The Subsidiary Sandwich

The Subsidiary Sandwich

CIOs in subsidiary offices of global corporations often report to both the local CEO and the international CIO. Serving two masters can be liberating or a liability. A look at the chance and challenge of running a subsidiary’s IT

Systems on the Move

Scott Allen is CIO for rental car business Europcar Asia Pacific. The company is the master franchisee for Paris-based Europcar, and as such a completely separate entity. Allen has a good relationship with Europcar's global CIO but it is very much arms-length. Although being a franchisee means that some information systems are non-negotiable — customer-facing front ends and online branding, for example — the back-office systems can be quite different. That is largely due to the radically different economics and markets at play in different parts of the world.

Europcar Asia Pacific was bought by a venture capital firm in late 2004, and shortly after that Allen visited Europcar head office to see whether its information systems could be transposed to Australia. If he had adopted the system used in Paris his business would have been 100 percent integrated. "But we didn't go that route," he says. "partly because of cost, and also because they are in a very different position in the market. They are very corporate oriented customer-wise, while we are very leisure oriented. There would be a benefit from sharing more, but the cost of providing robust access to their information systems with industrial strength delivery was just too high."

It is something that Allen believes he will revisit in the next 18 to 24 months as business grows in this region, but for the present a third-party car rental application running on computers in Melbourne underpins the regional information needs of Europcar. "Our application is rather simple compared with that in Europe," he acknowledges.

It also has to be considerably less expensive. So for example where Europe may run parallel information systems and hot site recovery, in Australia, "multiple site redundancy is to a large degree overhead until the building burns down". It is a question of horses for courses, and it makes more sense for Allen to make such decisions given his understanding of the local market, rather than be dictated to by the Paris-based Europcar CIO.

However, he believes that as far as the information systems of the regional sub-franchisees are concerned, it is better if he does dictate what they use. Again it is a question of economics and access to skills.

Allen says sub-franchisees will be provided with telnet access to the Australian host information system, which will keep their costs low and help ensure the integrity of the information system. "The biggest strength of our system is that the booking is confirmed on the spot and therefore you need a centralized or heavily integrated multiple-node environment," which is currently out of the economic reach of fledgling sub-franchisees.

All CIOs interviewed for this article stressed the need to take account of local conditions — rather than impose what might be inappropriate technology — is paramount in international organizations.

They confirm significant advantages if the grunt work of selecting technologies and nutting out procurement deals is centralized, as long as the technologies selected make sense for the local business conditions. And not having to manage day-to-day operations can be liberating, freeing subsidiary CIOs to focus on locally strategic IT, as long as global head office allows them the necessary freedoms. The lot of the subsidiary CIO remains a curate's egg.

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