When David Guzmán took over the CIO position at Owens & Minor in December 2000, he found that he had joined a company already well on its way to revolutionizing its business through technology.
The nearly $4 billion healthcare distribution, supply chain and logistics company in Richmond, Va. had begun a rapid adoption of customer-facing Internet applications in 1999, under the leadership of its chairman, Gil Minor III. The result of the company’s internal application development led to an Internet-based data mining tool and a data warehouse called Wisdom, an extranet exchange Internet portal called Owendirect, through which 92 percent of the company’s total business orders are now processed, and several cost and asset management tools to allow Owens & Minor customers to predict what products they would need to stock. The new applications improved Owens & Minor’s financials by nearly $2 billion.
“I give credit where credit is due,” says Guzmán. “[Minor] invested in the future of the company. The company thought long and hard about what the issues are that our customers are facing and how can we solve them.”
But with the new applications in place, Guzmán quickly realized that his task lay in updating his company’s own back-end infrastructure to handle them, with an information technology staff of only 10 people to tackle the problem.
“The back-end systems, the order management, the warehouse management systems, etc., it’s all on technology that’s 15 years old,” says Guzmán. “We needed to modernize our systems from the old alphabet soup for the new systems.”
Guzmán found that Owens & Minor’s network not only included dated network infrastructure, but even systems that are no longer supported by the companies that provided them.
“Our contracts and pricing system is a very complex rules-based system that was originally created using the Knowledgeware tool, from a company which no longer exists, and the code was developed on OS/2, which is an operating system no longer supported by IBM,” says Guzmán. “We have this code base that is the heart and soul of our organization, on a platform that isn’t supported, using a tool that is not supported, and that’s unacceptable to our company.”
While the company considered purchasing an enterprise resource planning (ERP) system, Guzmán believed that a lot of business processes that Minor had automated, that were particular to its business, would not come with an ERP system.
“I was looking for a way to modernize without coding by hand, and we did think about that and outsourcing, but we came across a solution I call the sausage grinder,” he says.
The “sausage grinder” is actually called RescueWare, by Relativity Technologies Inc., of Cary, N.C. RescueWare converts Cobol code into Java, C++ and VisualBasic code.
“You put in the old Cobol code, VMCS, etc., and out the other side comes clean product,” says Guzmán. “Now we’re able to rescue the legacy code and modernize it, while keeping all the information and the “gold in those there hills.”
Even with the RescueWare product, and a three-year timeline for the completion of the project, taking on the task of updating its legacy network would be impossible for Minor without the outsourced assistance of Perot Systems and IBM, according to Guzmán.
Owens & Minor currently has 70 IBM employees managing its database operations, while 140 people from Perot Systems operate in the application development area, including updating the legacy system utilizing the RescueWare system.
While Owens & Minor’s relationship with Perot Systems stems from 1998, before Guzmán’s tenure as CIO, he still feels that Perot and IBM have greater resources to throw at a problem than he would or could maintain as part of his own staff.
“We don’t feel that we can get all the resources necessary by ourselves,” says Guzmán. “With Perot we can tap into 10,000 people they have working with them. And IBM is more than that. It gives us an enormous amount of flexibility of people to get on a problem at a time.”
Guzmán also feels that Perot Systems’ business strategy makes it a good fit with his own company.
“What we do is we retain control over the architecture; the agenda for what we are going to work on and the change management process, etc., and then the actual work is done by Perot,” he says. “Their culture fits our culture, in terms of ethics and hard work.”
Guzmán is considering expanding Owen & Minor’s current outsourcing relationship with Perot Systems to HPS, a joint venture between HCL Technologies and Perot Systems, located in Noida, UP, India.
“We are looking at some off-shore resources,” says Guzmán. “[Perot] has a relationship with HPS in India that we are looking very hard at now. It’s certainly the case that those resources are of very high quality and attractive rates and have a wonderful work ethic.”
Based on his experience rebuilding a modern back-end infrastructure and utilizing outsourced resources to accomplish it, Guzmán warns that some organizations think “it’s important to have a CIO that understands business, but does not necessarily understand technology, and I don’t agree.” Says Guzmán: “A CIO has to understand both. It’s very important for a CIO to have a clear vision of where technology is going and how the business systems that he’s responsible for are going to mesh with the direction of technology.
“With an outsourcing relationship, it’s important to have a partner that fits your culture and works the way that you want them to work. The stewardship that we are entrusted with - it’s important that it’s always in line with your brand,” he says.
Guzmán and Owens & Minor expect to finish updating the company’s complete infrastructure by the end of this year.
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