Rio Tinto Group is a multinational metals and mining corporation headquartered in London with a management office in Melbourne. The Group is a world leader in the production of many commodities including aluminium, coal and diamonds, as well as significant operations in refining. The Group operates on six continents but is mainly concentrated in Australia and Canada.
Like most major mining companies Rio Tinto has grown through mergers and acquisitions.
For IT folk, mergers and acquisitions brings a bevy of disparate applications, server platforms, networks, telecommunications systems, vendors, and the like.
Not only does this bring an administrative burden, but it places complexity in the path of collaboration, with users, files and folders, applications, calendars and so forth spread across many different environments. The end result is duplication of data, inaccessible data, complexity of management, and generally duplication of effort and of expenditure.
Rio Tinto has announced its intentions to modernise and consolidate its various Enterprise Resource Planning (ERP) and information management (IM) applications into a public cloud system. This rollout and the ongoing management is being handled by Accenture.
This new model will migrate the core enterprise systems off-premises and onto the cloud. As well as managing the application landscape and related infrastructure the agreement also sees Accenture transforming the global service desk and site support functions.
While the commercial terms of the deal have not been disclosed Accenture states it incorporates "consumption based pricing to ensure costs are fully flexible and in line with business demands."
This strategy and comment highlight advantages of the "cloud", which while to some a contemporary buzz word, is a serious strategy for companies large and small. In this modern era executives would do well to consider what their core business is. Just as a business chooses to rent premises rather than deal with property management, so too companies need to consider if they are in the business of owning and administering server hardware. Given the commodotisation of infrastructure and ancillary services it can be a sensible business choice to use hosting services to remove capex costs, to transfer the burden of infrastructure management and uptime to another party, and to only pay for services used, allowing for both expansion in times of need and contraction in times of less need.
The challenge for IT departments is how to stay relevant, and the answer is that the traditional IT dept. must evolve to focus instead on business problems rather than "keeping the lights on." This is a challenge and transformation that unfortunately not all IT folk are capable of taking on.
Rio Tinto's Group CIO Simon Benney stated "Rio Tinto is on an ambitious journey to a world-class IS&T delivery model that is innovative, adaptable and cost-effective, fully supporting our business priorities and group operating model. We selected Accenture to help us manage this transformation based on its global delivery capabilities, its vision for the intelligent business cloud and its ability to support our digital transformation programme."
The move will affect all Rio Tinto's employees globally. Public information records the company as having 66,331 employees in 2013.
iTWire asked for the salient information which CIOs worldwide are keen to know: how many applications are being consolidated? How long will the project take? What was the cost of IT services before consolidation and move to the cloud, and what is the expected cost afterwards?
Unfortunately both Rio Tinto and Accenture stated they were not in a position to disclose this information and that it was commercially sensitive.
Based on my own experiences with mergers and acquisitions and migrations to a single disparate platform I estimate Rio Tinto may be currently spending 2% of operating income ($US 11.3b) on IT infrastructure, or $220m annually. From my own metrics of cost savings I have seen achieved I think it viable Rio Tinto could be looking at a reduced spend of $137.5m pa after the transition is completed.
These calculations are my own only and are not supplied by Rio Tinto or Accenture. I have based them on my own experiences, but they may not reflect Rio Tinto's circumstances. I present them for information only and they should not be relied upon for any financial decision-making.
Pierre Natnerme, Chairman and CEO of Accenture, states "This project redefines the delivery of application and infrastructure services. This solution will allow Rio Tinto to smartly connect its infrastructure, software applications, data and operations capabilities in order to become an agile, intelligent, digital business that can better navigate the commodities cycles."