Owens & Minor: IT Modernization Effort Funds Itself

Interviewed with Rick Mears, by Bob Violino, TechWeb

When Owens & Minor, Inc., a Richmond, Va., distributor of medical and surgical supplies and a healthcare supply-chain management company, needed to move its business applications to a more cost-effective platform, it migrated its custom code to the Windows Server 2008 environment. By moving mainframe applications such as enterprise resource planning (ERP) to the Windows Server 2008 operating system, Microsoft SQL Server 2008 data management software and server-based hardware, the company created a much more cost-effective computing platform that provides agility and the ability to adapt to changing requirements.

We spoke with Rick Mears, senior vice president and CIO at Owens & Minor, about how this updated IT environment has opened up new opportunities for the company.

How can modernizing an application portfolio and platform help organizations build a more agile IT operation that supports rapid change?

Mears: The primary reason is as you create new products and services, to improve value to your existing customers as well as to enter new markets, if you to try to simply use your existing legacy technology for each new service or new product, it’s just not a workable strategy. On the other hand it’s not wise to implement new systems for each and every new business.

How is your company taking advantage of the modernization of its application portfolio and IT infrastructure?

Mears: We are not unlike many companies that are looking to build new, relevant businesses and services to further support our customers, and we need our technology to support those efforts. Our IT modernization strategy is [not only to] improve what we’ve done in the past, but to extend our capabilities beyond current markets. And in order to do that we are making sure, as we enhance our systems, that we don’t just implement a bunch of new stovepiped systems. We set out to update and enhance our suite of capabilities to support our entire enterprise consistently.

For example, one of the areas we are focused on is master data management. We look at all of our current businesses and new businesses that we are entering and we aim to have a consistency around customers, products, suppliers, pricing and even employees. Those are five areas where we want to have consistent data and not stovepipe data around the company. This gives us consistency around how we view those things, and we feel that’s core for us as a technology group. A risk of any business is to wind up with separate data stores for each business process or for each business unit or department. Our master data management approach how allowed us to avoid that.

We are also investing heavily in e-commerce, building Web portals for our customers and our suppliers to really create a deeper integration with them and to improve supply chain visibility. End-to-end supply chain visibility is so critical for us. Updating our IT environment to the Windows Server platform really set the stage for these efforts.

What are some of the other benefits you’re seeing from the IT modernization efforts, such as cost efficiencies?

Mears: One of the aspects of our approach that we’re most proud of is that it funds itself. It does require some capital investment, but it’s not increasing our operating expenses. The way we achieve that is through the operating expense savings that are generated by the new environment. We get recurring savings by migrating our customer ERP system off a mainframe platform. The Microsoft computing platform is significantly less expensive.

Also, we are shortening the time to market for new services and products. We can now launch many new services, such as a logistics business, in one quarter rather than in a year.

How does a CIO get buy-in from senior management, such as the CEO or CFO, for an IT modernization effort?

Mears: I think that one of the keys is that recurring operating expense for IT is always going to be scarce. One of the biggest benefits of our approach is that with these migrations we are going from a high total cost of ownership platform to a lower-cost computing platform. We are not increasing our recurring operating costs. Also, we need to diversify and create new products and services and enter new customer markets, and if your technology platforms support the necessary speed-to-market at no incremental cost, then that’s a pretty compelling approach. We demonstrated a business plan for doing this. Fortunately our management team understands the value of technology and is not just looking to take the operating expense savings to the bottom line. We understand how important IT is to our efforts to continue to innovate.

Does modernization help IT become more of an agent of change at your company?

Mears: It really makes it possible for us to come up with new, innovative services and products that we believe make us a better company and that can serve our customers better. This allows us to go from concept to reality much quicker and in a much more cost-effective manner.