By Peter High, published on Forbes
The integration of a major acquisition is the bane of the existence of many executives. Chief information officers have special challenges during such scenarios, since, after all, they must think about the people, processes, and technologies that must be integrated. This is an enormous amount of change to usher in.
When Steve Phillpott became CIO of $19 billion revenue developer, manufacturer and provider of data storage devices and solutions, Western Digital less than two and a half years ago, the company was nearly a third of its current size. With the acquisition of HGST in 2015 and the acquisition of SanDisk in 2016, there was no avoiding the fact that this would be a heavy lift for Phillpott and his colleagues. This was all announced in his first months on the job.
Phillpott noted that across the technology stacks of the three companies, in most areas, two-thirds of employees would be impacted, as the “winning” solution would be named. Phillpott recognized this as an opportunity to choose best-in-breed solutions across the technology portfolio. The mandate for change that any integration brings about would be a boon.
This would lead to the integration of more than 3,000 applications and would test the company’s change management practices, but Phillpott and his team have made enormous progress, as he notes herein.
Peter High: You are the Chief Information Officer of Western Digital. In its current generation, Western Digital is the combination of three multi-billion dollar organizations: Western Digital itself, the 2012 acquisition of HGST, and the acquisition in 2016 of SanDisk. I know you took an interesting approach to integrating these companies. Please explain.
Steve Phillpott: We integrated three large multi-billion dollar, Fortune 500 companies into one future Fortune 150-ish company. You are looking at integrating systems, integrating processes, and integrating technologies. As we started on this journey, this integration became a great opportunity to transform the company. By transforming the company I mean looking at those applications systems and processes that we have today, thinking where we want to be in a couple years, and starting to lay the foundation for that journey.
Consider ERP as an example. Across the three legacy sub-companies, we had three different ERP systems. Going forward, we could have picked any one of the three. In a typical acquisition where you have two companies; one large company, one small, it may default to the larger company’s ERP. Two like-sized companies integrating together, you may flip a coin, or you pick the best one and go forward. With three, it provides an interesting dynamic because, at a minimum, two-thirds of the company are going to have to go through change.
Our thinking was if two-thirds of the company are going to have to go through that massive amount of change, why should we not look at a newer, best-in-breed solution and have the entire company go through that change. What that does is it allows us to transform a foundational application that will support us as we grow to $20 billion, $25 billion, and beyond. It became a great opportunity to go through and rebuild processes and applications that we knew would not scale. We were able to revisit chart of accounts, revisit cost centers, and revisit the reconciliation process with an eye to the future and a focus on ensuring those processes would support us as we grow past a $20 billion company.
High: You have had to rationalize around 3,000 applications. Could you share how far you have come in that process, as well as what learnings you have had?
Phillpott: We had roughly 3,000-plus applications across the three major companies, and then we added a couple more acquisitions after that, which added more applications to the mix. I would say we are still early in the journey, but we have completed some major activities and 2017 was a very productive year for us. We focused on getting a lot of the collaboration and communication tools correct. Communication tools allow for the flattening of the organization, which is increasingly important as you are trying to go through these integration activities.
The speed at which companies can effectively collaborate is essential in helping move these integrations forward and trying to harmonize the processes in the system. The other interesting thing about focusing on those collaboration and communication tools is it also sets us up well for future M&As. Once we get those in as we move forward and have more acquisitions, we can bring them into the mix much quicker. We determined best-of-breed technologies across a variety of communication and collaboration tools.
Globally, we have everybody on the same email, the same file sharing around Box, the same intranet, Jive, WebEx, Jabber – those core collaboration and communication tools. If you look beyond those initial communication and collaboration activities, we have started to migrate many of the legacy applications. Now we are on a global Human Capital Management system which we consolidated with our CRM. We consolidated on a global ServiceNow instance which was interesting because that is another area where we try to get everybody’s information into one area, but it is diverse in terms of what activity we need to help the end users with.