WITH MORE THAN A THIRD OF ALL CARS produced in North America using its electronics products, Johnson Controls (NYSE:JCI) has emerged as the world’s largest independent supplier of automotive seating and interior systems, including overhead systems, consoles, door panels, instrument panels and floor consoles. The company’s customers include BMW, Daimler-Chrysler, Ford, GM, Honda, Mazda, Nissan, Toyota, and Volkswagen. Today, the $18 billion company ranks 111 on the Fortune 500 list.

Like many companies, Johnson Controls responded to the increasingly competitive 90s by overhauling its business model and information systems to enhance efficiency. Spread over the globe, the company’s manufacturing plants ran on a variety of unconnected systems. Consequently, information flow was often slow and unreliable.

In 1998, Subhash (Sam) Valanju joined the company as its CIO, hoping to take advantage of the company’s enormity to cut expenses by using technology. During its 117-year history, Johnson Controls has grown not only in size but also in complexity. Valanju knew big changes were ahead. He had to get rid of legacy mainframes across Johnson Controls plants worldwide if the company had to cash in on its size and improve customer service. He successfully steered the migration of the company from a mainframe-based IT system to a distributed client-server based computing environment.

The Federated Model Strategy
The next goal for Valanju was to ensure that IT strategies were aligned with business strategies. He began by aligning the company’s business units towards a common IT strategy. He created a rollout plan called the “federated model.” The model intended to solve the IT conflicts and meet the technology needs of the company. It consists of five layers: infrastructure, application and systems, business process, knowledge and people.

The infrastructure (PCs, laptops, servers) is standardized throughout the company and divisional heads have no control over it. At the applications and systems layer, Valanju has setup a “de-proliferated system.” That is, divisional heads get limited flexibility to choose applications for executing a given functionality. However, divisional heads have flexibility in deciding the technology required for business processes, as they change depending on the business units and customer demands.

Luckily for Valanju, the model seems to be working well. His “federated model” has successfully brought in business process and cultural changes, which for most CIOs, is a trickier task. In the “federated model,” limitations of divisional CIOs at certain levels are visible and Valanju knows it. He recalls his days as Director, Information Systems of the automotive division at Rockwell Automation, “When someone is responsible for a division of the company, it is apparent that certain ideas don’t get a support. So my responsibility was limited in scope because lot of the treasury systems, corporate wide systems and IT infrastructure were outside of my control.”

Having learned the hard way, Valanju says, “A CIO has to have a business mindset rather than being tech-savvy. He should have the ability to comprehend technology and also be willing to take calculated risks on the technology that might change business.” For Valanju, the knowledge of business and technology go in tandem. He holds a degree in mechanical engineering from VJIT College in Mumbai, a master’s degree in industrial engineering from Illinois Institute of Technology, Chicago and a MBA from University of Detroit.

Technology implementation
Even though there have been downturns in spending across the industry, IT budgets at Johnson Controls have pretty much remained flat. With $250 million under his belt, Valanju has made sure that technology and its adoption are part of the company’s DNA.

For example, he understands the need for standardization in manufacturing environment and supply chain in order to provide managerial control and flexibility necessary to respond quickly to changes in the marketplace. And since the number of sites involved was dauntingly large, ease of implementation was of critical importance. Hence, Valanju chose QAD’s MFG/PRO manufacturing package. “QAD software has greatly improved our through-put and decreased inventory levels,” says Valanju. The company has seen its delivery time window, with key manufacturers, move from days to as little as two hours. In this short window, it receives order and delivers it to the supply base. Executing this task in a 24/7/365 cycle, along with a penalty clause of $10,000 per minute, calls for a creation of an environment where there is IT demand. There were seven email systems across Johnson Controls. Now the company has only one email system–Lotus Notes.

Similar standardization of technology at all levels has resulted in consistency of quality process required by ISO 9000 standards. Today, Valanju and his team are committed to Six Sigma. Not an easy task, but once achieved, the payoff is huge.

Streamling Costs
With a Six Sigma quality initiative underway, Valanju has explored several options for outsourcing the management of the company’s IT resources and services. His decisions have not only resulted in cost savings, but also improved productivity.

Today, much of the company’s IT management burden is taken care of by HP. This enables Valanju to spend more time addressing core business operations. “Our strategy is to outsource pretty much all components related to application support and development. However, we will never outsource our ability to control creation of new processes,” says Valanju.

Like many CIOs, Valanju says changes in staffing strategy has put him in a good position to manage IT budgets. Earlier, the company used to hire IT contractors. At one time, 70% of Johnson Controls’ IT staff were on contract, the rest being full-time employees. Now the ratio has reversed. Only 30% are on contact basis. Reducing the number of IT contractors has resulted in huge cost savings and increased IT worker productivity.

Outsourcing to India?
Like most of the Fortune 500 companies, Johnson Controls too is working with Indian IT firms. TCS, Wipro and Infosys have worked on embedded technologies for software that went into one of the Johnson Control’s products.

“Cost-saving is not the driver. We look at the qualification as to who is going to take us to our end game fast. If we are just doing release upgrade, we will ask the initial product vendors to do the implementation. If it is an already established release, which needs to be implemented across 275 plants, then we will opt for Indian players to carry out the same. Indian players are good at “repeatability”—that is, copying into multiple locations,” says Valanju.

Lessons Learned
Valanju recalls the famous “big bang theory” of his career as a CIO. “In the initial days I tried to launch all the ERPs at one time. It crashed. I tried that once and will never do it again,” he declares. Valanju also warns that CIOs should be careful while negotiating with vendors because they always undersell the capacity requirement of hardware. “You should multiply it by three to get to the actual capacity to run your business,” he says laughing. Managing expectation and drawing fences whenever required are two essential elements of a successful CIO, according to Valanju.

One wonders if Valanju ever looks back after he has decided to go with a particular vendor. “It is like getting married,” says Valanju, “There are some good days and some bad days. But you have to make the decision for the long haul. You have to overcome the relationship issues because there are always going to be resource conflicts, priority conflicts and so forth. You just work through them. No partnership is easy. There are always problems. But in the long run is it tending towards the right direction? That is what I focus on.” It is interesting to note that Valanju has not said “goodbye” to any vendor yet.

Going Forward
Valanju does not see all his problems being addressed. “ There is lot of unstructured data that exists within the company. How do you capitalize or interpreting those unstructured information?” he asks. According to him, only 20% of the total data in the company is structured. And most of the ERP systems or traditional systems are designed to address only structured data. “The enterprise software vendors haven’t caught on with solving unstructured data. We are working with a Florida-based startup, Intelligenxia, to tap the unstructured business critical information, which we believe leads to knowledge creation,” he says. He also hints that Indian IT companies can take initiatives towards this end.

Valanju also sees strong willingness among his workers to learn Internet technologies as the company beefs up its efforts in web-enabling all its applications. “Internet is the only way forward. It is our future,” he proclaims. The company is relying heavily on portal technologies to enable its employees to work from anywhere, anytime, anyplace.