Business Process Management Journal

Implementing reengineering using information technology

Peng S. Chan Carl Land
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Peng S. Chan Carl Land, (1999),"Implementing reengineering using information technology", Business
Process Management Journal, Vol. 5 Iss 4 pp. 311 - 324
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Implementing reengineering Implementing

reengineering
using information technology
Peng S. Chan and Carl Land
California State University-Fullerton, Fullerton, California, USA 311
Keywords BPR, Information technology, Internet, Organizational change
Abstract Reengineering is becoming an increasingly popular option for corporations seeking
radical process change. Central to the success of reengineering is the coordination of information
technology (IT) throughout the organization. Essentially, IT represents the core mechanism of
information flow. When companies improve core IT processes, such as gathering data only once,
integrating cross-functional systems or increasing information speed to customers, radical
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business process change is possible. However, for IT to be an enabler of reengineering or

organizational change, it is imperative that managers are conversant with the various methods by
which IT can help advance process change. At the same time, management needs to be aware of
the numerous pitfalls that may doom any change effort using IT.

Introduction
Over the last few years, US management has bought into the idea that radical
change may be their only hope for survival in the competitive environment of
the 1990s. From failing companies on the brink of bankruptcy to solid
corporations interested in achieving better performance, these hopes are found
in a concept called ``reengineering.'' Hammer and Champy, who popularized
this concept, define reengineering as the ``fundamental rethinking and radical
redesign of business processes to achieve dramatic improvement in critical,
contemporary measures of performance'' (Hammer and Champy, 1993). Central
to these efforts, information technology (IT) is one of the most prevalent
facilitators of process change. IT is often the primary catalyst, which allows a
company to achieve its business objectives. It is regarded as the essential
``enabler'' of reengineering. However, not all companies that embrace
reengineering are successful in attaining their goals. By some estimates, 70 per
cent of reengineering projects fail for one reason or another (Hammer and
Champy, 1993). In some companies, failures are often attributed to internal
organization problems. In other companies, projects fail because the IT
organization is often viewed as an obstacle to innovation. Management often
questions the value of IT because it is difficult to measure quantitatively.
During the 1980s, 85 per cent of all IT spending occurred in the service sectors,
while productivity in this sector increased by only 1.9 per cent (Kehoe, 1994).
Project failures can also result from a lack of senior management support. The
poor performance of an IT department can severely impair a department's
future credibility with upper management. Another major problem in all
companies is the time dedication required by a senior manager or board Business Process Management
member. One study suggests that for a reengineering project to be successful in Journal, Vol. 5 No. 4, 1999,
pp. 311-324. # MCB University
achieving major change in broad, cross-functional processes, 30 per cent to 50 Press, 1463-7154
 BPMJ per cent of a senior executive's time is required throughout the entire project
5,4 (Hall et al., 1993).

Objective of study
All business decisions have an inherent risk of failure. However, the goal of
every manager should be to reduce the elemental risk in the decision process.
312 Reducing this uncertainty can be achieved through the power of knowledge.
The purpose of this paper is to expose non-technical managers to common IT
pitfalls that companies can experience. With this knowledge, managers will be
able to lessen the risk of reengineering failure.
Furthermore, it is important that managers understand the range of IT tools
available that will allow a company to perpetuate a reengineering initiative.
This understanding will lead managers to cultivate inductive thinking. This is
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a key point developed by Hammer and Champy whereby people recognize a

powerful solution and then seek the problems it might solve. This objective of
searching for solutions and seeking problems can be achieved once
management has a better understanding of the IT organization and its
applicability to everyday business.

The road to successful change

Much has been written about reengineering and the methods by which
companies can achieve success. However, it is important for companies to
understand the critical role interdependence plays between technology,
practice, and strategy. Change within the organization is a constant learning
process, lined with unexpected obstacles along the way. As managers plan for
change, their strategy must take into account the interactions among all of the
business system components (Milgrom and Roberts, 1990). Management's goal
should be to minimize the uncertainty through understanding the importance
of IT in facilitating process change.

The nature of change

The importance of task interdependence is often overlooked in reengineering
planning. The goal of reengineering is to completely reinvent the business
processes model. However, the ``blank sheet of paper'' approach is not always
the most effective technique when working with IT processes. Since IT is to be
the enabler in the process, a more useful approach is to:
. understand the benefits and weaknesses of existing systems;
. develop a model of the ``ideal'' system;
. become familiar with recent technological offerings;
. offer a transitory solution from the existing system to the proposed
system.
Before a new system can be devised, the existing systems and the interactions
between these systems must be fully understood (Caldwell, 1994). It is
 important to determine whether steps are performed concurrently or in Implementing
succession. For instance, in manufacturing processes, some companies have reengineering
had success in moving away from a purely assembly line mentality to that of a
pod assembly process. The routing of information between functional
departments can also be improved in this manner. Equally important is an
understanding of the nature of the processes that are occurring. Focus should
be put upon the critical, important processes. For instance, dividing processes 313
into value-added and non-value added categories could help differentiate
critical processes from non-critical processes. In the case of automated
processes, several categories can exist: document-based automation, such as
electronic forms, or group-centered automation, such as activity coordination
(Willets, 1995). Another useful suggestion is constructing a process flowchart
for the existing and proposed systems to aid with visual reference.
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Another important factor in determining the success of reengineering is the

transitory process: the process of migrating the existing IT system to the new
IT system. In most cases, this transition will involve a combination of many
interconnected systems: hardware, software, networking equipment and
customized programming. Project management, consultants and key
employees can also have an effect on this transitory process.
In all cases, it is important for managers to have a comprehensive
understanding of the nature of information flow throughout the organization,
from beginning to end, horizontally and vertically. This understanding will not
only facilitate the reengineering process, but also provide a tremendous benefit
to IT as an enabler of process change.

The internal organization

Non-technical
Corporate culture and strategy can have an impact on the success of
reengineering because it directly affects the IT organization. For reengineering
to be successful, top executive involvement needs to be maintained throughout
the process. A lack of organization receptiveness to change will lead to a project
not being completed on time or can even lead to a project's failure. Without a
constant project enthusiasm from the high corporate ranks, skepticism and
resistance will grow throughout the organization.
One way to minimize the effect of corporate culture is to identify the
company pursuing reengineering as one of two types: introverted or
extroverted. Introverted corporations place a higher emphasis on traditional
top management control, saving labor costs and instituting minor
organizational changes. Conversely, extroverted companies view IT as a tool
for increasing revenue through improving customer satisfaction. Recent
studies suggest that extroverted companies can sustain a higher productivity
growth and are better candidates for reengineering (Brynjolfsson and Hitt,
1997). However, extroverted companies can also suffer from other potential
pitfalls, such as information overload. The problem with information overload
 BPMJ is that the company may attempt to create a system that is unmanageable or
5,4 unattainable within a reasonable budget. Additionally, the IT department may
possess a different corporate culture than the rest of the organization.
The key point is that managers need to have a solid understanding of the
corporate cultures involved before reengineering begins. Speed of delivery and
understanding the goals and communication can all be affected when corporate
314 cultures are misperceived. Understanding the internal workings of the
organization can prevent a reengineering effort from being vehemently
opposed by the masses.

Technical
Just as the organization outside of IT is important to a project's success, the
structure of the IT organization is even more crucial. According to one study,
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some alarming statistics plague IT organizations: 40 per cent of IT application

development projects are canceled before completion; 35 per cent of the
remaining projects are ``challenged'' by cost/time overruns or changes in scope;
and failed projects cost US companies and government $145 billion a year
(Field, 1997). Why the high rate of failure? The reason, the dreaded 4Cs:
complexity causes confusion and costs. Many of these defect IT projects, which
include a growing number of reengineering initiatives, fail because of improper
IT project management. Some poor management practices include not
determining user's needs properly, not requiring tangible results and not
defining a project's scope accurately. Assigning under-skilled project managers
to highly complex and risky projects is also a road to project failure.
Reengineering projects can be saved by instituting solid project
management practices. Managers should constantly look for warning signs
throughout the life of the project: benchmarked goals not met; unresolved
issues that outnumber deliverables; escalating project costs; and
communication breakdown between team members. Another important
concept is to answer the following question prior to the start of a reengineering
project: under what circumstances should the project be terminated? With such
a high failure rate of IT projects, this question must be answered. As explained
by a manager for DHL Worldwide Express, ``It is better to spend $50,000 to find
out that a project doesn't make sense than to spend $250,000 on something that
won't get used'' (Fryer, 1997). Although project termination will vary from case
to case, some strong indicators for project termination include: project costs
that exceed expected business benefits; critical deadlines that are continually
missed, or technology and business needs that evolve beyond a project's scope.
Another factor to consider is the importance of competent IT people in the
organization. In the upcoming years, IT will be experiencing a higher shortage
of qualified technicians. Colleges are turning out fewer graduates with
computer-related degrees and keeping skilled IT employees will be
increasingly challenging (McGee, 1997). As companies begin process change,
they need to ask themselves the following question: Can this project be done
with the current IT staff? What level of IT staff is required to complete this
 project on-time and under budget? Many IT projects run into trouble because Implementing
IT staff are inherently ``task'' and not ``project'' oriented. It is important to look reengineering
to previous IT projects as indication of future performance. Often, the
perception of the IT organization from other departments within the company
can indicate whether the IT staff possesses the proper skills. If the proper skills
do not exist, the IT organization must proactively take the necessary steps to
ensure that projects can be completed correctly. 315
Company-wide reengineering projects succeed because the IT organization
takes the time necessary to develop the required skills, which was the case with
Fujitsu. When the company began reengineering its software systems, it
implemented a SAP program and migrated data from its existing mainframe
system. The reengineering at Fujitsu succeeded because the IT staff learned the
required skills to complete the job.
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Another point worth noting is that business and technology cannot be

developed in separate vacuums. In the case of Fujitsu, the IT organization
learned new skills which allowed reengineering to occur. All IT employees
learned ``soft skills'' such as process management, problem-solving and
business English. Because of the level of integration associated with a SAP
system, the IT department was forced to modify its project management style
from one of a task-oriented nature to a project-oriented nature. In the end, the
positive results of reengineering were delivered: delivery performance
increased by 30 per cent while employee productivity increased by 10 per cent.
Another added benefit was that the IT productivity rose by 30 per cent even
after a 20 per cent reduction in IT staff (Fryer, 1997).

The lessons of technology

A problem affecting many IT organizations is technical disease. Progressive IT
organizations often experience the problem of ``technology for technology's
sake.'' This mindset is not only incredibly risky; it can also be extremely costly
when applied in the context of business process reengineering. Companies need
to remain focused on inexpensive, reliable, and functional systems. Powerful
technologies do not necessarily translate into appropriate technologies. As
mentioned earlier, if corporate climate is properly understood, then technical
disease can be identified early in the planning process.
It is also important to understand that less functional technology can often
be less problematic and less costly in the long run. Solutions, whether
hardware, software, network or other, should be proven effective in a wide-
range of operating environments. Managers need to take the time to investigate
all technologies before attempting implementation. Companies should always
look towards leading edge solutions rather than bleeding edge solutions. This
is especially true with enterprise software solutions where hundreds or
thousands of users can be affected by ill-performing software and hardware
malfunctions.
The reliance on a single software vendor solution poses substantial risk.
Recently, Owens Corning Inc. consolidated more than 200 legacy (mainframe)
 BPMJ applications into a single server application using the enterprise application
5,4 tool SAP. After the conversion process, the new system was brought online and
a variety of problems occurred. Many of these problems could have been
avoided with better IT planning. As a result of the SAP debacle, customer
service support was jeopardized until a solution could be found. After several
weeks, a third-party software solution solved the problem (Gillooly, 1997). The
316 key point to remember is that even the most proven software products have the
possibility of failure. Limiting the possibility for failure is the number one
responsibility of the IT organization.

Common sense IT practices

With the road to successful change paved, it is important to understand basic
IT practices that should be followed by all organizations to ensure that
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reengineering can succeed. The concept of IT should be thought of as a living

system that is used to route information throughout the organization. It is
somewhat like the Army view of intelligence. The Army delivers information
anywhere needed without knowing ahead of time who will need what
information. The same philosophy can be applied to IT procedures. Systems
and processes should be designed with expansion and vision in mind. As stated
previously, technology needs to remain an essential enabler.
IT projects, whether as large as company-wide reengineering or as small as
a single department, should always look towards IT-proposed systems which
attempt to provide cross-function integration. Integrated solutions can
dramatically increase the speed of information delivery, streamline activities
and decrease redundant data entry (Taylor, 1996). Each of these factors adds
up to enhanced productivity, better data integrity and increased customer
service. IT process change should also strive for automated workflow systems
which route information throughout the organization. These systems, which
are usually more sophisticated than an electronic mail application, strive to
route information intelligently throughout the organization. Furthermore, as
teams integrate these systems during the reengineering process, vertical
information routing, such as routing all communication upward for approval,
should be minimized in order to avoid costly time overruns. For reengineering
to be truly efficient, a certain level of empowerment of team members needs to
occur. For the highest level of efficiency, functional groups should always
maximize lateral communication.
As stated before, top management involvement is critical in the
reengineering process. However, equally challenging is changing the
organization's perception of IT as a capital expense to one of capital
investment. For top management to remain committed throughout the life of a
project, accurate communication needs to be disseminated by the IT
organization. Supporting this belief, the IT organization should remain
proactive by constantly analyzing the risk impact of the proposed systems.
Pilot programs, meetings with end users and constant communication with
functional teams should be continually employed. IT credibility with top
 management can be improved through the consideration of zero-expense and Implementing
low expense solutions. In most cases, process flow changes can be streamlined reengineering
through improving internal management practices. It is important for the IT
organization to apply the concept of return on investment (ROI) to internal
projects. Many IT organizations apply primitive business practice techniques
in deciding the benefit of new technologies. Computerization does not always
have to be the panacea for all ills (Strausman, 1997). 317
IT management should remain open to current technologies and solutions.
This can be achieved internally, with the aid of consultants or through
outsourcing. However, it is always important to embrace new technologies with
an attitude of cautious skepticism. Current process capabilities need to be fully
understood before a proper solution can be proposed. Another helpful
suggestion when evaluating new technologies is to focus on reusable solutions.
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Non-platform solution dependency, meaning that a system can be used on a

variety of computer systems and operating systems, can ultimately increase
the shelf life of a customized software solution. Once again, IT applications and
solutions need to be thought of as long-term capital investments rather than
ongoing expenses. Additionally, reusable solutions can also reduce long-term
training costs.
As managers look toward reengineering as a means for radical change, the
importance of understanding the potential pitfalls prior to beginning a project
is imperative. The key is to approach reengineering with full knowledge so that
fundamental mistakes can be avoided. Whether a company is in the middle of
reengineering or looking for inventive ways to increase profitability, it is
important to have a good knowledge of the IT tools which can make
reengineering a reality.

IT tools for reengineering

For managers to play an active role in reengineering or process changes, they
must possess a basic knowledge of the mechanisms for change: the IT tools.
This is not to say that non-technical managers need to be experts in each IT
tool or system. These managers can focus on familiarity rather than expertise.
The role of expertise should remain with the IT organization and expert
consultants. Because most IT organizations tend to be reactive rather than
proactive in regards to change, perpetuating radical change in a company will
most likely develop from outside the IT department. Non-technical managers
should make an effort to become familiar with IT reengineering tools, that is,
methods that can be used to implement process change successfully. This
paper will now review some of the tools available to companies when
implementing a reengineering strategy.

ERP systems
Enterprise planning systems (ERP) allow the sharing of real-time information
between manufacturers, customers and business partners. In 1997, ERP project
spending represented a $40 billion dollar industry. By 2002, it is expected to
 BPMJ reach $94 billion (Stein, 1997). In its most basic form ERP is the 1990s version of
5,4 the electronic data interchange developed in the 1970s. Whereas many EDI
systems are prohibitively expensive due to costs associated with mainframe
technology, ERP systems are better suited for smaller companies. Some of the
benefits include: shorter manufacturing cycles; increased communication
between consumers and business partners; better supply-chain management;
318 and greater control of cost and operation management.
One application used commonly in ERP application is SAP, an enterprise
software application that allows a tight coordination between sales,
manufacturing, procurement, finance and accounting. Many companies utilize
SAP for global integration across geographical business units. For instance,
AutoDesk company implemented SAP with significant business results: quote
to time shipped reduced from two weeks to 24 hours and quarterly accounting
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preparation time was decreased by 50 per cent (Davenport, 1995).

In Adaptec, a computer parts manufacturer, SAP was implemented to
connect with assembly subcontractors in South East Asia. In the computer
industry, the first company to market reaps the highest rewards. After SAP,
average production cycle was reduced from 12 weeks to eight weeks (Wilder
and Stein, 1997).
In the case of Owens Corning, the company experienced nearly 16
acquisitions over a two-year period. As a result, the company found itself with
a hodgepodge of applications and systems. With a $100 million dollar budget,
Owens Corning not only reengineered successfully but developed the system
nearly 50 per cent under budget. The reason for the company's success:
understanding business processes and systematic planning (Stein, 1997).
ERP solutions succeed when assimilation and training are implemented
quickly and efficiently. The ability to ntroduce quickly ia functioning system
with little business disruption should be an underlying goal of a project.
Equally important in ERP systems, especially as employees' roles and skills
change, is providing adequate training before and after implementation. In the
case of SAP or other ERP system, creating super users can ease the post-
deployment process by giving a functional department a central source of
application information. Super users are users who are intimately familiar with
an application, like SAP, within a single department. Not only does this lessen
the burden on IT, but also it provides the first-level and ongoing support to all
users within a functional department.

Outsourcing
One of the more common trends in the IT industry in the past several years has
been the use of project outsourcing. Outsourcing is an attractive choice because
it allows companies to implement new technologies quickly, cut costs or
improve IT services. However, the reality of outsourcing falls short of the
perceived advantages. One of the inherent problems with outsourcing is the
high relationship between technology and internal business processes. When
systems are outsourced, systems and processes can often become dysfunctional
 (Caldwell and McGee, 1997). Companies seeking radical change will not find Implementing
outsourcing a source of substantial productivity gain. However, for smaller reengineering
projects, outsourcing can be a cost-effective solution.

Consulting firms
Another popular trend is the use of outside consulting firms for a variety of
services. Consulting firms and the use of analysts are key during the planning 319
and implementation stages of reengineering. For instance, in 1997, companies
purchased on average 227 reports from consulting firms. One reason
companies turn to these types of companies is to prevent making poor business
decisions. Furthermore, because IT analysts are expensive to employ year-
round, companies can reap the benefits of this information by using consulting
firms. Common research topics include business applications, operating
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systems and IT alignment with business processes.

In 1995, the Eastman Kodak Company approached several consulting
companies when deciding on a new operating system for its 30,000 desktop
machines. Because the company could not agree internally, the consulting
companies represented a fresh perspective and the latest information. Bottom
line, the company made the correct decision and saved itself thousands of
dollars in costs (Violino and Levin, 1997).
The use of outside consulting firms is key for major projects like re-
engineering, because it allows the company to receive the timely, precise
information regarding new technologies. However, use of consulting firms should
be limited to aiding the company in making informed decisions. In no way should
a consulting firm take the place of the internal decision-making process.

Enterprise software
In addition to ERP discussed earlier, other enterprise software solutions exist
which can lead to dramatic improvements in information processing. Supply-chain
systems allow suppliers, distributors and retailers to connect, similar to ERP
systems. These systems allow a company to outsource specific portions of the
production process to the best-equipped business partner. Furthermore, supply-
chain systems focus on supplier issues and are often more affordable than larger,
more functionally integrated systems like SAP. Once Thompson Consumer
Electronics implemented supply-chain software, the company benefited
tremendously by process change. After employee training, the company was able
to reduce its planning and scheduling staff from 22 to four (Stein, 1997).
Sales and business process automation is also becoming an increasingly
popular area for reengineering. One reason for its rising popularity can be
attributed to the falling prices of software. Once at over $3,000 per user,
systems can be acquired for under $1,000 per user. As software improves,
prices will continue to fall while features will continue to grow. These types of
systems seem more common in smaller companies, where legacy (mainframe)
systems are less prevalent. Once again, the results speak for themselves. In one
company, as a result of better communication between salespeople and the
 BPMJ corporate headquarters, sales immediately increased by 20 per cent after
5,4 sufficient training. Over the next few years, sales-force automation is expected
to grow at a rate of 35 per cent per year (Lent, 1997).
Another popular area for software implementation is in business process
reengineering (BPR) software. Although some of these software applications
are limited in capabilities, the majority of packages will give companies a good
320 start with the planning aspects of a reengineering project. Software prices
begin at $600 for simple flowcharting and can go up to tens of thousands of
dollars for sophisticated simulation/modeling software. Depending on the size
of the company and the size of the reengineering project, BPR software is well
worth investigating.

Internet
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Over the last few years, companies have been investing heavily in the Internet
in hopes that a revolution would occur overnight. Many companies agree that
using the Internet provides a competitive advantage to their business. Some of
the areas which are driving the development of Internet applications in
businesses tend to be directed toward communication and customer service
areas. For instance, in the computer industry, the use of the Internet has had a
severe impact on improving margins. Look at a company like Microsoft which
distributes hundreds of different software products, each with different
versions and operating systems. In the days before the advent of Internet,
Microsoft would distribute software updates to thousands of different
customers. Disk duplication, handling costs, distribution costs, to name a few,
represented a sizable expense. With the Internet, a single point of distribution
to all customers could be created at a fraction of the cost. Essentially, the
Internet allows the barrier between the company and customer to be
diminished. Some other benefits include: better communication, cost reduction,
increased productivity and a flattening of the organization (Information Week,
November 17, 1997).
However, not all companies experience the same level of dramatic business
process improvement. Understanding the technical hurdles surrounding the
Internet are pivotal before any business process strategy can be developed.
Security, employee productivity and support are just a few of the main IT
concerns. A company's decision to outsource its Internet business or develop a
strategy internally using existing IT can have severe financial repercussions on
a company. Other technical concerns include the reliability of Internet-based
systems and management concerns.

Intranet
An intranet is like an internal Internet for the corporation. An intranet is a
software/hardware/network system that is accessible to the entire company. The
term intranet is used because the information on the system is only accessible to
employees within the company. Sophisticated security prevents people from
outside the company from gaining access to company-held information.
 An intranet allows employees to use a software application, like an Internet Implementing
browser, to gain access to a wide variety of information. Employees can access reengineering
text, images, audio and video. The main advantage of an intranet is its ability
to create a single point of distribution to the entire company. If all employees
have access to the intranet, then information can be instantaneously distributed
to all employees with little effort. Imagine the costs associated with the simple
task of informing 60,000 employees about simple procedure change. Not only 321
does the company save money on distribution, but it also improves information
speed and corporate communication.
Many companies are using intranet strategies for application training and for
human resource management. When used prior to a new application launch,
such as a SAP or ORACLE based product, an intranet training solution could
disseminate important information to all users instantly. In addition, as updates
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and changes to the system are made, all employees can be notified immediately.

EDI
Electronic data interchange (EDI) is still used in many companies for keeping
customers and suppliers in contact with one another. Over the years,
companies like Wal Mart have made substantial investments in EDI. In
addition, business partners wishing to work with Wal Mart have also been
required to use EDI as a method of conducting business. Recently, EDI systems
have improved by allowing more information to be communicated from the
retailer back to the manufacturer. This is done by using bar-coding, which
allows manufacturers to monitor consumer demands in different regions. The
end result is better control of purchasing and inventory.
Many companies have combined EDI solutions with ERP solutions like SAP.
For instance, when Lennox International, a manufacturer of heaters and air
conditioners, reengineered using SAP and EDI, its lead time improved from 14
weeks to two weeks (Schwatz, 1996). Not only does EDI allow companies to
manage inventory, it gives the company the capability to smooth out the peaks
and valleys in the normal production cycle.
Another future trend in EDI is the use of the Internet as the primary method
of communication. Most EDI systems operate on what is known as value-added
networks (VAN), private networks used for data communication. VANs are
typically very expensive and prohibit smaller companies from implementing
EDI. As these combined EDI/Internet systems become more secure, more
companies will be able to utilize the technology as a source of cost reduction
and process improvement.

Knowledge management
The concept of knowledge management is a method that allows employees to
gain access to the knowledge base of a company. Essentially, by allowing
employees access to explicit and tacit knowledge, a corporation can develop
more informed employees, which in turn, will lead to greater innovation.
Explicit knowledge is common, public information. Tacit knowledge explains
 BPMJ the difference between an engineer with one year of experience and an engineer
5,4 with 20 years of experience. Certain types of expertise can only be acquired
through extended periods of working knowledge.
Knowledge management can be achieved through information repositories
and specialized networks. A few years ago, these types of systems would be
prohibitively expensive due to the high costs associated with enterprise wide
322 computer systems. However, smaller client-server applications are now
available which can serve an entire organization at a fraction of the cost of
older mainframe technologies. Dow Chemical decided to develop a system,
which analyzed data from nearly 30,000 of its internal patient files. The end
result of Dow's reengineering was an increase in licensing royalties from $20 to
$125 million over a three-year period and a reduction of nearly $4 million per
year in tax maintenance (Schwatz, 1996).
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Another example of knowledge management occurred at Miller Freeman

Incorporated (MFI), a publishing and trade show company. In late 1994, upper
management, in conjunction with its IT people, developed a system to archive
its 176 different publications via an intranet-based application. The advantage
of this system is that it allows instant access to articles and images from MFI's
entire library of publications. Duplication is reduced, flexibility is increased
and the system has added value by generating revenue through an online pay-
by-article commercial package connected to an Internet-based application.

Legacy systems
Legacy systems, or mainframe computer systems, will continue to remain an
integral part of corporations. During the 1980s, as computing costs continued to
fall, many companies began switching their mainframe applications to less
expensive UNIX based client-server systems. However, the long-term advantages
of client-server over legacy systems are open to debate. Many companies
switched to client-server in order to reduce costs, but the long-term reality was an
increase in operating costs. In addition, management costs and security were also
major concerns. In 1994 and 1996, Deloitte and Touche surveyed companies on
the obstacles faced in replacing in-house legacy systems. The survey reported
that while some companies were less concerned with the replacement costs, many
indicated an uncertainty about the future direction of business and what types of
systems would be required to support future applications (Bertin, 1997).
The bottom line is that IT organizations are once again looking to re-
centralize client-server applications into a single system. At Chrylser, nearly
160 UNIX client-servers were consolidated into a single system. Savings from
operating costs alone totaled nearly $1 million dollars after implementation. In
addition, from an IT perspective, Chrysler realized the following benefits: easier
management, improved security, easier disaster-recovery and increased system
performance. From a customer service perspective, a problem ticket that took
four hours to complete was reduced to 50 minutes after the system was
implemented (Garvey, 1997).
 Implications and conclusion Implementing
Project failure can be attributed to a variety of issues: internal conflicts, reengineering
structural issues, timing, coordination of technologies, communication or
product mixes. After all, the goal of management should be to lessen the risk of
failure through lack of knowledge. When managers make informed decisions,
corporations succeed. When managers are knowledgeable, innovation happens.
Reengineering is a corporate process that involves radically changing 323
business processes through the use of IT as the central enabler. Management
should take the time to learn from the history of companies that have failed in
reengineering. In the process important questions should be raised: Why did
company XYZ fail to reach its objectives? What should company XYZ have
done differently? As a manager what can I learn from company XYZ's
misfortune?
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Equally important is the idea that the corporation is a living entity that
continually changes and evolves. For this reason management should be
constantly looking for areas in which to improve processes and the flow of
information. Although this inevitably involves the use of IT, it is important for
managers to understand the tools available, which will enable reengineering to
occur.
The evolution of the corporation represents a process of continuous change.
With change, come challenges, success and failure. If companies wish to survive
in a global economy, change is required in the process of achieving corporate
maturity. The process of change, such as reengineering, places a heavy burden
on the IT organization. For IT to improve business processes successfully,
communication, coordination and understanding are required. When managers
have a better understanding of the problems facing IT, as well as the tools which
can help promote internal process change, then the corporation can dramatically
improve its chances for achieving reengineering success.

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