Babcock ready for its next round of acquisitions

Posted on 17 Oct 2012

UK engineering group Babcock has replaced its IT infrastructure in a project that will make it easier to acquire companies.

Simon Parker, CIO at Babcock, said that there are “multiple areas” where it is looking to takeover new companies to absorb skills and technologies into its business to raise the barrier to its markets.

“There won’t be any big acquisitions but we are reviewing relatively small, niche players that fit into our strategic future,” he stated.

Mr Parker revealed that Babcock spent just over £20m on its nine-month IT project, which includes both design and implementation while noting that this is “a lot less than the hundreds of millions our competitors are envisioning because we had money to spend during the recession.”

As a result, Parker says that the future cost of acquisition will be “much lower” as companies will now be absorbed into the Babcock group rather than operating on separate systems and operating in different ways.

He admits that its £1.3bn takeover of defence services VT Group hadn’t realised business synergies until the IT infrastructure replacement.

Just nine months ago the engineering group had a federated IT approach with different systems for different divisions of the business.

Its IT infrastructure was a reflection of the company’s recent acquisition strategy, which increased annual revenue from £400m to over £3bn in the last three years, and the disparate natures within the group.

Tim Welburn, IT director at Babcock Marine, explained that the company “had five software versions from ERP software provider IFS, and three other big ERPs,” to support its numerous supply chains and divisions operating in different sectors.

It has now implemented a singular platform for the whole of Babcock, reducing the amount of vendors it was using and slashing the number of separate applications from 4,500 to fewer than 1,000.

“The way we will realise synergies is by having a singular IT system,” said Mr Welburn. “We now have the ability to ability to absorb companies into our system and say this is the way you’re going to do procurement, this is the way you’re going to do manufacturing, this is the way you’re going to do contract planning and HR.”

He describes Babcock as a series of islands operating on their own prior to the rip and replace IT infrastructure project that now allows it to move best practice around.

Parker adds the company “needed to get more out of some acquisitions,” noting Babcock’s  acquisition of Strachan & Henshaw from the Weir Group in 2008 for £65m, which wasn’t moved onto the same business system until the single platform had been set up. “You can’t just buy a company and say here is a sales target go and do it, you need to help them do it,” he adds.

IT is still seen by many manufacturers as a block on innovation rather than an enabler but that can be explained by the still large amount of companies using old systems that have become entangled as customisations have been made as well as mergers and acquisitions.

Surrounded by CIOs from the world’s top companies, Welburn was preaching amongst the corridors of the converted at the IFS conference in Gothenburg, Sweden.

Babcock’s new IFS 7.5 software has allowed the company to do more from more places, while only eight months ago staff logging in at one of its sites to work on an application was difficult as everyone was working on different systems.

Before there were multiple WANS and domains, with no unique identifier, so people had to move to certain areas of the site to do something as simple as extract data. Now the data moves and not the person.

Babcock has transformed its business from one that has three or four different ways of doing things, with procurement hampered by fighting systems, to one with standardised operations streamlining one way of doing MRO and one way of doing project management.

It will encompass any company that it goes on to acquire into this and not rack up the cost of designing and attaching systems to allow firms to continue as they are but connect up to Babcock’s once tangled web of IT systems.