Oxygen breathless for new e-business

By ADAM GIFFORD

Oxygen, a company formed out of Carter Holt Harvey's shared services department, has its slate out looking for business in the New Zealand IT market.

Oxygen's experience with the SAP enterprise resource planning software, developed over the five years Carter Holt has been implementing and running the German system, already makes it one of the largest and most experienced SAP shops in the region.

Chief executive Jeremy Fleming said external growth was a key part of the Oxygen strategy, but not at the expense of the needs of existing customers.

Carter Holt, which is 50.3 per cent owned by US-based International Paper, reorganised itself on April 1 into 33 separate businesses, rather than six business groups. Most of those businesses are still processing their transactions through the shared service centre.

Oxygen has more than 220 staff in Auckland, Melbourne and the central North Island.

"We support just over 6000 desktop and laptop users, including 3000 SAP users," Mr Fleming said.

"We have customers from Perth to Dunedin so we're a genuine transtasman company."

Key clients are International Paper, plastics manufacturer Vertex Pacific and distribution company Packaging House.

Two staff are in the United States assisting International Paper with its SAP implementation.

Mr Fleming said Oxygen was already a $60 million business, and aimed to become one of the largest IT service firms in the region.

Its SAP practice had a core of 40 consultants with three years' experience or more, and a team of five running the software.



"Oxygen has the potential in SAP deployment, support or hosting," Mr Fleming said.

This could be done at an ASP (application service provider) level - which could suit some of Carter Holt's smaller subsidiaries.

While Oxygen has a five-year contract to supply core IT and business processing services for Carter Holt, it must compete for professional service contracts such as SAP consultancy, web development and training within the group, as well as the development of new e-business or business-specific applications.

Oxygen is developing a robust and potentially scaleable web hosting capability to host everything from brochure websites for Carter Holt subsidiaries to sites with full business-to-business capability.

Mr Fleming said there was almost nothing on the New Zealand market that met Oxygen's criteria for high-availability hosting, so it was building its own.

Carter Holt information technology chief Russell Jones said each business in the group was being encouraged to formulate its own e-business strategy.

These included electronic procurement and business-to-business integration. Mr Jones said initiatives were classed as "e-basics" (the application of e-business and web technology to existing processes) or "e-innovation" (the adaption of new business models).

The most visible e-basics initiative is freight management portal e-cargo, which involves business-to-business integration with customers, suppliers and partners.

Mr Jones, who came to Carter Holt in 1996 after working for five years on an SAP implementation in Europe, said the SAP system was providing a solid platform for development.

The five-year project to implement SAP started early in 1996, after Carter Holt found it had 58 computer systems and 38 general ledger systems across the company.

The program was originally estimated to cost $72 million. Mr Jones would not reveal the final cost.

The first sites went live in April 1997, and the last major installations were competed last September. The exercise involved more than 40 SAP projects.

"We continue to do post-implementation audits. In general we find the businesses are getting benefits, but the flow of benefits is later than expected and the settling-in time is later than expected," Mr Jones said.

Each business unit had to make its own case for how much of the software it should implement.

"Some businesses have non-SAP systems as their commercial system - pulp and paper is non-SAP, while the tissue and wood products businesses are full-suite SAP."

He said monthly reporting had come down from more than 15 days to less than three. Those standards had been maintained, despite the shift from six businesses to 33.

Mr Jones said there had been problems, particularly in the implementation of SAP's Advanced Planning and Optimisation (APO) module at Carter Holt Tissue.

The changeover to full-suite SAP for more than 500 users at 10 sites on both sides of the Tasman at the same time "was always going to be tough."



SAP, "to their credit, threw a lot of resources at it. They shipped a number of people from Germany to assist."

The module went live last July "and then got worse before it got better."

It was now performing acceptably for demand forecasting and production planning.

Mr Jones said the parts of Carter Holt that had been on SAP the longest were performing better on the system and shared services was delivering the benefits promised.

Sites that had installed the full SAP suite were better positioned for e-business, "because you can't put a front end on something which doesn't pull together the business behind."

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