Philips claims ‘good progress’ on IT systems for organisational split

Splitting into two firms provides an opportunity for Philips to embark on a SAP rationalisation project, putting more software in the cloud and improving business processes with streamlined IT systems, but progress appears to be slow.

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Philips’ large-scale IT transformation project seems to be plodding along, with the manufacturer-come-technology firm tight-lipped on its live date.

The electronics firm is currently splitting itself into two separate entities: a connected lighting division and a health technology manufacturer, in anticipation of a public offering early next year.  

In a financial update, the electronics firm said it was “working on defining the optimal infrastructure and right perimeter for each business, including tax and legal structures, real estate footprint and IT systems”.

Earlier this year CEO Frans Van Houten said that new, streamlined IT would deliver £1.2 billion in savings, following a difficult 2014.

Now, the firm has reported that, as part of a wider business transformation programme, the new IT (including an improved CRM and digital channel) is "on target" to deliver 265 million savings this year, and eventually 1.8 billion in overhead reduction.

But the cost to separate will come in at around 300 to 400 million this year alone, the firm added.

Similarly to last year, Philips did not confirm when the new “integrated IT system” that Van Houten said would boost productivity by 1 percent would be in place.

A restructuring of the firm's global IT has been on the cards since 2012, when it signed a deal with Cognizant to help rationalise its sprawling estate.

Its legacy IT consists of 14 SAP systems with several instances of Salesforce.com including its Service and Marketing Cloud. The IT transformation will include moving its services, storage, compute, security, analytics, connected devices, cross-supplier service management and high-volume transport to cloud subscriptions, as explained by the firm’s technology transformation vice president on a blog on BT's website last year. 

Lean development methods

The firm is adopting software development methodologies in its wider product development and manufacturing processes to get products quicker to market, Van Outen said.

“Our Accelerate program continues to drive improvements across the organisation resulting in enhanced customer centricity and service levels, faster time-to-market for our innovations, strengthened quality and compliance systems and better cost productivity.

“In consumer, the deployment of Lean allowed the male grooming team to reduce the lead-time for development and launch of a new range of shavers by 30 percent. The team was able to simplify the end-to-end processes and re-use existing technology platforms. In Lighting thanks to a faster time-to-market, a new range of basic LED lamps with a price point below USD 5.00 was successfully launched for the NA market within only four months.”

Slow-down on hiring IT workers

Philips upped its temporary IT staff hires last year, but let go of 194 since last year, it confirmed. 

Innovating with APIs

Philips is an avid user of APIs, encouraging developers to use its platform, supported by API management provider Apigee, to create new products, like smartphone apps for its connected lighting line, for example, to sell to customers.