Avon Products' new CIO, Sateesh Lele, knew he had a Herculean problem on his hands after finishing a 10-week, 10-country tour of the beauty products company's top revenue-producing regions.
Some of those operations -- in South America, Asia, the UK and Puerto Rico -- are riddled with myriad, outdated hardware platforms; dozens of incompatible, homegrown order processing and financial software systems; and hundreds of information technology staffers with 15 to 20 years of mainframe experience.
Worldwide, "we wound up with 700 [disparate] local systems, despite the fact we were spending a significant amount on IT," said Charles Perrin, CEO of Avon.
Even in the US, the order system the New York-based company uses is 20 years old. Most of Avon's field representatives still write orders on carbon paper forms and mail them to headquarters, where they have to be manually keyed in to a mainframe computer. Yet they still manage to send out 4 million orders every two weeks.
"It's kind of like revisiting the mid-'80s -- like the world stood still," said Lele, former CIO at General Motors in Europe. He joined Avon in April to spearhead the overhaul, after helping GM with its re-engineering projects. Lele also led similar projects at Network Equipment Technologies and Telogy, both in California.
The good news is the company has still managed to grow into a $US5.3 billion empire with 2.8 million sales representatives in 135 countries. Earnings rose 40 per cent in the first quarter this year from the same quarter a year ago. But 1998 revenue was up just 3 per cent over 1997.
Industry dynamics are changing, and e-commerce has become the focal point. Though Avon's field representatives continue to be the company's strongest sales link, the increase in two-income families means that nobody's home when Avon pays a call.
"The direct sales industry in general is having a hard time" reaching its audience, said Brian Hume, president of retail consultant Martec International. So Avon has created additional channels, including more catalogue offerings, a Web site -- which Lele acknowledged is in a nascent stage -- and 40 new retail stores nationwide. Lele said he wants to link those entities through common systems sharing information over the Internet. So he has outlined an aggressive plan for a massive IT overhaul.
Lele said he plans to standardise all hardware on Unix platforms and Oracle relational databases; choose a common enterprisewide system for financials, supply chain and human resources; consolidate 35 data centers into about 10; and replace or retrain Avon's 1,300 IT employees on client/server systems, e-commerce and supply-chain technologies.
He also plans to develop a worldwide intranet for sharing information among countries and an extranet to tie in with suppliers, allow sales representatives to place orders quickly and directly, check product availability in real time and track order delivery.
Lele said he plans to finance the new IT initiatives with the money saved by cutting inefficiencies like manual order entry and maintenance on too many systems. The budget should be clearer in the first quarter of next year, he said, and the effort should take three to five years.
Perrin said the overhaul is critical to Avon's competitiveness. "We're not an easy company to do business with. We're still a paper-based company, we're not flexible enough, we don't offer the representative as much information as she should have in running her business. We see the role of technology" in changing that, he said.