Walgreens CIO Timothy Theriault has a huge task ahead of him: cutting $1 billion in operating costs at the nation’s largest drug retailing chain. His role becomes prominent in the wake of Walgreen’s acquisition of Boots, a British pharmacy chain.
As Forbes.com reported, “Walgreens is attempting to cut a staggering $1 billion from its operating costs, and IT will play a major part. Costs will be slashed and efficiency improved across a number of major areas including procurement and the supply chain, store planning, loyalty schemes, and e-commerce, all of which have a huge involvement from Walgreens’ and Boots’ IT departments.”
Walgreens told its investors that the merger between the two pharmacy giants, creating a first international company of its size, would not be completed until 2016. That gives Theriault two years to identify the $1 billion in savings against an expected $7.2 billion in annual revenues.
The Forbes piece hints that Theriault might be up to the challenge. The article says, “At Walgreens, Theriault’s title has been chief information, innovation and improvement officer, and he has focused much of his last four years there on how to ‘reinvent cost structure’, according to Walgreens’ own corporate website. This includes consumer facing and business-to-business relationships, and ‘centralizing patient health information and developing capabilities for payers and providers to view patient data.’
“Theriault has spearheaded extensive technology change at the company, reorganizing its IT team and focusing efforts on big data analysis to better understand customers (in fact both Walgreens and Alliance Boots widely use similar SAP data analytics tools). He has also spent extensive time working to improve e-commerce and mobile commerce, and integrating new in-store digital terminals.”
TechTarget.com offers some advice for Theriault based on suggestions from Forrester Research. The article says, “… for CIOs, mergers and acquisitions mean rough weather ahead, according to Forrester analyst Alex Cullen, author of “Mastering M&A: The CIO’s Game Plan.” CIOs need to start planning an integration strategy as soon as they have knowledge of the deal, with a goal of being ’90% confident about the IT plans by the date of the deal’s close,’ he said.”
That’s an interesting statistic. CIOs need to be almost 100 percent up to speed on the integration plans but there has to be room for flexibility. After all, there are going to be changes with any merger.
Forrester suggests, according to TechTarget.com, “Once the deal is closed, successful CIOs will make integration their top priority, Cullen said. “This is the obvious point that people most often overlook.”
Here are four tips for CIOs dealing with mergers.
- Be brutally honest about jobs. CIOs need to quickly and clearly state how staffing decisions will be made. Identify which positions and staff members to keep and ways to retain them.
- Move quickly to get the low-hanging “savings” fruit. That means consolidating data centers and renegotiating software licenses and vendor contracts to prepare for a larger user base.
- Drive business decisions away from feature-by-feature comparisons. Application rationalization is critical because the cost of redundancy is so high and because business process integration requires a single applications set. The big insight? CIOs must help executives see that “the shortest path to synergies may be to use as little as possible from the acquired firm.”
- Pick one firm’s set of processes. Roll those out to the other firm’s staff. Process consistency is the hallmark of a mature IT organization. It’s also an important element in how business perceives IT.
The advice works at mergers from companies the size of Walgreens and Boots all the way down to small businesses of 5 employees. Of course the latter may not have CIOs but that doesn’t mean your advice may not be sought out.