Ansell turns to SAP as Oracle ERP project lags



news Australian condom and medical protection giant Ansell this week revealed it had chosen to extend an existing SAP-based business systems platform from its acquisition of French protective equipment company Comasec to other areas of its business, instead of further extending its new Oracle ERP rollout, which has suffered significant problems.

The Oracle initiative — known internally at Ansell as ‘Project Fusion’ after the Oracle software it is based on — was kicked off in 2009, as the company recognised the need to update its business processes and consolidate no less than 25 separate legacy systems into a single global platform. The Financial Review has reported that the platform is Oracle and that IBM was assisting with the integration.

The first phase of the rollout, which would primarily impact Ansell’s North American operations, went live in July 2011, the company said in February 2012, but ran into “systems design and interface issues”, particularly with relation to its largest (third party) warehouse. Since that time, Ansell has devoted “significant resources” to enhancing the system’s performance, correcting design problems, stabilising the platform and returning it to normality.

In a financial results briefing in August 2012, the company’s chief executive Magnus Nicolin said after going through “a lot of pain”, the Fusion project was now “looking far better”. “We entered [financial year 2013] with order & inventory management and warehouse & distribution operations stabilised and inventory back orders at normal pre-Fusion levels,” Nicolin said. “Between IT and the various other parts of the business, we still have extra resources involved in running our ERP. But we can see the light at the end of the tunnel.”

Nicolin said the company’s North and Latin American teams and its IT division at at that stage fully understood the new ERP system, and what its mistakes had been in implementing it. “Once we have it working flawlessly in the Americas and delivering benefits, we will continue with the global rollout,” he added. “Having said that, we have learned a great deal, have significant internal expertise now, and have done some early work in the other regions to ensure a smooth rollout.”

However, in its newest financial results briefing session this morning, as first reported by iTNews, the company revealed it had chosen to extend systems from its recent purchase of French protective equipment company Comasec into some areas of its business rather than extend its Oracle rollout.

“We’ve been a little frustrated with the pace of improvement in our ERP platform in NA and Latin America, Caribbean (LAC),” Nicolin told corporate announcement site OpenBriefing (PDF). “Although a lot of progress has been made and the system is fully operational, there is room for further improvement and optimisation.”

“When purchasing Comasec we were aware that it was a reference site for SAP and that it had implemented SAP for a very reasonable cost and on schedule. Comasec has a well- qualified IT team with a strong background in SAP. So to speed up integration we decided to put our EMEA Industrial and Specialty Markets businesses onto Comasec’s SAP platform (a reverse integration if you will). This will also help deliver some planned synergies quickly.”

It’s been a relatively quick integration effort for the SAP platform. Ansell bought Comasec in mid-2012, but in its financial results session this morning it noted that the EMEA extension of the SAP platform went live on 3 February. The company noted it was still early days in the “go-live operation”, but that it had made “good progress” so far.

The Oracle ERP rollout has continually frustrated Ansell’s expectations. In February 2012, as the company revealed the botched implementation had caused US$13 million to US$15 million worth of lost sales, the company expected the remaining ERP issues to be resolved by June that year.

But by August, when the company filed its next set of financial results, those problems had not yet been resolved, with Ansell stating that it “can see the light at the end of the tunnel”. Despite this, in this week’s financial results briefing it noted it was still seeing implementation of the system as a challenge.

The news comes as analyst firm Gartner has recently warned that large, monolithic and heavily customised in-house enterprise resource planning systems will be relegated to the status of “legacy ERP” over the next several years, as smaller, nimbler and often cloud computing-based alternatives eat the lunch of this old mainstay of the IT application portfolio.

A number of Australian State Governments — notably Queensland, New South Wales and Victoria — have flagged plans to take a “cloud-first” approach to the rollout of major business systems such as ERP platforms.

It looks like what has happened here is that Ansell has realised its Comasec acquisition brought with it a more stable platform than it was able to achieve internally with its Oracle ERP rollout in North America. Consequently, the company has decided to extend that platform rather than migrating its existing Oracle systems over. That sounds like an extremely smart option to me. Acquisitions are tricky enough without having to worry about major IT migrations at the same time.

Image credit: amadeusm, public domain