Waste Hauler Trashes The OldWaste Hauler Trashes The Old

When complete, Waste Management will have deployed dozens of enterprise systems around operations, customer relationships, finance, and corporate management. Ultimately, the new network and applications will let the company reduce its overall spending on IT.

Companies the size of Waste Management typically spend 3% to 4% of revenue on IT, Macy says, but he's looking to drive that down to 1% at his company. Already, the overhaul appears to be helping Waste Management's bottom line. In October, it reported that third-quarter net income was $231 million, compared with $226 million a year ago on an adjusted basis. The increase, while modest, came even though revenue held flat at $2.9 billion. During the first nine months of 2002, Waste Management reduced its selling, general, and administrative costs by $7 million.

Smith attributes the lack of revenue growth to the overall sluggish economy, but even that has provided an upside for Waste Management, he says. The downturn in the IT industry has enabled the company to build out its infrastructure for half of what it would have cost at the height of the tech boom, he says. Major vendors are all too happy to provide heavy discounts to get a piece of major projects.

Still, some observers believe the company's massive IT overhaul is risky. Amanda Tepper, an analyst with J.P. Morgan Chase Bank, says some of the company's competitors are reaping as much benefit with less ambitious, and less expensive, IT projects. Republic Waste Services recently upgraded systems such as route optimization on a department-by-department basis but decided against connecting everything via a big ERP project. As a result, Republic Waste is spending millions less than Waste Management, she says. "The jury is still out on whether the extra money that Waste Management is spending will help them compete more effectively," says Tepper, who holds a neutral rating on the stock.

Despite the complete overhaul of Waste Management's business processes, Macy says the company decided against bringing in consultants to help manage the project. "Their folks aren't necessarily better than ours," he says. The sheer complexity of the undertaking, he adds, weighed against using outside personnel lacking an intimate understanding of Waste Management's business operations. It's important that there's a continuity of process flow among Waste Management's various areas, Macy says. "Consultants would have wanted to work in silos."

It's been exciting to help drive change at a company that was ready to welcome it, Smith says, and in which new CEO Myers was a strong advocate of these initiatives. "We've not had a lot of pushback," Smith says. "Even when you give people a basic product [to do their jobs better], they're thrilled to death."