Dial: A Clean, Fresh Feeling

is much smaller than the others, in some cases, by an order of magnitude. To help compensate for its size,Dial generates roughly $1 billion in annual revenue and employs 2,900 people,the Scottsdale, Ariz., company is looking at various parts of its business and is trying to create competitive advantages where it can. One area where Dial believes it can improve is IT. In fact, you might say that the soapmaker is giving its entire IT department a clean sweep. Out, for example, are a mix of applications from Siebel, Oracle, Manugistics and others. In their place is a new SAP suite that Dial is counting on to transform its supply chain and give it that clean, fresh feeling. In addition, Dial has decided to outsource its ERP project to EDS, the Plano, Texas, services giant. After totally revamping its hardware, storage and networking gear last year, Dial is handing over the infrastructure and its 50 employees to EDS, too, as part of its IT clean sweep. The SAP implementation alone will take approximately 18 months and cost $35 million. All told, Dial is likely to spend $110 million cleaning up its IT department. And it's not alone.

Dial joins a growing list of customers farming out massive enterprise applications projects. For example, the California State Automobile Association recently signed a 10-year outsourcing agreement with Accenture to implement and manage its PeopleSoft 8 suite, while ASAT Holdings tapped IBM to help with its SAP implementation. A team of solution providers led by CSC, meanwhile, is helping the United States Army implement its Logistics Modernization Program.

As for Dial, now is crunch time for the consumer-products company, which is trying to modernize its inventory-management, financials, forecasting, CRM and planning applications as it overhauls its supply chain. The company has long lagged its rivals in terms of implementing an integrated business application and supply chain, as well as coming to the table with emerging technologies like RFID. The move is part of a strategy that began several years ago when Dial decided to shed noncore businesses. In a one-on-one interview, VARBusiness senior editor Jeffrey Schwartz poses some tough questions to Dial CIO Evon Jones about the company's plan. In short, he says his biggest challenge as CIO is to deliver solutions that are sustainable in the most economic way. He declines to cite the company's actual IT budget other than to say, like his competitors, it's in the range of 1 to 2 percent of revenue, or between $10 million and $20 million. Recruited from America West Airlines in 2001 specifically to oversee the effort, Jones believes he can save the company $21 million in operational costs by turning a major portion of its data center and IT operation over to EDS. In this interview, Jones outlines his views on the company's phased implementation, the challenges it faces and what he personally looks for in partners. One tip: It's not top VAR salespeople. He also shares his thoughts on technologies important to companies like his. If you're looking to help your companies clean up their IT investments, don't overlook what Jones is doing at Dial.

VB: What drove your decision to outsource your ERP implementation?

Jones: We wanted to be able to implement our ERP solutions in a way that would be the least disruptive to Dial. And we were looking to create an environment where we could get some IT operational savings. Under our outsourcing agreement, we are getting the best of three worlds. One is through outsourcing. We are able to save on the expense of the ERP implementation. Second, under the outsourcing agreement, the employees of Dial IT are now employees of EDS. So Dial has retained its intellectual capital, so to speak, that is definitely needed for a successful implementation. Third, while doing ERP, we still have to run the business on the legacy systems that are going to get replaced. And by having those people still engaged with Dial, we have not really missed a beat making sure we continue to run legacy systems effectively.

VB: So your entire IT staff is going to EDS?

Jones: Yes. What we have left behind is a governance team that primarily serves in a strategic role. And the governance team will deal with IT strategy, architecture [and] IT applications in what's going on in our industry. And, of course, there is also governance surrounding the EDS relationship.

VB: What made you decide to outsource the SAP solution vs. doing it internally?

Jones: [Regardless of whether you're doing an] SAP implementation with an outsourcer or not, I would caution any organization, even if [it's] going to do it internally, to get an implementation partner who does this for a living and who understands the pitfalls and knows how to get out of them. If you think about the architecture of the deal, it almost feels as though [it's being done] internally because employees who are outsourced to EDS are going to be part of the project. The cutover to EDS is business as usual. It's the same faces, the same people and the same relationships. They are effectively just rebatched.

VB: What is the time line for moving these legacy applications onto SAP?

Jones: We have an SAP time line of around 20 months. And we are doing it in two phases. At the end of month nine, which is around second quarter of next year, we'll go live with SAP financials and procurement solutions. And then in February '05, we are targeting going live with the rest of the suite, which is the supply chain, order to cash, manufacturing, etc.

VB: How does your overall outlook for IT spending in the coming year look in the wake of this project?

Jones: On the operating side, we will see some savings.

We will see an increase in capital spending as a result of the SAP project.

VB: What other types of infrastructure changes do you see yourself making? For example, have you decided on a server platform for the SAP application?

Jones: The current plan for EDS is to remain on an HP platform, which is what we have today (HP/UX). The SAP platform will be housed in an EDS facility. Keep in mind, EDS could go to a different server platform. I'm just speculating that they'll continue to use HP/UX.

VB: Are you looking at any other infrastructure upgrades?

Jones: We just completed a comprehensive infrastructure upgrade. We have a new network, new network core, new server farm and new storage, so in terms of infrastructure upgrades, I don't anticipate too much.

VB: What kind of new platforms did you [recently] upgrade?

Jones: We went from a Nortel core to a Cisco core, so we're now doing video over IP. For enterprise storage, we are using EMC's Symmetrix; for database file sharing, we are using a Network Appliance box. We are standardized on ProLiant boxes on the NT side. We've moved away from Novell to Windows and from static IP addresses to DHCP. We've done a comprehensive regutting of the infrastructure and replaced it.

VB: Who were some of the solution providers who did that?

Jones: We worked a lot with Cisco and a local company called Calence, which is also a Cisco partner. We worked with a number of organizations.

VB: What about on the ProLiant side?

Jones: We have an extensive relationship with HP, and we work with [the company] directly and from a procurement standpoint, not maintenance.

VB: Why do you work directly with HP and Microsoft, but you use a Cisco partner for your networking?

Jones: We do an annual technology think tank, and we bring in a number of technology organizations to brainstorm some of the things we're going to look at in the upcoming year. It's very customary for us to bring in competitors to participate in that space. We have worked with Cisco. In fact, we've worked a lot with Cisco. [Cisco has] helped us with a lot of the architectural design, and, of course, we are running Cisco equipment. Dial also has a push to work with local companies as well, and Cisco has a great partnership with Calence. So far, they've done a phenomenal job for us.

VB: Did Cisco recommend Calence?

Jones: Yes.

VB: How much of the development work will be

done offshore?

Jones: Very little. Most of the work will be done on-site. At the end of the day, what's most important is making sure we have quality and consistent service delivery, so the question really lies in what kind of work you put offshore. If you're putting offshore a lot of the routine procedural type of work, I have no problems with that.

VB: Are you doing any of that?

Jones: Not with this project. But as part of the outsourcing relationship, there will be a component of that, such as application maintenance and maybe some Web development. EDS will be doing that. They are looking at India

and Ireland.

VB: In the end, what are you looking to achieve from the ERP implementation?

Jones: A number of things. One, as you look at the consumer-products space, most of our large competitors use SAP. So off the bat, Dial will gain some parity in terms of our processes with our major competitors. Second, SAP with their experience has some really good practices in terms of business processes within the consumer-products-goods industry. Business processes are embedded in their software, and Dial is looking to take advantage of those. By taking advantage of those, we expect to see some process or operational savings even within the business.

VB: Will you be using it for your supply-chain apps as well?

Jones: Yes, we will be.

VB: How are you attempting to revamp your supply chain from an IT perspective?

Jones: I look at this as more of a business project than an IT project. One of the areas where we are spending a lot of time and a lot of money is around the whole change-management aspect of a project like this. We're working to make sure that we take advantage of change in our internal processes, to take advantage of what's already embedded in SAP. We're looking at a vanilla SAP implementation with little or no customization.

VB: Why did you decide on that vanilla approach?

Jones: A couple of [reasons]. You mentioned earlier that SAP projects go awry. Usually one of the things that causes that is the amount of customizations that organizations go through. So we certainly want to avoid that situation. Second, taking advantage of the best practices with an SAP, you certainly benefit from a company like Dial. We gain the benefit of SAP research, as well as research and functionality that they've developed over time working with other large

SAP customers.

VB: How will you reconcile your desire to avoid too much customization in trying to maintain a competitive edge?

Jones: This is where change management really becomes critical. We will go through a very vigorous process to justify any customizations. And the customizations that we would undertake would have to be ones that could give us a competitive edge.

VB: Where do you see customization making sense?

Jones: That will become more clear when we get into the blueprint phase of the project. But at a high level, the place where [we] will get a lot of value is in trade promotions, where we are better aligning consumer demand with our manufacturing activities and, second, consistency and data integrity and how we interact with our customers and suppliers.

VB: In terms of supply chain, there's a lot of buzz about RFID. Are you looking at implementing or testing that?

Jones: We are actually looking at that as an independent effort. We are still in the early stages of assessing how we're going to approach it [to] make sure that we're compliant with the requests we get for RFID by our large customers, but also seeing how we can leverage it internally for other things. For example, we are in very early discussions of implementing an RFID lab.

VB: How much did Wal-Mart's recent announcement that its top suppliers must test and ultimately implement RFID lead you to push forward with RFID?

Jones: Wal-Mart is a big customer of ours, and as a customer-focused organization, we try to do the best by our

customers.

VB: What other emerging technologies are you looking at?

Jones: I'm very curious [to see] how the whole wireless space is going to really help some of our packaged-goods companies. I think it's an untapped area. At some point, I'll start to do some exploration in that area.

VB: Are you looking at IP telephony?

Jones: We actually looked at IP telephony. The challenge is justifying a return on investment. Obviously, [we're] going to have to invest in new IP-telephony infrastructure software, and [we're] going to have to get rid of [our] existing PBX. So far, we haven't seen the payoff at this point, but we continue to look at it. When we rebuilt our infrastructure, we had that in mind, so our network is IP-telephony-ready. As a matter of fact, we are running video over our IP network today for videoconferencing.

VB: As part of the SAP implementation, are you looking at any single sign-on or policy-management tools to provide more granular and secure access to specific information?

Jones: We are researching that. It's critical, but it's not make-or-break. We are running Active Directory today, so we have a fairly good set of security standards and apps. Getting to single sign-on is a very elusive goal, but we are going to take that on as soon as it's appropriate.

VB: What is your battle plan for security?

Jones: Our battle plan right now is to deal more effectively with spam and Web content.

VB: Have you determined who is going to help you with that plan?

Jones: We will put out an RFP at some point. Obviously, EDS will have an opportunity to participate in that in terms of responding to the RFP, but EDS does not have exclusivity. We'll be looking at a variety of solution providers to come in and pitch us.

VB: What will this RFP look for?

Jones: It's kind of the Holy Grail of security. Everyone is trying to get to single sign-on, so we're trying to get there. This is everybody's problem. When we get our next think tank in place, we need to think about what we [need] to do next. We're doing things like Internet content filtering [and] spam blocking. We implemented a new firewall with DMZ as part of our infrastructure upgrades, but we need to take it up to the next level, and we need to figure out what that is in our technology think tank.

VB: How often do you have these think tanks that you've referred to a few times?

Jones: We tend to have them once a year. We bring in our vendor partners, and the ground rules are no sales guys. We ban them. Quite frankly, if someone tries to do the sales thing, they actually get thrown out. I'm serious. Not only that, one of the ground rules is if you have a product, but your competitor really has a better product [that] fits better within the overall objective of Dial, if we catch you trying to push your inferior products, you're going to get thrown out. It tends to be a fun process. And the vendor partners are very good at adhering to those rules.

VB: What do solution providers, integrators and other third-party providers need to know to more effectively do business with Dial?

Jones: We are fortunate to have good partners. In general, prospective partners need to understand our company's strategy and challenges and bring forward relevant solutions. Because anything outside of that is truly a distraction to the IT executives,and we just don't have time for that.

VB: Do you have any other advice?

Jones: Solution providers should understand how their products and services fit. As soon as [we] understand that, [they will] have a fruitful relationship with our organization, because if you can convince me that your products and services fit, and are willing to accept the fact that sometimes they don't fit, I think we will have a trustworthy relationship. I don't want to be sold a bill of goods. There's just no time for that, especially in this economy.