When the sun never sets
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Every day, major IT projects flounder as a result of basic misunderstandings about the way that people in other countries do business, their culture and their legal system.
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Global companies are hardly new, and nor are international networks of computers. Dip into the corporate histories of IBM, BP or General Motors, and they tell stories of electronic file transfers dating back to the early 1960s.
But naivety is nothing new, either. Ask Martha Bennett, group vice president for analyst and consultancy group Giga (now part of Forrester Research), an advisor to many large businesses: "One client seriously thought that they were going to roll out a global online marketplace that could only take US dollars," she says. "And that was in 2001."
Had the system gone live, it would almost certainly have done no business outside the US. But while such oversights might be unusual, executives at many global companies, and especially analysts at advisory companies, can tell similar stories.
Global IT projects, because of their scale and cultural diversity, have always been riskier than local ones. But in recent years - especially as organisations consolidate data centres and roll out standard packages that cover the world - the risks and the number of embarrassing failures has risen, not fallen, in spite of decades of experience.
The list of companies that have suffered as a result of bodged software roll-outs is long and includes chemical manufacturer ICI, facilities management group WS Atkins, sports goods group Nike and US chocolate maker Hershey. The majority of disasters are hushed up.
In many cases, especially during the peak of the dot-com boom, companies sought to globalise too fast, and put too much faith in technology. Now a
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"Public company management could turn into a legal-liability nightmare for executives, each of whom will run the risk of going to jail at the first signs of an accounting slip," says Philip Lay of the Chasm Group, a US consultancy.
Now, some organisations have started implementing standardised accounts software, running on a single database instance - if not globally, at least regionally. That way, the head office can see at any time exactly how units around the world are doing.
One example is Cisco, whose position as a bellwether for technology stocks on Nasdaq has made it highly sensitive to the danger of misleading the markets. Now, it boasts, it can get an up-to-date view of its trading position across the world at any time - it can even close its whole quarter in a single day. "Virtual close lets you be proactive, rather than reactive," Cisco CEO John Chamber told an analyst conference.
It is not just about improved reporting, however. Companies can save money by centralising and globalising their systems and consolidating their data centres. Database giant Oracle, for example, claims that it saved $150 million from a financial software roll-out combined with a data centre consolidation program.
Many organisations are also reducing the instances they have of major software programs, such as ERP, in order to reduce licence fees, hardware costs and, most importantly, support costs.
Border hazards
But such cross-border projects are fraught with difficulty. The challenges faced are not just technical, but legal and cultural. Such issues are often much under-estimated, says James Spitze, co-founder and partner of management consultants Systems Consulting Consortium.
In one dramatic case, he says, a failure to get disparate IT teams across the globe to work together resulted in the halving in value of a major client.
But how do senior executives unite IT staff in countries as diverse as the US, France and Japan and persuade them to work together to achieve the common goal laid out by the head office in London, or New York?
Many project leaders have found that best practice in one country cannot necessarily be applied to another. Some report, warily lest they cause offence, that the way that teams from different parts of the world approach a major project often runs according to national stereotypes.
US companies tend to adopt a particularly gung-ho attitude, setting strategy and objectives centrally and expecting the rest of the world to fall into line, figuring that anyone who gets in the way can simply be fired - as they would be in the US, says Gary Waylett, managing director of Eclipse Computing, a services supplier that specialises in global implementations of financial software.
But what works in Paris, Texas, doesn't work so well in Paris, France. Outside the US, such an attitude can be expensive, particularly in highly regulated markets such as Europe and Japan, where it runs entirely contrary to the more consensus-oriented business culture.
In France, for example, employment law makes it much more difficult to lay-off staff, or even to employ them on short contracts. In Japan, meanwhile, it is important to achieve support for a project from top to bottom, often including input from the data entry clerks, for example, on how the interface should look and feel. "They [the Japanese] are very good at giving all the right signals and agreeing with everything that the corporate says. But as soon as they walk out the door, they don't do anything," warns Waylett.
CIO magazine in the US recently reported on how Paul Stevens, the global head of technology for Barclays Global Investors, has managed the global roll-out of projects. His role has taken him to offices round the world, where he hosts 'Sit down with Paul Stevens' sessions where he can communicate the company's goals with staff and they can give him vital feedback.
Whereas the meetings in Sydney, Australia and even London can be lively, in Japan when he asks for questions he is greeted with silence. And surprisingly, San Francisceans do not say much either. "I'll say, 'please speak freely,' but no one says anything and later we'll find out that there were problems."
One common problem, reported by many global IT executives, is that Americans can be reluctant to accept technology, or differing opinions about technology, from outsiders - at least until they are proven.
Crossed wires
Data centre and server consolidation is a major activity today, says Jonathan Murray, vice president of global accounts at software giant Microsoft. Oil giant Shell is a prime example, he says. It is consolidating all its data centres around the world into just three hub data centres and using Windows 2000's Active Directory to manage its entire Windows environment worldwide.
But data centre consolidation plans can sometimes be tripped-up by over-estimating the quality of the telecoms infrastructure around the world. Despite deregulation
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Very often, communications links from major cities in Africa to Europe or the US are better than point-to-point links within the continent. There is also a question of skills availability in some regions.
In Tanzania, for example, communications can be so rudimentary that the local telecoms companies still employ rooms of people to plug and unplug calls manually.
The managers of one recent server consolidation project in the telecoms industry decided to locate the server for its African operations - which encompassed such places as Gabon and Sierra Leone - in the Netherlands. It was easier to run it from a central point in Europe than in Africa, they concluded.
Harmony, what harmony?
Data privacy and other legal issues have been a major cause of problems for global projects, and, say legal advisors, are likely to remain so. US companies have had particular difficulty understanding, and certainly sympathising and conforming to, Europe's much stricter privacy legislation.
Furthermore, national governments within Europe have implemented the EU directive in different ways, warn lawyers. Although the US and European Union hammered out a compromise, in the form of the Safe Harbour Agreement, many international companies still think it is something of a diplomatic kludge, imposing extra management and technical burdens.
Some companies, such as Microsoft, approach such legal issues by adopting the most stringent law and conforming to it worldwide, says Murray of Microsoft. But others find that this approach can be commercially damaging, especially in the US, which allows much more liberal use of personal data. Some content management software suppliers and project managers have been designing systems with partitions, allowing different rules to be set up, for different groups.
In Asia, legal issues are further complicated by the lack of regional cohesion. "Asia is more complex because it is a much more fragmented geo-political region," says Murray. There is a big difference between ordered and modernised Singapore, for example, and Laos and Vietnam, he says. This makes it hard to treat the whole region as one block.
The peculiarities of different countries' financial systems across Europe can also cause big problems. A huge issue currently concerning financial services, for example, are the new US laws, such as the Sarbanes-Oxley Act, that lay down strict rules on what information securities companies need to keep, and how they should keep it. As a result, "We expect most Global 2000 organisations to re-evaluate their records management policies this year," says research company the Meta Group.
Across Europe, financial reporting requirements can still vary widely, despite years of attempted harmonisation. In the Netherlands, for example, rules are quite liberal; in France, Belgium and particularly Italy, they are more prescriptive. "In Italy, you have to keep the actual copies of all of the data locally," says Waylett of Eclipse Computing. He recommends replicating the data onto a machine running locally as a way of meeting such regulations without synchronisation problems.
Roll-outs of cross-border accounting systems often need to be handled sensitively. "When you are doing global roll-outs, one of the things you are doing is enforcing a standard. In many cases, you are restricting peoples' choices," cautions Murray of Microsoft.
At the moment, many organisations are implementing standard financial software packages worldwide to help them speed-up the reporting process and to get a better idea about what is going on in each country or region. Such software is based on a common code base and common processes, regardless of where in the world the software is implemented and the financial system being operated there.
It is that code commonality that helps the global head office to speed up its consolidated reporting. But in the process, locally developed accounting packages are swept aside, sometimes to the consternation of the finance managers who rely on them.
This is a particularly sensitive topic in Italy, where the penalties for failing to comply with local regulations can be harsh. As a result, finance directors may quibble over details that their counterparts in other countries would think trivial.
In such cases, the finance directors in those territories may need to be persuaded that, although the data may be stored in a structure that they are unfamiliar with, they will still be able to present their accounts in a way that conforms to their local regulatory standards.
"Many honestly believe that unless they keep their data in that [local] structure, they are going to be in big trouble. It is not that they are trying to be awkward, it's the way that they have been trained in their accounting schools," says Waylett.
It is not unusual for unconvinced finance directors to simply continue running the old software, he adds. A US customer with operations in France, Germany and the UK will often run a corporate chart of accounts common to everybody and a second chart of accounts that is common to the national subsidiary.
Cisco's end-of-quarter virtual close is widely admired, but few expect to be able to emulate it. "They accomplished it by sheer brute force. They had enough IT dollars and they used them in a unique way," PeopleSoft chief financial officer Kevin Parker told Information Age in 2002.
While most software packages, even from second-tier global vendors, are capable of producing reports that conform with local accounting standards and in virtually any desired language, not all are yet adaptable enough to be able to assimilate different character sets, such as Kanji - a small, but telling flaw.
Different languages can easily be implemented by installing different dictionaries - but some non-Roman character sets, because they are so complex, use two bytes for display instead of one. Many US and European software vendors overlook that when they first design their software.
Some can be suitably adapted on implementation, but not all. "The underlying design of the Microsoft Great Plains systems means that it won't ever be able to fully handle Japanese and Korean, which require double-byte characters," says Waylett. This may change in a completely new version of Microsoft Business Software planned for 2005.
Language barrier
Language problems are frequent. It is not uncommon, says Martha Bennett of Giga, for old, locally developed software running in the local language to be thrown out in favour of software that requires an understanding of English or the use of English 'Qwerty' keyboards.
While this may not be a problem for graduate level staff in India, for example, in the back office it will probably be a different story, warns Bennett.
Yet in some cases, users prefer English to their own language. "In Eastern Europe, developers prefer English language manuals because they don't trust the translation," says Bennett. This is because software vendors rarely spend the money on technically competent translators and only the English language manual can be trusted.
Networking giant Cisco Systems, with all the vast resources at its disposal, only provides its online help pages in English, notes Bennett.
Paranoia
There is, of course, another side to the many global projects that are being implemented today - a side that means that a degree of conflict, suspicion, even paranoia is to be expected: cost cutting.
Many global IT projects - such as data centre consolidation - are either openly or indirectly intended to reduce the headcount of IT and other administrative staff.
This, say advisors, makes it extremely important that big, global projects are handled with great care and with the close support and involvement of local managers.
