How CIOs Unravel IT Systems After a Business Divestiture

IT organizations devote decades of sweat to integrating corporate technology systems, wringing out every efficiency, leveraging every ounce of scale and seeking every bit of synergy their technology can offer.

Until, one day, they must do the exact opposite.

Corporate divestitures are on the rise. Nearly three-quarters of 148 executives surveyed recently by Deloitte said they expected to attempt divestitures between 2013 and 2015. When a company sells part of the business, IT is charged with systems de-integration.

Untangling those complex systems is every bit as critical as the years of integration were. But that technology parsing has to happen in a fraction of the time and amid great uncertainty.

Last March, oil company Hess announced it would divest all downstream businesses to focus on exploration and production. Then-CIO Jeff Steinhorn had to unravel the corresponding IT. “Over the past 25 years, IT has tried to tie things together,” Steinhorn says. “What we had to do is take that all apart.”

Making matters trickier, Hess didn’t plan to peddle the downstream business as a single unit; it would be broken up and sold as separate units. IT had to begin systems separation not knowing what might be sold to a private equity firm, for example, and what might be sold to a competitor, and each scenario carried different technology implications.

Unknowns for the Staff

Hess IT focused on the most likely scenarios, moving the hundreds of applications and terabytes of data associated with the energy marketing business into the cloud. Regardless of who the buyer was, moving the systems to a neutral environment would enable Hess to “turn over the keys,” says Steinhorn.

The team also had to figure out how to split up a single instance of SAP, which was used by all downstream businesses but which a buyer might not want to keep.

At Axalta Coating Systems, a company sold by DuPont to the Carlyle Group last year for $4.9 billion, CIO Dru Rai is paring down 500 applications to 280. The work has been going on nonstop for more than a year.

“Almost 90 percent of IT and 400 individuals outside the corporation are engaged in the transition,” says Rai. “That’s all we do right now.” The business can get impatient. “Sales, marketing and operations moved on within a few months. They want new IT projects,” says Rai, who was also involved in GM’s divestiture of Delphi Automotive and GE’s sale of Momentive Performance. “Managing expectations is very important.”

Divestitures are hardest on IT staff. Like the corporate systems, they don’t know where they’ll land. “It’s emotionally draining and exhausting for CIOs and their people,” says Rai. Axalta, for example, will need IT employees with new skills, including business and customer savvy and knowledge of customer applications.

Under DuPont, the team was largely focused on managing outsourced IT operations, he says. Rai acknowledges that even a CIO’s fate is unclear in these circumstances.

As the global CIO of Hess, whose job was leveraging common technologies for upstream and downstream systems, Steinhorn knew his role would become obsolete. (He is now the CIO of Johnson & Johnson Consumer Products.) But he acquired some new skills. “You have to embrace uncertainty,” he says, “and get comfortable with being uncomfortable.”

Stephanie Overby is regular contributor to CIO.com’s IT Outsourcing section. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.