Paying the price for Y2K

Sunday, April 01, 2001

Y2K - the switchover from 1999 to 2000 that had the potential to confuse computer software - cost LTV $58 million. That's twice as much as Y2K work cost at U.S. Steel, a much larger company.

In the end, like most companies, LTV didn't have any big glitches when the calendar ticked over.

But the company had to put on what spokesman Mark Tomasch called "a full-court press" to make sure that all its software and equipment would be able to cope.

That's because LTV fell behind on modernizing its hardware and upgrading its systems to a new package called SAP. Instead of one up-to-date system, LTV had three different, older computer systems, hiking the cost of safeguarding against the date change.

ZACH SCHILLER

The Plain Dealer

-- Anonymous, April 01, 2001

Answers

LTV spent lavishly on computer system that never panned out

Sunday, April 01, 2001

By ZACH SCHILLER

PLAIN DEALER REPORTER

LTV Corp. spent tens of millions of dollars - or more, some say - on computer systems that never worked out or contributed little to the bottom line.

An ambitious program in the late 1990s to install a system that would track the company’s manufacturing process never got past the pilot phase, costing the steelmaker a $37 million write-off in 1999. And the company spent $58 million to prepare for the Y2K date switchover, a figure inflated by delays in modernizing its systems.

LTV had inherited the computer systems of the three big steelmakers it had acquired: Jones & Laughlin, Youngstown Sheet & Tube and Republic Steel. While the software had been improved over the years, these systems were first installed in the 1960s and ’70s. Two or three decades later, they badly needed updating.

When the company came out of its first bankruptcy in 1993, spokesman Mark Tomasch said, it decided to "leap from where we were all the way to the front of the pack."

In 1995, LTV signed a 10-year, $350 million contract with Andersen Consulting, now called Accenture, to take over its data systems, handling the day-to-day work.

Soon after that, LTV decided to install "enterprise" software that would help control its vast operations. A lot of other U.S. companies were doing the same thing, many using the system of Germany’s SAP AG.

Creaky technology Just to prepare for SAP, Tomasch said, LTV had to overhaul its creaky computer and communications hardware, rewiring all its plants and offices.

Enterprise software, covering everything from accounting to production scheduling, allowed companies to knit their operations together and make better, quicker decisions. Someone in sales or finance could see instantly what inventories were or where an order stood in the production cycle.

SAP systems generally work well. Cleveland-based TRW Inc., for instance, uses it to oversee about a third of its big auto-parts operations.

However, SAP’s systems also are complex and can be hard to install, and they suffered some highly publicized failures in the late ’90s. The trustee for FoxMeyer Corp., a drug distributor that went out of business, is suing SAP and Accenture over a system the consulting firm helped install.

At LTV, even as work was beginning on SAP installation, the steel maker and its consulting firm also were trying to develop a new, separate data collection and software system to make a finishing plant in Hennepin, Ill., more efficient.

Coordinate the process The system was supposed to track orders, schedule production and coordinate the whole manufacturing process. It would be linked with the larger SAP software and tied into LTV’s other plants. After testing in Hennepin it would be installed at steel mills in Indiana Harbor and Cleveland.

Instead, the system was dropped at Hennepin and never installed elsewhere.

"Basically, what they did was make a mess out of the system," said Dave York, president of United Steelworkers of America Local 7367, which represents 550 workers at Hennepin. "We had to scrap the production system because the costs were horrendous. It never did work.

"They were renting every computer from [the consultants] for a ridiculous price ... $200 or $300 a month for each terminal. ... We had them all over the place. ... Just a few are left, what we really need."

Trying to tackle both the Hennepin system and the overall SAP work at the same time may have contributed to the problems. "I liken that to trying to do heart surgery and brain surgery at the same time," said one industry consultant. "The patient dies."

In general, LTV officials and outsiders agree that standard enterprise software isn’t well adapted to handle steel-manufacturing processes. The software was set up to handle widget-making businesses that track parts by number. There aren’t any parts numbers in steel.

"We did push the edge with some of the systems and software," Tomasch said. "In the case of Hennepin, it didn’t work." That brought the $37 million write-off.

He said overall SAP implementation cost $25 million. However, former LTV information-technology workers and industry experts say the full cost was a lot more than that. One knowledgeable observer pegs it at $300 million, double what he said was originally anticipated.

Some former LTV workers criticize Accenture’s efforts. They note that LTV rented one floor of a downtown office building for five years while the consultants set up the SAP system. They argue that Accenture employed scores of highly paid consultants to implement a system that didn’t come close to delivering on its promise.

Darienne Dennis, a spokeswoman for Accenture, said, "My understanding is that the project was concluded to the satisfaction of both parties."

LTV gives thumbs-up LTV officials say they’re happy with Accenture’s work. LTV has been using the SAP software for its financial, human resources and maintenance functions, and officials say it works well.

But after the Hennepin pilot project failed, LTV brought in another company, Dallas-based i2 Technologies Inc. Its software helps LTV juggle the work at the Cleveland mill to maximize customer service, cut inventories and run efficiently. It’s also being put into the Indiana mill.

LTV’s information system "does what’s required to run the business. It’s fine," said William F. Morgan, who just arrived in February as chief information officer after a 25-year career at Copperweld Corp.

And Tomasch said the company had to overhaul its systems. "It was difficult; it was time consuming; it was costly; but there was no alternative," he said.

The Plain Dealer

-- Anonymous, April 01, 2001