to decline as industrial

production in developed countries slowed.

As the market share of U.S.-based industrial produc-

tion companies declined, demand decreases were soon felt

in the U.S. custom machine industry. Excess production

capacity suddenly became a reality. Underutilized plants

became targets for closing, and plans for scores of new

plant and additions were canceled. Annual capacity addi-

tions declined after 1975. By the mid-1990s, annual capac-

ity additions had fallen below the level of the early 1960s.

When the data were released for 2000, experts expected

additions to capacity to be nearly zero.

The industry slowdown caused Williamson Machines

and Engineering Corporation (WILMEC), which held

about 30 percent of the U.S. market, to close its “medium

Copyright © 2010 by Stephen R. Nelson and Daniel W. DeHayes. This case was developed to provide the basis for class discussion rather than to illustrate either effective or ineffective handling of an administra- tive situation.

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 117

June Page

Vice President

R.A. Gates

Division Strategic

Planning Manager

Chicago Plant

&

General Manager

M.C. King

Development & Product

Support Engineering

Product

Engineering

Manager

CAD &

Standards

Manager

E.W. Quip

Engineering

Computer

Systems Manager

Fort Wayne Plant &

General Manager

Large Horizontal

Product Line

Manager

Large Vertical

Product Line

Manager

Medium

Horizontal Product

Line Manager

J.R. Moran

Division Controller

Fort Wayne

Controller

J.B. O’Neil Fort

Wayne & Division

MIS Manager

W.D. Gears

MIS Operations

Manager

EXHIBIT 1 Organization Chart: IMT Custom Machine Company, Inc.

horizontal”–type machine factory in Cleveland, Ohio, in

1983, moving its medium horizontal production capability to

its one remaining custom machine factory in Fort Wayne,

Indiana. The Fort Wayne facility was constructed in the early

1970s specifically to manufacture a similar, but technically

different, type of custom machine called a “large vertical.”

In 1988, General Engineering, Inc., which in previous

years had been an equal market rival to WILMEC, aban-

doned its custom machine business by closing its Detroit,

Michigan, plant. General Engineering (GE) sold its technolo-

gy to WILMEC, and GE’s production equipment was moved

to WILMEC’s Fort Wayne plant. The result of WILMEC’s

technology acquisition from GE was that a third, and very

different, technology called “large horizontal” also started

being manufactured in Fort Wayne. At this time, WILMEC

also expanded its custom machine reconditioning operation

in Chicago to handle the assembly of one-third of its medium

horizontal machines. By 1990, the Fort Wayne plant pro-

duced all three custom machine types: large horizontal, large

vertical, and medium horizontal.

Starting in late 1993, WILMEC refocused its strate-

gy away from the machine fabrication industry into

various service industries. WILMEC sold all of its custom

machine engineering, manufacturing, and sales operations

to International Machine and Tool (IMT) of Bonn, Germany,

in mid-1995. IMT was itself the result of a 1987 merger

between Europe’s two largest machine manufacturers—

International Machines (English translation) of Germany

and Tools of Commerce (English translation) of Italy.

Numerous plant closings and consolidations had rippled

through Europe as well as the United States in the late

1980s and early 1990s.

By 1995, the production capacity for custom produc-

tion machines in the U.S. market had essentially stabilized at

95 percent of the demand level. As was true for most cycli-

cal industries, a significant increase in demand would cause

capacity problems and delay deliveries. Indeed, some indus-

try observers suggested that the custom machine industry

might return to a robust building program by 2005.

International Machine and Tool

International Machine and Tool used a matrix-style organiza-

tion throughout its operations, modeled after the structure of

118 Part I • Information Technology

35

40

C a p a c it y A

d d it io n s (T

o n s) 30

25

1965

20

15

10

5

0

1970 1975 1980 1985 1990 1995

EXHIBIT 2 The U.S. Custom Machine Industry Production Capacity Additions from 1965 to 1995

other large, European-based global companies. Dr. Wilhelm

Schlein, Chairman of IMT, summarized the organization as

“a federation of national companies with a global coordina-

tion center—a distributed organization which has many

homes.” Schlein’s strategy for building a decentralized,

multidomestic enterprise was critical to achieving IMT’s

goal of “think global, act local.”

One side of IMT’s matrix organization was country-

based. Each country manager (president of the national

holding company) was responsible for financial targets for

all of IMT’s companies in that country. Country presidents

coordinated synergistic relationships across IMT opera-

tions within the country (e.g., the same distribution and

service networks). They were also responsible for main-

taining relationships with national government officials.

The second side of IMT’s matrix was technology-

based (product classes) and reported through a separate

transnational technology management group, called a busi-

ness group (BG). The mission of each BG was to support

shared knowledge and operations among many interna-

tional factories in the same industry. BG leaders served as

business strategists who set global “rules of the game” and

then let local managers (like Page) pilot the execution.

In 2002, IMT had eight international custom

machine factories, two of which were located in the United

States. The U.S. plants represented nearly one-half of

IMT’s global capacity. The combined capacity of the

Chicago and Fort Wayne plants was far larger than any in

the other countries.

Page reported to two managers in the matrix, the U.S.

country manager and a Custom Machine BG manager, who

often had conflicting goals. While she had to increase return

on assets to support the U.S. country manager, she

simultaneously was encouraged to maintain a leading tech-

nology position by the BG head. As was true for all custom

machine factories, Page’s division paid about one percent of

sales to the BG for global research and development projects.

June R. Page

With more than 18 years of custom machine engineering

experience, Page was widely known and highly respected

throughout the custom machine industry. Earlier in her

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 119

Serve U.S. customers to their individual needs and total satisfaction. Create an organizational environment that allows all IMT-USA's employees to add value. Promote an atmosphere of thirst and eagerness to perform that allows delegation of responsibility to the lowest possible organizational level and attracts good people. Generate a sense of urgency and results orientation in the development of capital and human resources to ensure proper return for both our employees and our shareholders. Expand the horizon of the organization to share in and contribute to our worldwide core competencies.

Create a sense of urgency—concentrate on priority actions rather than procedural issues. Promote a unifying culture: “can do—do it.” Remove barriers to performance. Shift organizational focus to servicing the customers and beating the competition.

Demonstrate leadership in serving the U.S. marketplace in its transition to cleaner industry, where products are more efficiently produced, distributed, and applied.

The following was taken from a presentation given by the IMT-USA President on March 26, 1999.

Mission

Guiding Principles

Vision

EXHIBIT 3 IMT-USA Mission, Guiding Principles, and Vision

Statements

career, Page had worked her way through several engineer-

ing and manufacturing management positions at WILMEC.

She had always been active in the industry by chairing and

working on technical committees of various professional

associations.

However, Page was not actively involved in the use of

the information systems at IMT. Her personal use of a com-

puter was limited to preparing short documents, maintaining

a calendar, constructing and reviewing reports, sending

e-mail at work, and browsing the Internet from home. She

felt that her hectic schedule made it impossible to use the per-

sonal computer in her office for more than 50 minutes a day.

In 1999, Page was appointed Vice President of IMT

Custom Machines Company, Inc. (CMCI), the IMT sub-

sidiary in the United States. On the “country side” of the

matrix, CMCI reported through the IMT-USA holding com-

pany in New York, which in turn reported to IMT’s world

headquarters in Bonn. On the BG side of the matrix, Page

reported to the managing director of the Custom Machine BG.

The headquarters for the business group was in Milan, Italy.

Shortly after taking the job, Page and other division

managers worked with the IMT-USA President toward

developing universally applicable (to all IMT-USA compa-

nies) statements of the corporate mission, principles, and

vision. After considerable discussion and many revisions,

the IMT-USA President disseminated the final product on

March 26, 1999. (See Exhibit 3.)

The Fort Wayne Plant

The work environment at the Fort Wayne plant over the prior

25 years was dynamic, to say the least. Over that period, the

plant first transitioned from a busy single-product factory

into a stagnant operation that nearly closed due to a lack of

orders. A few short years later, it evolved into a facility that

supported three technically different products (large horizon-

tal, large vertical, and medium horizontal custom machines),

each originating from a different company with different

engineering design systems. In 2002, IMT’s Fort Wayne

facility was producing near its capacity and was staffed with

about 1,200 employees.

Until the mid-1990s, all the engineering and market-

ing operations for the Fort Wayne and Chicago plants were

located in Cleveland, Ohio (200 miles from Fort Wayne

and 350 from Chicago). In 1995, IMT closed the

Cleveland site and transferred the engineering and market-

ing staffs to either Fort Wayne or Chicago.

As the Fort Wayne plant evolved to support multiple

product lines, a number of informal procedures emerged

to handle day-to-day situations. These undocumented

processes worked well enough, despite the incompatibilities

among the three different machine technologies, which used

three separate drafting systems as well as unique manufac-

turing processes. Very little capital had been invested in

upgrading the operations during the last several years of

WILMEC’s ownership. In fact, it was not until IMT had

completed its WILMEC purchase that a major capital

upgrade was even considered. Low margins and strict

capital budget limits always prevented significant upgrades.

As a result, the informal processes continued under IMT

ownership, as company executives focused on making the

acquisition show a profit.

In early 1996, the plant was reorganized into three

“machine-type” product lines, each operating as a separate

product line and profit center. In June 1997, CMCI’s

Quality Assurance Manager, Edward Fortesque, completed

the mission statement for CMCI. (See Exhibit 4.) Finally,

the company’s reorganization was coming together.

120 Part I • Information Technology

Vision

Goals Provide market leadership Customer satisfaction Quality Reliability Delivery Service Serve the market with optional products and services Be the technology leader

Zero failures On-time performance Low throughput time for orders through the factory High productivity of labor Return on capital employed >30% (pre-tax) Revenue to total compensation growth of at least 5% per year

To be perceived by each of our customers as superior to the best of our competitors in the overall quality of our products and services.

Achieve business (operational) excellence

The following was issued throughout the Fort Wayne plant on June 25, 1997 by Edward Fortesque, Manager of Quality Assurance.

Mission To be recognized as the outstanding custom machine manufacturer in the world.

EXHIBIT 4 Mission/Vision Statement, IMT Custom Machine

Company, Inc.

The following was issued to top division and plant management on July 30, 2002, by Joe O’Neil, division MIS manager.

Direction Pursue a more structured MIS strategy with a reasonable and manageable level of risk that will be consistent with our being a leader in the custom machine industry. Develop and execute a plan that will continually upgrade our hardware, software, applications, database, and network environments to accomplish the above.

Objectives Recognize our business is designing and producing custom machines, not chasing ever-changing computer technology and theories. Coordinate MIS strategy with our business objectives of: Zero defects Low throughput time ROCE (return on capital employed) of 30% Control our own destiny. Minimize risk and hidden costs. Work from a total systems architecture plan to: Develop an applications architecture Select the hardware plan required to best accomplish our goals Maintain an integrated environment that supports the various functions of our division.

EXHIBIT 5 Fort Wayne MIS Direction and Objectives, IMT

Custom Machine Company, Inc.

CMCI’s Information Systems

Charles Browning began his investigation shortly after

receiving his charge from June Page. By mid-September

2002, he had uncovered considerable data about the infor-

mation systems at Fort Wayne and Chicago.

Support for Fort Wayne’s information systems was

split into two groups: an engineering systems (ES) group

and a management information systems (MIS) group (again

see Exhibit 1). The ES group consisted of eight of the 25

people who reported to Dr. Michael C. King, Fort Wayne’s

Development Engineering Manager. Dr. King had been

trained as an engineer and was known as an industry-wide

expert on the design of automated fabrication technologies.

Twenty MIS support staff members reported directly

to Bill Gears, who in turn reported to Joe O’Neil, the

division MIS manager. Chicago had its own one-person

MIS “group” who reported directly to O’Neil. O’Neil

reported through the division controller’s organization.

O’Neil was a former IBM employee with extensive experi-

ence on large mainframes and on the IBM AS/400

platform. He had been the MIS manager at another IMT

site before coming to Fort Wayne in 1998.

On July 30, 2002, O’Neil circulated a memo to the

top division and plant managers that summarized his objec-

tives for Fort Wayne’s MIS group (see Exhibit 5). O’Neil

later told Browning, “I do not have a formal mission for the

MIS group, but essentially I am looking to provide an ade-

quate, responsive, and economical network structure of

data processing support for all sites within the division.”

Browning found that a variety of computing hard-

ware was used to support the division. (See Exhibit 6.)

The division operated an IBM mainframe located at

Fort Wayne that could be used by anyone in the division

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 121

IBM MAINFRAME (CAD, MDB, INFO, DBOMP, WIP, PIS)

AS/400

(All

administrative

systems)

Test LAN

PCs

85 CAD

“Seats”

Chicago

18

Workstations

(CAD)

Fort Wayne

Engineering

LAN

HR

6 PCs

[LAN has been

proposed]

AMSERV Telephone

Line

EXHIBIT 6 Computing Systems and Applications,* IMT Custom Machine Company, Inc.

* Applications are in parentheses

with no direct charge. All lease and operating costs for

the mainframe were covered in the division’s overhead.

When they joined the company, new engineers and other

professionals were supplied with a mainframe user

account, a personal computer (PC) equipped with a board

to enable it to communicate with the mainframe, and sev-

eral PC software packages for local work. The mainframe

arrived in March 1999 on a 5-year lease. A mainframe

upgrade in 2001 was driven by the need for improve-

ments in computer-aided design (CAD) response time

and an increasing number of users. From 1999 to 2001,

65 new users throughout the factory and front offices

were connected to the mainframe.

CMCI also had an IBM AS/400 that it had inherited

from General Engineering. Immediately after the acquisi-

tion, MIS personnel attempted to create a procedure to

move data between the two mainframes, but that proved

to be difficult. Most exchanges were done by “pulling”

data from one system to the other. Although a routine

(called AMSERV) was available to “push” data to the

other system, its use was not fully understood. Another

reason AMSERV was not used was that the receiver’s

data file could be updated without the user’s knowledge.

As a result, data security issues slowed the practice of

sharing data between the two systems. In sequential

applications, where data were created in one system and

used by another, identical data files were needed on each

system.

From 2001 on, the heaviest use of the mainframe

was by drafting and engineering staff. IMT Fort Wayne

used IBM’s CAD product on the mainframe. The CAD

application, along with additional drafting and engineering

programs, represented about 65 percent of mainframe use.

Total usage in August 2002 was estimated at 54 percent of

the mainframe’s CPU capacity.

The division also used personal computers exten-

sively. The policy at Fort Wayne was that anyone who

needed a PC could get one. Financial justification was not

necessary, as PCs were considered a tool. Fort Wayne’s

standard PC configuration included the latest Intel proces-

sor running the latest version of Microsoft Windows as

well as the Microsoft Office suite and several other popular

122 Part I • Information Technology

packages—all connected to an inkjet printer. PCs were

obtained under a three-year lease from a local supplier.

Many users felt that the lack of sufficient mainframe

software support and lengthy systems development time on

the part of the MIS group had been partially compensated

by the use of PCs. For example, production scheduling in

major work centers in the factory was done with a spread-

sheet on PCs. However, the principal use for many PCs was

as a “dumb” terminal to the mainframe for database inquiry

or sending e-mail. In addition, secretaries and engineers rou-

tinely used PC word processing to write memos. Of the 300

users on Fort Wayne’s mainframe, about 210 were accessing

it through PCs. The remaining users were CAD users.

The division also had powerful personal worksta-

tions for technical work. As of 2002, Fort Wayne had six

IBM workstations used by the development engineering

group for special projects. They were connected through a

local area network (LAN). Several Sun workstations were

also linked into the LAN during the previous year.

Personnel at the Chicago facility used 18 IBM CAD work-

stations for normal production work. At Fort Wayne, there

were also 25 Sun and IBM workstations used for the pro-

duction of drawings.

Drawings made in Chicago on workstations were

stored on Fort Wayne’s mainframe and uploaded and

downloaded over a high-speed dedicated telephone line.

Chicago’s designers liked their CAD stations, but they

were having trouble with the connection between the

mainframe and the Chicago LAN. Tom Goodman, the MIS

support person in Chicago, told Browning, “I feel like we

are the beta site for linking sites together.”

Data Flow and Functional Responsibilities

Exhibit 7 illustrates the generalized data flow among the

main functional areas of the Fort Wayne operation. Of the

seven functions, only the human resources (HR) depart-

ment was not connected to the main information flow. The

remaining six organizational areas participated in a contin-

uous sequential flow of information.

The flow of business information started with the

interaction between marketing and the customer.

Information originated from the customer when a technical

description or specification (a “spec”) was sent to IMT for

a new machine. The length of the spec could be from ten to

several hundred pages. A marketing engineer would then

read the spec and enter his or her interpretation of it into a

mainframe negotiation program. The negotiation program

(MDB), inherited from WILMEC, required the input of

about fifty computer screens of data and was written in

COBOL. For presentations, marketing used Excel and

PowerPoint on their PCs.

If a marketing engineer had a question about a spec,

he or she called a design engineer or another local expert.

Most estimates had to be turned around in 10 working

days. Because of the volume of requests and a staff of only

two engineers covering all of the United States, negotia-

tions were sometimes very hectic. Mike Truelove, a mar-

keting engineer, told Browning, “We do the best we can,

but we miss some things from time to time. Almost always

after winning the order, we go back and negotiate with the

customer over what we missed.”

Another frequently used mainframe application was

a query system (called INFO) automatically linked to data

from the negotiation program. It was used to analyze data

from ongoing negotiations as well as contracts after they

were won or lost.

The administration and finance group was the home

for most business support systems. The purchase order,

accounts payable, and accounts receivable systems were

applications used by purchasing, receiving, and other

groups. All three systems had been custom developed on

the AS/400 by the General Engineering MIS staff (some of

whom now worked at CMCI). Although wages and

salaries were maintained locally, an external data service

company handled the payroll.

As of 2002, human resources used only stand-alone

computers. HR had plans to install a LAN that operated

customized corporate programs for handling HR func-

tions, including benefits and pension/investment plans.

There were no plans to connect the LAN with Fort

Wayne’s mainframe due to security concerns for the confi-

dential personnel records residing on HR’s computers.

Production Requirements

Each machine the company made was electrically and

mechanically custom designed to a customer’s exact spec-

ifications. Customization requirements, when mixed with

the complexities of the economic and engineering limits,

required sophisticated computer programs for modeling

and design work. In 2002, Fort Wayne had three separate

design systems, one for each of the three types of custom

machines. Design engineers for each product line were

experts on their own programs.

The first step in design engineering was to receive

electronically the data previously entered into the negotia-

tion program. The process entailed pulling the data records

from the negotiation database. The design engineer reread

the customer’s spec and decided which additional data

needed to be added to the input files for the design pro-

gram. The program then generated a design that the engi-

neer reviewed in detail and often revised. After the design

was accepted by the engineer, the electronic computer file

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 123

Bill of Material

Customer Specification

Test

Manufacturing

Drafting

Marketing Admin.&

Finance

Human

Resources*

Customer

Quote

Design

Customer Specification

Bid Design

Costs and Order Tracking

Engineering

Test Requirements

EXHIBIT 7 Data Flow Among Functional Areas,*

IMT Custom Machine Company, Inc.

* Uses only applications supported by IMT-USA.

and a paper folder with completed job forms were sent to a

drafting supervisor for completion.

The ES group had designed all of Fort Wayne’s

design systems. The number of routines used by each of

the three systems was a relative measure of size and com-

plexity. Large vertical had about 500 routines, medium

horizontal had about 400 routines, and large horizontal had

about 2,400 routines.

All drafting at Fort Wayne and Chicago was per-

formed on a CAD applications system. At Fort Wayne, the

CAD application ran on the IBM mainframe, and in

Chicago it ran on the local IBM workstations. There were

85 CAD “seats” at Fort Wayne and 18 at Chicago. (A

“seat” is equivalent to one hardware CAD setup with a

high-resolution screen, keyboard, function-button box, and

a pointing device that worked like a mouse.) During the

prior 5 years, additional programs had been written to take

output automatically from the design programs and create

CAD drawings or references to drawings of standard parts.

About 60 percent of the drawings for the average 4,000

parts per machine were created in this way. The remaining

40 percent of drawings had to be created by a draftsman

from the design specifications. All jobs were reduced to

drawings prior to being released to the factory.

A standard part drawing included the material speci-

fication on the drawing. Assembly work orders contained

the bill of material (BOM). Having CAD and the design

programs on the same platform made the development of

the automatic drawing programs very convenient. Jennifer

Velan, an engineer in the development group, told

Browning, “There are things we have been able to do with

this setup that would be impossible if the jobs were split

between two separate systems.”

When all the drawings for a custom machine were

completed, the BOM was manually transferred from the

drawings into the BOM database system, called DBOMP.

124 Part I • Information Technology

DBOMP was originally written by IBM and extensively

modified for Fort Wayne in the 1990s to handle bills of ma-

terial for the vertical type machines. When production of

the medium and large horizontal machines was transferred

to Fort Wayne, DBOMP’s limitations forced many “work-

arounds.” For example, when the General Engineering

large horizontal technology was moved to Fort Wayne, it

was discovered that DBOMP could not handle the longer

General Engineering drawing numbers. Moreover, there

was no one at Fort Wayne who knew the DBOMP code

well enough to make a change in the software.

The work-in-process (WIP) inventory tracking sys-

tem for the shop floor at Fort Wayne was very limited and

worked only for items required for the main aisle assembly

area. It could only handle made-to-order parts, not stock

items. The system worked by having a main aisle supervi-

sor request a “pull” from the storeroom to get parts deliv-

ered. The tracking systems for items within feeder aisles

were either done manually or on a spreadsheet, with each

aisle having its separate system. The WIP main aisle track-

ing system resided on the mainframe, and the data were

loaded by hand from the DBOMP.

The parts inventory system (PIS) was very limited

and similar to the tracking system except that it worked for

all stocked inventory items for the main and all feeder

aisles. It used an identical process to the WIP system.

The MIS group was backlogged in supporting the

rapid changes occurring at the Fort Wayne plant. The lead

time on most system upgrades was 3 weeks for emergencies

and 6 to 9 months for nonemergencies. When a computer-

ized system failed to provide needed functionality, paper

systems were created to support the information needs.

Because each custom machine was a significant

investment—between $2 million and $8 million—all

machines were fully tested at Fort Wayne or Chicago, and

the testing was personally witnessed by an employee or

agent of the customer company. The test department, along

with the witness, certified that every machine met the

customer’s test requirements set forth in the specification.

Scheduling information and other test details were

forwarded to the test department by hand. Test information

was written on a form that was interpreted or copied from

the customer specification in marketing and engineering.

The biggest complaint from the test department was that

sometimes the marketing department did not properly inter-

pret the customer’s test requirement specification. A failed

or unnecessary test that resulted from misinterpreting a cus-

tomer’s specification could cost IMT well over $100,000.

The test department had several personal computers

connected to a LAN. Although all PCs in the test depart-

ment were also connected to the mainframe, this connec-

tivity was only used occasionally. The test department

was a part of the quality assurance organization at Fort

Wayne, which was responsible for the data and produc-

tion of the test reports sent to customers. Electronic test

result data, however, remained only on the test depart-

ment’s LAN. The test department maintained its own

LAN applications.

Personnel Issues

Browning uncovered some additional information about

the information systems personnel at the company. The

programmers in MIS had extensive backgrounds in

COBOL and in RPG for the AS/400. None of them,

however, knew the UNIX operating system or its related

programming languages. Of the 14 programmers, four had

over 25 years experience at Fort Wayne, two had about 12

years, and the remaining eight had three years or less.

Engineers who supported the engineering system in

the development group had significant backgrounds in

scientific computing and four had some experience with

UNIX. Each engineer had more than 10 years of experi-

ence with the company. One of the recently added pro-

grammers in the engineering systems group knew UNIX

very well.

Browning heard many comments during his investi-

gation that suggested that the MIS and engineering

systems staff at Fort Wayne always made the systems

work—despite the constant change.

Browning concluded that as a result of employing

informal systems, work-arounds, and an extraordinary

amount of human effort, Fort Wayne was profitable in

2001—its first profitable year in several years. Slowly, things

were stabilizing at Fort Wayne—the informal systems were

being corrected and formalized. Restructuring into three

product lines had helped to clarify the focus and purpose of

operations systems and procedures. Overall, the primary rea-

son many staff members saw progress was that each product

line was allowed independent control and responsibility.

Computer systems support, however, remained an

issue. The engineering systems group supported engi-

neering and drafting, and the MIS group supported every-

thing else. The HR organization was not considered a

local issue because its applications were supported from

the corporate MIS group in New York (IMT-USA). A

small group within MIS maintained all PCs and miscella-

neous computer hardware for all the functional groups

across the plant.

Support for Engineering and Drafting Systems

Browning also discovered an ongoing debate over

where the IT support for the engineering and drafting

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 125

systems should be located. Browning summarized the

three alternatives that arose from the debate on a legal

pad at his desk:

1. In the engineering support systems group:

Arguments for leaving support for engineering and

drafting in the development engineering line of

authority were strong. The design and drafting pro-

grams produced models for the three product line

technologies. The three principal people supporting

these design systems were engineers with strong

computer backgrounds. Two of the three had mas-

ter’s degrees in engineering. Support for these pro-

grams required a balance of custom machine design

knowledge, creativity, and programming. By work-

ing close to the user engineers in the product line, the

ES engineers could update the systems rapidly. The

engineers feared that MIS programmers had little

understanding of the underlying design technology.

Some of the engineers speculated that the MIS peo-

ple might make coding changes that “would cost

millions to correct once a design was committed and

the parts were made.”

2. In the product lines: Arguments for product line

support of engineering systems included the fact

that product line engineers had extensive firsthand

knowledge of how the system was used. As a result,

feedback on problems would be more obvious to

those who supported the system. Furthermore, it

could be argued that ultimate control of the software

should be in the hands of each of the profit centers.

They should have the option to regulate the level of

computer support based on their own strategy.

However, if the engineering systems support

responsibilities were located within the product

lines, a programmer would need to be transferred

from the engineering support systems group to each

of the product lines.

3. In the MIS group: Arguments for MIS-based sup-

port of engineering and drafting systems included

an alignment of all computer-related functions in

one functional group—thus providing a common

responsibility point for all computer support and

integrated applications. Product line and develop-

ment engineering would have to submit change

requests that were more completely documented.

Support through MIS would guarantee that coding

changes would be better documented. If support

were the responsibility of the product line engi-

neers, MIS people argued that the end result might

be “spaghetti code,” which no one but the original

programmer could understand.

The Move to a Common Custom Machine Design

System

Browning discovered that in early 2002, Page had received

instructions that her subsidiary would have to use a redevel-

oped set of custom machine design programs from

Germany. The BG management team believed it was appro-

priate to institute a common custom machine design system

across all factories. The BG strategy was based on porting

the German programs onto a UNIX workstation platform

and then distributing and supporting it worldwide. When the

announcement was made that the German programs would

be used, however, none of the programs would work with

UNIX. Nor did the German developers possess more than a

few years of total experience in the UNIX environment.

A New Marketing and Negotiation System

Browning learned that marketing and engineering saw the

existing negotiation program as inefficient and ineffective.

Two years of studying how the IMT division should do

business with its customers led the marketing group to pro-

pose a reengineered “front-end information” system. The

proposed system would include capabilities to optically

scan in all customer proposals, including text. Customer

specs could then be analyzed and processed more quickly.

The proposed system had an initial price tag of over

$2.5 million. The original idea for the system was con-

ceived in the marketing department, which employed two

staff engineers and had hired an independent outside con-

sultant as its own IS expert. Only recently had MIS been

involved with planning the system. The project was being

led by the division strategic planning manager, which iso-

lated the project from division MIS and engineering input.

Hardware purchases were to begin in November 2002, and

the system was to be completed and operational by the end

of 2003.

CMCI’s Interface to Field Sales

Browning discovered that IMT’s field sales group had itself

been planning to implement a new customer relationship

management (CRM) application using a service called

Salesforce.com. Russ Nelson, Vice President of Sales,

noted that this Web-based service could be put in place with

no capital investment. This new CRM system would have

to be enhanced for transferring order information to the fac-

tories. The new system to transfer order information to the

factories, called SPEC, was planned to come online in late

2003. By mid-2003, each factory was to have installed

high-speed access to the Internet to use Salesforce.com.

They would need to develop system connectivity to accom-

modate the data downloaded from field sales personnel.

126 Part I • Information Technology

As of September 2002, SPEC had been plagued with delays

because staff could not arrive at a consensus on the exact

information that should be transmitted to each of the facto-

ries and the creation of the necessary system interfaces.

New Software Design Tools

After asking some questions in the controller’s office,

Browning found that payments from Fort Wayne and

Chicago accounted for 25 percent of the funds used for the

BG’s R&D development budget. CMCI’s MIS group felt

that about 30 percent of its investment was received back in

the form of useful information technologies while the

remaining 70 percent benefited production hardware

improvements. The BG was definitely committed to addi-

tional investments in UNIX application tools. Various soft-

ware engineering and applications development tools had

been mentioned, but the specific software and the number of

seats that would be leased or purchased had not been

finalized as of the end of September 2002.

Bill of Material (BOM) System Replacement

The production scheduling people told Browning that the

DBOMP system was nearly 15 years old and could not

handle the new German-developed design system that was

to replace the three older systems. To support the new de-

sign system and its subsequent BOM structure, a new

BOM system would be required. Fort Wayne systems staff

had identified a system that would run on the IBM main-

frame and could be acquired at no cost. The program,

called PUFR, was free because it was in the process of

being discarded by IMT-USA’s corporate MIS group. The

only requirement was that Fort Wayne MIS staff had to

support PUFR.

By September 2002, over 4,000 staff hours had been

consumed by Fort Wayne MIS personnel trying to make

PUFR operational. Projections suggested that approxi-

mately 10 percent more work had to be done in order to get

PUFR into a test mode. To get this far, the Fort Wayne MIS

group had already purchased additional modules that were

not originally included in the free IMT corporate version

of PUFR. The effort had also included converting some of

the approximately 400 auxiliary programs that used the old

DBOMP format. Occasional discussions of replacing

PUFR “in a few years” were heard in the halls.

Browning’s Meeting with Page

In an October 2002 meeting with Page, Browning summa-

rized the findings of his six-week investigation as follows:

“The best way to characterize the current informa-

tion systems situation at Fort Wayne is as a lot of manual

points where data are transferred between a patchwork of

old, semiautomatic, and outdated processes. The result is

that since each place where information is transferred has a

probability of introducing a new error, checking and

rechecking is necessary to ensure integrity. And since the

outdated processes require constant fixes and work-

arounds, the newer processes never move ahead. What we

really need is a clear vision to guide our decisions today, so

we can be ready for tomorrow.”

“I was afraid of that, Charlie. So do we have any

options?” asked Page.

“We do,” replied Browning. “But first we really need

to develop a vision, architecture, and strategy statement for

all information systems consistent with our business objec-

tives. I see three options for the basic information technology

architecture.”

“Let me hear the first one,” replied Page.

“OK,” said Browning. “The first option is to move

toward a centralized, likely IBM, computing environment.

Under this option, we would commit to staying with the

mainframe for all important applications, discourage the

use of the Sun and IBM workstations, maybe allow the use

of Linux on the mainframe, and eliminate the AS/400. IBM

replaced the AS/400 with the eServer iSeries the year after

we acquired our system. This new platform would not only

run our current operating system, OS/400, it can also run

AIX (IBM’s version of UNIX) and Linux. This approach

would maximize the use of the lower cost, energy-efficient

mainframe.

“Our commitment to the mainframe would have to

be long term. To continue to maintain a large central main-

frame and acquire new applications and full access for all

users would require a systematic plan. The plan would

include porting all the major AS/400 applications to the

eServer iSeries mainframe in order to assure central usage,

support, and control. Major mainframe packages would be

reviewed for upgrades that could handle Fort Wayne’s cur-

rent capacity and requirements. Older packages used in

Fort Wayne would be phased out over the next 5 years. PCs

connected through LANs to the mainframe would do

spreadsheet and word processing work, but almost all

computational work would be done on the mainframe.”

“OK,” remarked Page. “I can see that as feasible

even though a lot of people would be upset. Our engineers

have become accustomed to using the Sun and IBM work-

stations whenever they want to. What is option two?”

“I call option two workstation computing,” said

Browning. “Here we would follow a strategy whereby the

mainframe is phased out completely over time. At the

same time, we would make significant investments in Sun

and IBM workstations running UNIX, as well as PCs, big

UNIX servers, and LANs. We could allow the use of Linux

Case Study I-1 • IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 127

on the workstations. Such an architecture would allow

migration to a full client/server environment.

“Our plans for a long-term shift to a distributed

UNIX environment would include the migration of all

applications to the new environment. A high-speed net-

work would be installed to link all computers. Data and

application servers would be distributed by functional

area and profit centers (e.g., marketing, development

engineering, human resources, and testing). CAD seats

would be slowly transferred from the mainframe to dedi-

cated workstations. During the transition period, the

mainframe would be connected to the network and avail-

able for access from all workstations.

“One relational database server cluster would serve

the entire UNIX network system, but local databases could

also exist as necessary. PCs would be linked via LANs,

and a wide area network (WAN) would be installed to

bridge between networks.

“As CAD and other major applications were shifted

off the mainframe, it would be downsized to a smaller,

compatible midrange mainframe. The process could be

expected to take approximately 10 years and two main-

frame downgrades before all of Fort Wayne’s applications

would be migrated to UNIX workstations.”

“All right,” said Page, “but wouldn’t this one be a lot

more expensive and create a kind of ‘disintegrated’ com-

puting environment? I have heard of other companies

going this route only to have to reassert central control in a

few years.”

“It sure has that potential,” said Browning. “And

you are right—it will likely be more expensive than the

mainframe option, given what has happened to the cost of

mainframes over the last several years.

“Before you evaluate each option, let me explain

option three. This one is even more risky. We would

outsource the management of our servers to a data center

hosting company that would set up and manage ‘virtual

machines’ for us. We can operate as if we have a virtually

unlimited number of servers. We would eliminate any need

for additional computer hardware investment and just pay

for what we need on a monthly basis.1

“In this option, we would pursue a course of aban-

doning the mainframe, but converting the complete com-

puting platform to a Linux-powered environment. Linux is

similar to UNIX as an operating system, but even more

flexible. Linux-based solutions are offered by companies

such as Red Hat, Corel, IBM, and HP. In the past few

years, several large companies have adopted this environ-

ment for their computing needs.

“Given the diversity of our needs across the company,

the Linux solution could also provide more than adequate

flexibility. Utilizing services provided by a recognized sup-

plier like IBM, specialty Linux companies, or the in-house

programming staff, Linux solutions could be used for

anything from tracking quality control to managing

machines and monitoring production. Furthermore, some

data center hosting companies employing Linux-based

servers have a guaranteed 99.7 percent or higher uptime. I

read that Linux had been useful for automobile simulations

at DaimlerChrysler and Ford. In addition, the platform’s

durability has been proven at Amerada Hess and other

oil companies through their exploration activities.

Nevertheless, this is a major leap from IMT’s current con-

servative environment. Someone else would be running our

central computers.”

“I guess,” replied Page. “But at least we ought to

consider it. Any more options?”

“Just one, to be complete,” replied Browning. “We

could consider just waiting and watching carefully. This

option says do nothing fundamental at the present time.

We wait and see what develops. We would decide on

specific system changes only as circumstances force us to

make decisions. Following the ‘watch carefully’ option

would mean that each decision would be made in response

to immediate demands. As part of this approach, we could

bring in Linux and let some people experiment with it. If

Linux is the wave of the future as some people claim,

maybe the best idea is to not make a commitment now. It is

not clear that Linux is ready for prime time. But a few

years of experimenting could determine if it really is a

long-term solution for the company.”

A Decision and Direction for IMT IS

“OK,” said Page. “Having the options is very helpful. I

appreciate all the time you put into the project. Let me

think about the options and make a decision.”

After Browning left the office, Page began to reflect

on the options he had presented. Change was going to be

painful. Although Browning had captured the basic strategy

alternatives, there were many considerations to take into

account before a decision could be reached on which option

to follow. Years of neglect, restructuring, and a growing

organization had finally caught up with CMCI’s infor-

mation systems. Page also recognized that changes in the

division’s IS architecture might require organizational

changes as well. A decision had to be made soon. Or did it?

Now the only question was, what to do?

1A few years after 2002, this concept came to be called “cloud computing”—actually one of several ways of utilizing cloud computing.