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Georges Melon
CIO for IT Infrastructure Services - Europe, ArcelorMittal.
Making a step change
Georges Mélon, General Manager of ArcelorMittal, is CIO for IT Infrastructure Services, Europe. Mr Mélon leads the on-going optimisation of the IT infrastructure at the European level across all segments and units. He reports to Vice President of ArcelorMittal. Mr. Mélon joined ArcelorMittal (Cockerill Sambre) in 1979 and held different positions, mainly in the Information Technology field.
In 2000, he moved to Usinor SI, managing the Paris agency. After the creation of Arcelor, he joined the IT corporate platform to lead several projects resulting from the IT synergies plan. Between 2004 and 2006, he managed the stainless perimeter in Arcelor Systems and in 2006; he took the responsibility of the global Application Management scope. He became head of IT Supply Western Europe in August 2007 prior to his nomination in September 2009 as CIO Flat Carbon Europe in charge of IT supply and IT demand. Mr Mélon graduated in Business Administration & Economics from the University of Liège in Belgium.
At ArcelorMittal in Europe we are taking a major step in IT Infrastructure services in Europe. Not only are we outsourcing what was predominantly internal; but more than that we have committed to a step change in how infrastructure services are produced, managed, provisioned and charged. From what is essentially legacy, diverse, heterogeneous and internal to one that is simplified, standardised, consolidated and harmonised. In this brief discussion, I share with you not only our journey so far, how we thought about various aspects and dealt with challenges that inevitably arose, but also where we want to head and how.
Arcelor Mittal in Europe is a diverse organisation. There are many company and country cultures, which have a history of growing through merger and acquisitions. The different lines of businesses (Flat Carbon, Long, Tubes, Wires, Distribution to name the least) imply a variety of organizations, from the major plants with several thousands of employees to the smaller transformation and distribution sites, highly decentralised and running as almost independent profit centres.
The diversity as seen from IT
Arcelor Mittal business landscape has created different levels of IT maturity and varied delivery models including shared services, local sub-contracting, in-house teams, strong and varied preferences on all aspects of IT based on locations and businesses, a mixed technology landscape that reflects the diversity of the organisation and the bottom up way that the IT has grown. Such a diverse landscape led us to explore the opportunities of synergies across the whole European scope that could be exploited through the transformation of IT Infrastructure: a real opportunity to reduce costs, to improve performance and to make IT more agile and responsive to business.
Our Objectives
Our broad objectives were clear right from start; we wanted a reduction in cost, flexibility in our IT cost-base to reflect consumption and level of industrial activity, the improvement in service level and overall a more agile IT that would be more responsive to business. Out of these objectives, flexibility was especially important. During the last financial crisis in 2008 when the demand for steel dropped dramatically, we were challenged to reduce IT cost equally dramatically. However, at that time we had no option but to curtail projects and investments as the run costs were essentially fixed.
As a key lesson learnt from that time, we wanted our IT run costs to be correlated with industrial activity, therefore if industrial activity decreased so would the run costs. In this scenario, if there were to be another crisis of similar proportions, we would not be forced to curtail the critical investments; especially investments that would help us recover faster in the post-crisis period. Even if there are to be no future crisis' similar to what we experienced in 2008, flexibility is still very important because the volatility in business has increased considerably since then. For us to meet these objectives, it was clear that we would need to simplify, standardise, consolidate and rationalise our IT landscape, harmonise our processes, exploit the scale we had, use global sourcing and shared services concepts. The vision that we developed was that all entities in the group would plug into this new transformed IT infrastructure platform, to enjoy the benefits of scale and to receive a harmonized service level.
Starting the Process
It was with this background that Arcelor Mittal in Europe embarked on a study almost a couple of years back to explore options that finally culminated in a Europe-wide Infrastructure Outsourcing deal earlier this year (July 2011). Up to date we have overcome all hurdles, which did not glare out at us in the beginning. Standing where we are today, it is clear that we have still huge challenges ahead and much still remains to be accomplished, however we are confident for what is to come in the future.
We Had to Outsource
During the RFP process, various options were examined, including an internal solution and possible partnerships with key IT service providers. Our conclusions lead us to choose global outsourcing as the best model to manage our IT infrastructure in Europe. Our conclusion had three considerations:
In 2000, he moved to Usinor SI, managing the Paris agency. After the creation of Arcelor, he joined the IT corporate platform to lead several projects resulting from the IT synergies plan. Between 2004 and 2006, he managed the stainless perimeter in Arcelor Systems and in 2006; he took the responsibility of the global Application Management scope. He became head of IT Supply Western Europe in August 2007 prior to his nomination in September 2009 as CIO Flat Carbon Europe in charge of IT supply and IT demand. Mr Mélon graduated in Business Administration & Economics from the University of Liège in Belgium.
At ArcelorMittal in Europe we are taking a major step in IT Infrastructure services in Europe. Not only are we outsourcing what was predominantly internal; but more than that we have committed to a step change in how infrastructure services are produced, managed, provisioned and charged. From what is essentially legacy, diverse, heterogeneous and internal to one that is simplified, standardised, consolidated and harmonised. In this brief discussion, I share with you not only our journey so far, how we thought about various aspects and dealt with challenges that inevitably arose, but also where we want to head and how.
Arcelor Mittal in Europe is a diverse organisation. There are many company and country cultures, which have a history of growing through merger and acquisitions. The different lines of businesses (Flat Carbon, Long, Tubes, Wires, Distribution to name the least) imply a variety of organizations, from the major plants with several thousands of employees to the smaller transformation and distribution sites, highly decentralised and running as almost independent profit centres.
The diversity as seen from IT
Arcelor Mittal business landscape has created different levels of IT maturity and varied delivery models including shared services, local sub-contracting, in-house teams, strong and varied preferences on all aspects of IT based on locations and businesses, a mixed technology landscape that reflects the diversity of the organisation and the bottom up way that the IT has grown. Such a diverse landscape led us to explore the opportunities of synergies across the whole European scope that could be exploited through the transformation of IT Infrastructure: a real opportunity to reduce costs, to improve performance and to make IT more agile and responsive to business.
Our Objectives
Our broad objectives were clear right from start; we wanted a reduction in cost, flexibility in our IT cost-base to reflect consumption and level of industrial activity, the improvement in service level and overall a more agile IT that would be more responsive to business. Out of these objectives, flexibility was especially important. During the last financial crisis in 2008 when the demand for steel dropped dramatically, we were challenged to reduce IT cost equally dramatically. However, at that time we had no option but to curtail projects and investments as the run costs were essentially fixed.
As a key lesson learnt from that time, we wanted our IT run costs to be correlated with industrial activity, therefore if industrial activity decreased so would the run costs. In this scenario, if there were to be another crisis of similar proportions, we would not be forced to curtail the critical investments; especially investments that would help us recover faster in the post-crisis period. Even if there are to be no future crisis' similar to what we experienced in 2008, flexibility is still very important because the volatility in business has increased considerably since then. For us to meet these objectives, it was clear that we would need to simplify, standardise, consolidate and rationalise our IT landscape, harmonise our processes, exploit the scale we had, use global sourcing and shared services concepts. The vision that we developed was that all entities in the group would plug into this new transformed IT infrastructure platform, to enjoy the benefits of scale and to receive a harmonized service level.
Starting the Process
It was with this background that Arcelor Mittal in Europe embarked on a study almost a couple of years back to explore options that finally culminated in a Europe-wide Infrastructure Outsourcing deal earlier this year (July 2011). Up to date we have overcome all hurdles, which did not glare out at us in the beginning. Standing where we are today, it is clear that we have still huge challenges ahead and much still remains to be accomplished, however we are confident for what is to come in the future.
We Had to Outsource
During the RFP process, various options were examined, including an internal solution and possible partnerships with key IT service providers. Our conclusions lead us to choose global outsourcing as the best model to manage our IT infrastructure in Europe. Our conclusion had three considerations:
- Whilst IT infrastructure is critical to our business, it certainly is not core.
- The scale of IT transformation that we need is huge and we want to have the benefits sooner rather than later.
- The fast pace of change in IT technology
In business like ours where IT infrastructure is critical, any interruption or down-time can potentially have a serious impact on our revenues and our reputation. However, the competency of managing IT infrastructure is not core to us, while this competency is core to suppliers who provide IT infrastructure management as a service.
The scale of IT transformation and the speed with which business' expected benefits made it clear that we needed an IT partner who had hands-on experience of undertaking and delivering successfully on such huge and complex transformation programs in Europe. Whilst reduction in cost and flexibility in cost base are the important end objectives, we first have this complex and high-risk transformation to accomplish for which we need the experience and expertise of an external partner to rely on. For a company such as ours, it makes also a lot of sense to leverage the investments an IT supplier can make in enhancing technologies. We expect our supplier to help us tap into new technologies and innovations, particularly those that deliver clear business value and cost optimization.
Assessing suppliers The above thought process essentially informed and drove our selection process forward. We looked at a wide range of suppliers. We had global, European and Indian heritage suppliers in the mix. Whilst we had a good idea of what we wanted, we also wanted to understand what the market had to offer before making up our mind. We could see the variations in the different providers approaches through the solutions they built and the pricing they offered. Some offered solutions that were more industrialised and more robust, whereas others offered those that were more tailored and flexible. This was also reflected in the commercial and pricing constructs they offered, clearly each having their strengths, thus making the final decision close.
Nevertheless we chose a supplier who not only met our pricing objectives but also offered greater certainty of outcome from the initial transformation, reliability of service right through the transformation and beyond. Last but not least, we also chose a supplier that could offer a future to our people, to develop themselves in a highly professional environment.
Importance of Retained Team
The importance of a retained team to manage outsourcing initiatives can sometime be under estimated. The transformation such as the one we will embark on, is no doubt a huge challenge and it needs an extremely strong team to make it happen successfully. Before the contract is signed, the team managing the initiative has to have strong expertise on Programme Management and on all the three key streams Technical, HR and Legal/Commercial.
After contract signature, another key skill that is needed is relationship management. Managing relationships can be a tough task in an outsourcing scenario; on the one hand it's the business that holds the internal IT team responsible for the service and on the other it's the supplier who owns the service and the means of delivering it. Managing and clarifying expectations in situations that are often charged by day to day issues, related to delivery of services and commercial constraints, requires a very high degree of skill. Very early on in the process we worked on defining the retained organisation that we would need during and after transformation.
We discussed it internally and with our peers across Europe. Of course, we do realise that the design and structure of this organisation will change to adapt to the situations that emerge. To build our retained IT organisation we are relying on internal Arcelor Mittal people we will be staffing this team fully during the Transition & Transformation phase. Whilst our internal teams will learn on the job, they will require training as well which is provided by us.
Incorporating Innovations Including Cloud
Our approach to the adoption of Cloud will be part of a wider structured approach, to incorporate innovations that deliver business value. Our contract ensures that our supplier provides us with access to relevant innovations. We will continuously scan our portfolio of services to identify opportunities where innovations could deliver value.
We will then prioritise these opportunities, pilot and test those that. If we are convinced by a particular innovation's value to our business, then we will work out a plan along with the supplier to roll it out to a wider scope. During pilots, we will be looking out for challenges in adoption of these solutions, including those related to maturity of these solutions and their ability We believe that innovations that really generate value do so for both parties; implementing these will be a win-win situation for both suppliers and us.
Cloud for Cost Reduction and Flexibility
We are already having discussions with businesses specifically on cloud, primarily to address the twin objectives of reducing the cost and increasing the flexibility of cost base. Whilst we realise there is a lot of excitement around cloud, there is no doubt that some of these new developments will start to impact us fairly soon. Where cloud delivers business value and we have established it for ourselves, we will go for it. We are open in going to any model that best meets our objectives.
In fact for certain services where we will use shared assets in supplier's premises and pay-per-unit consumed, we are already moving close to the cloud approach of provisioning and consuming infrastructure services. We are also looking closely at what the market has to offer in terms of cloud offerings.
Supplier should Adapt as our Business Evolves
It is not enough that suppliers deliver a good IT service, they have to support us in our journey as well they have to be willing to be flexible to adapt to our business as it evolves during the life of the contract. Nobody today can say where we will be as a business three to five years from now.
Outsourcing Accelerates Change
We are at an early stage in our project and we must be cautions about not drawing too early conclusions. Social dialogue is still on-going in various countries and we are committed to respect this in order to make sure we proceed and manage this change in a socially responsible manner.
Some lessons learned have already been mentioned in this article, such as the importance of the retained organization. In addition to this social dialogue, social care, and prerequisite for implementation are also important; the integration of the change process in the contractual negotiation, because business and technology are changing matters as well. However, if I were to mention one single point, this would be the momentum towards change that this project is creating: our businesses, segments, entities are all aligned towards our objectives.
Teams are in place, the joint governance is being smoothly implemented, and action plans are on track. This makes me confident about the next important steps we will have to undertake such as transformation, and makes me think of this outsourcing project as a change accelerator for Arcelor Mittal.
