2002 CIO 100: The Integration Imperative

Back in the not-so-long-ago, when Internet-driven capital still flowed and new applications sprouted like dandelions on the corporate lawn, it took uncom-mon vision to pursue integration as a core business strategy. Many companies put new ERP, CRM and other software and systems in place to feed their growth and solve their immediate business problems, but few had either the time or the inclination to put much thought into how they would all work together in the future.

Sure, CIOs invested in tools that helped one application peek at the data in another. Lots of IT executives cobbled together systems and made business happen one way or another. But precious few could say they were integrated, with a big-picture view of their companies, customers and corporate collaborators.

That was then. Now, as you will see in this, our 15th annual CIO-100 issue, CIOs and their executive suite colleagues are treating integration as a business imperative?not as one possible strategy among others but as the only possible strategy. Today, integration is not a choice?it’s an obligation.

One Company, One Customer View

That’s certainly the case at MetLife, the $32.5 billion financial services conglomerate that was under pressure to generate and demonstrate payback on all of its many recent acquisitions. The mandate to create a single customer view?so that a call center representative could see a consumer’s retirement account, and health and auto insurance policies?came directly from Chairman and CEO Robert H. Benmosche. “With big companies like MetLife, you often don’t get treated as a single customer of the organization,” explains Tony Candito, CIO of MetLife’s individual business unit. By next year, they will. (See “Economies of Scale,” Page 46.)

At MetLife, executives don’t see integration as just one project or one process. Rather, it’s the backbone of the business, the core strategy. That high-level view is consistent throughout the list of CIO-100 honorees.

In “Strategic Alignment” (Page 56), companies such as Staples and Dow Chemical pledge allegiance to long-term integration goals. Staples, for example, has integrated all its sales channels so that a shopper can visit a kiosk in aisle A, see what’s available both in store and online, pay for it there and pick it up or have it delivered. And there’s a reason to afford customers all those options: revenue. “Our most profitable customers are those who use the full range of the way we do business,” says Staples CIO Paul Gaffney.

Taking the Lead

Dow, famous for its early-adopter ERP implementation close to a decade ago, has used that experience as the foundation for almost all its IT investments and as the technology enabler for its growth strategy. Dow’s decision to commit to SAP’s R/2 as an ERP standard bore fruit when it took only one year to integrate its ERP applications with Union Carbide’s after their 1999 merger.

Mergers, of course, provide powerful impetus for the integration imperative. It takes a deep understanding of both companies’ IT infrastructures and their business priorities to execute a successful integration across differing corporate cultures and between disparate systems. It also takes someone with the leadership skills to put that understanding to good use.

In “Mergers and Acquisitions” (Page 66), executives from companies such as oil giant BP and Royal Bank of Canada address the responsibilities of both parties involved in a merger. When BP and Amoco partnered in a $48 billion merger in 1998, three months of negotiations over how to reconcile the two companies’ IT strategies and systems (BP outsourced everything from application development to the help desk while Amoco kept everything in-house on a gigantic SAP platform) had achieved precisely nothing until Phiroz P. Darukhanavala, BP’s vice president and CTO, made the critical decision to outsource most IT operations and retain only the core of Amoco’s SAP ERP system. Even in a marriage of equals, someone must ultimately take responsibility for forging agreement.

Show Us the Value

Integration can bring a company closer to its customers and business partners. But integration on this scale costs money. Lots of money. And money is, in fact, one of those funny little things that people will argue about. “Return on Investment” (Page 74) shows how three CIOs successfully won their in-house arguments by proving that the ROI on their respective integration efforts justified the required investments.

For example, bank holding company National City replaced its one-at-a-time, or point-to-point, method of linking legacy applications with a reusable enterprise application integration tool. The cost: about $10 million. But the implementation will mean Executive Vice President and CIO James Hughes can save his bank almost $2 million on staff programming costs alone, not to mention providing it with new capabilities for developing fresh products, thereby generating more revenue.

Reducing the need to pay programmers for customized coding is a vital part of any successful integration strategy. But unless the strategy can create value by enabling new products and services, it will remain tactical.

“For us, integration is about [connecting] with our main customers so we become invaluable,” says Irving Tyler, CIO of Quaker Chemical, in the roundtable discussion “United States of Integration,” on Page 82. “Then they are willing to work with us on the basis of value, as opposed to price.”

That kind of approach will separate the successful companies of the future from the also-rans, says Marco Iansiti, a Harvard Business School professor who served on an advisory panel of experts for the CIO-100 Awards. It comes to this: Integration is not an option.

“Business is becoming the art of managing assets that are largely outside your direct control?a broadening network of suppliers that provides you with what you need. So all you have left is the integration combination that makes the business run,” Iansiti says. “If you don’t integrate now, you’re going to later, so you might as well think about it now.”

And if you don’t, chances are there won’t be a later.