Valero Energy, North America's largest refiner, has been on a fast growth track for the past decade, mostly through corporate buyouts. From 2002 through 2005 alone, the company almost tripled in revenue, from $29 billion to more than $82 billion; last year it reported $90 billion in revenue. Among its major purchases: the 2005 $8 billion acquisition of Premcor that added four refineries to its portfolio, for a grand total of 18.
But many of the companies Valero bought were themselves products of multiple acquisitions. The result was a hodgepodge of applications that Valero had to somehow interconnect and integrate with its core SAP R/3 enterprise resource planning system and mySAP business applications suite, which includes customer and partner relationship management as well as human capital management modules. This generally required the use of proprietary interfaces--software exchange points enabling applications to communicate with each other.
"I think one of the largest cost creators and work creators for the IT shops that I know of--and I've talked to a lot of different people--is interfaces," says Valero Senior Vice President and CIO Hal Zesch. "It's probably the largest single time consumer and cost consumer of any of the IT tasks."
It costs about $50,000 to $100,000 per interface for every five to 10 years of use, according to industry estimates, in addition to the people, time and money to support each interface, update it when there are system changes, and store duplicate data moving between systems.
On average, Zesch says, each application includes about 10 interfaces, which must be rebuilt nearly from scratch for even minor variations. And any time IT makes a significant change to any one system, it can break all the interfaces coming into and going out of that system, leading to a perpetual break/fix cycle.
"That is the challenge we have with these acquisitions," Zesch says. "When we saw that there were so many different systems, each requiring multiple interfaces, we said we had to get reusability for all these interfaces."