Northrop Learns and Grows with IT Integration Project

You know you've done something right when you can apply the wisdom gained from one project to save time and money on the next. That's the experience Thomas W. Shelman's team at Northrop Grumman Corp. had when it completed the huge IT integration project necessitated by the acquisition of $5.1 billion Litton Industries Inc. in 2001.

Considering Northrop Grumman's growth-through-acquisition strategy, that was a pretty important outcome. Since Litton, Northrop has acquired $2.6 billion Newport News Shipbuilding and $10.7 billion TRW. According to Shelman, it has integrated those IT systems in half the time it took to do the Litton integration.

"We made sure we captured processes of integration so we could repeat them for future acquisitions," says Shelman, CIO at Northrop. "It is essential for the company to look and act like one company, have efficient and secure access to computing resources from anywhere, one standard network protocol, calendar and desktop image and one way to collaborate."

During the Litton acquisition, Shelman had more than that hanging over his head. Shareholders were promised a high level of savings, particularly from IT. But his group did better than expected, delivering $58 million in annual IT savings, expected to grow to more than $600 million cumulatively over the next 10 years.

But even though the $12 million project came in on time and $4 million under budget, it wasn't all smooth sailing. For one thing, Litton was a big pill to swallow. The company had 26 separate IT entities supporting four businesses and 15,000 users at 64 sites.

Shelman's team had to integrate those separate groups into one centrally managed shared service, migrate Litton's Active Directory infrastructure to its own corporate IT resource and move eight e-mail environments to a corporatewide Exchange system. The group also consolidated Litton's 31 separate Internet points into three and two Litton data centers into the primary Northrop data center.

The biggest savings came from centralizing corporate buying. At Litton, each business unit purchased IT equipment without taking advantage of corporate purchasing agreements. Shelman's group negotiated new sourcing contracts based on projected volume and Northrop's accepted hardware and software standards. This not only helped leverage Northrop's buying power but also cemented which products the technical staffs would support.

Shelman says the entire organization now uses standard networks, office products, network security and routers, as well as the IBM WebSphere application integration layer. In addition, it manages suppliers, including SAP as a predominant supplier, with a corporate-level buying agreement.

"We told people, 'Here are the things you get a choice on, and here's what you use that's standard,' " Shelman says. He acknowledges that he met with a tremendous amount of resistance. "It's not easy telling someone to rip out their homegrown ERP system that they've used for decades, but you have to empathize and show people why you're doing it," he says.

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Thomas W. Shelman, CIO, Northrop Grumman Corp.
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Today, the cost of IT as a percentage of sales is 2.5%. That's down from 3% in 2000, before the Litton acquisition.

And savings aren't the only outcome. "The acquisition of a company like Litton brings more than just projects and revenue but relationships and trust that will continue to result in an increasing share of federal IT contracts," says Winn Hardin, an analyst in the aerospace and defense practice at Frost & Sullivan. "Northrop's experience in integrating large acquisitions has served it well in this case."

There are many lessons that Shelman's group will apply to future acquisitions. One is application scaling. While products such as Exchange readily scale from 40,000 to 120,000 users, "the way we govern the infrastructure had to change several times based on the magnitude of the situation, and that was not always a linear process," Shelman says.

Second: Win over the leaders. "We found that people always align with the management directly above them," Shelman says. He actually hired a consultant to help with what he thought was an employee-engagement issue. "But once we shored up management, the problem went away," he says.

Third, Shelman says, you can't communicate too much. "Just because you say something, doesn't mean they processed it and can articulate what you said." What might seem like resistance could simply be a lack of true understanding, he says.

Brandel is a freelance writer in Grand Rapids, Mich. Contact her at mary.brandel@comcast.net.

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Northrop Grumman Corp.

www.northropgrumman.com

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Business: A $25 billion global defense and IT company with seven business sectors that offer products and services in systems integration, defense electronics, IT, advanced aircraft, shipbuilding and space technology.

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Project champion: Thomas W. Shelman

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IT department: 23,000

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Project payback: IT delivered annual savings of $57 million. That figure is expected to grow to more than $600 million over the next 10 years.

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