Alcan Case Although There Are Many Drawbacks Essay

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Alcan Case

Although there are many drawbacks to Alcon's current application management, there are justifications for the current IT management system. The current Alcon application management structure, prior to Robert Ouellette's overhaul, emphasizes a culture of decentralization (Dube, Bernier, & Roy, 2009, Pt. A). This decentralized model is logical, in part, because it allows each practice group to structure its own strategic IT plan and choose its infrastructure based on each group's specific needs. Such a hands-off model permits the groups to pursue their own objectives, without regard to impediments or resistance from any one of the other practice groups. This is particularly relevant when one considers the income distribution among the four major practice groups, specifically the Bauxite & Alumina group (Dube et al., 2009, Pt. A). According to Dube et al., (2009), the Bauxite and Alumina group contributes the most to annual revenues; however, Figure1 indicates that just 7% of the annual income is distributed to this group. This means that the Bauxite and Alumina group has much higher costs than the other three groups -- income being the difference between revenues and costs. Accordingly, the Bauxite & Alumina group's IT organization has much more incentive "to meet the specific needs of their own business group" -- needs which can be met without regard to the needs of any of the other three groups, which apparently have lower costs than Bauxite & Alumina (Dube et al., 2009, Pt. A, p. 3).

Another arguable "pro" of the current system is that it permits the groups to remain focused on their own needs through mergers and acquisitions. By way of example, the acquisition of Pechiney may not have had a large impact on the Packaging and Engineered Products groups' operations, but it likely significantly altered the Bauxite and Alumina group's production, as Pechiney utilizes an electrolytic process "reputed to be the best in the industry"; a process directly related to the processing of bauxite and alumina (Dube et al., 2009, Pt. A, Appx.

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1). Accordingly, the "pro" of the current decentralized model is that it allows the business groups to reallocate their IT management resources and structure proportionate to the affect of said mergers and/or acquisitions.

In stark contrast to the arguable "pros," there are significant "efficiency" problems with the current application management -- "cons." Indeed, not only does Alcan spend a substantial amount of money on IT, approximately $100 million of the $295 million is "flying under the radar," i.e., unaccounted for (Dube et al., 2009, Pt. A, p. 4). As noted by Dube et al., (2009), each business group generated multiple costs, each of which were recorded using "a wide variety of methods" such that costs were "included in the groups' operating expenses, thus ending up in cost of goods sold [emphasis added]" (Pt. A, p. 3). This means that the Bauxite and Alumina group's income displayed in Figure 1 is likely inaccurate, as the costs of IT management should not be lumped into cost of goods sold in such a cavalier fashion. Another "con" of the current system is the difficulty mergers and acquisitions presented to IT management. Indeed, because of the "decentralized" model, Alcan had an influx of information systems, many of which included financial data (Dube et al., 2009, Pt. A). Because of the multiplicity of operations handling management and application of government regulations, e.g., Sarbanes-Oxley, Alcan was incurring significant costs. The inefficiency of the current model is further exacerbated by the fact that a number of SAP integrated software packages were being implemented by Alcan "without any apparent intergroup coordination" (Dube et al., 2009, Pt. A, p. 4). Furthermore, IT projects and initiatives which affected processes common across all four business groups "were inadequately coordinated" (Dube et….....

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