Growing Pains: The IT challenges of Spectrum Brands’ big acquisition
It’s one thing when business disruption is caused by previously unforeseen competition, but it’s quite another when the folks in your own C-Suite are responsible for it.
In the case of Spectrum Brands, the latter is a good problem to have because the disruption in question was created by an acquisition that doubled the organization’s employee count. But it resulted in no small degree of anxiety in the business technology department because for the first time, the company had to extricate a business from someone else’s technology environment.
“It’s kind of like taking the engine and seats, but you can’t have the frame of the car.” — Allen Benson, CIO, Spectrum Brands
That was the situation faced in 2013 by Allen Benson, CIO and vice president of business technology for Spectrum Brands, and his IT staff. Benson explained his integration challenge during a strategic briefing during last week’s Fusion CEO-CIO Symposium produced by WTN Media, but there probably is no briefing that could have prepared him for the day when Spectrum Brands acquired Hardware & Home Improvements (HHI), a $1.4 billion division of Stanley Black & Decker.
In late 2012, Benson was notified about the potential of Spectrum Brands acquiring HHI, but he was told the deal had only a 5% chance of happening. Not to worry, he wouldn’t have this on his hands, right? Well, someone must have wanted to consummate a deal very badly because less than a month later, the odds of that acquisition had jumped from a remote possibility to the real deal, with a high probability of closing in 2012.
Suddenly and without warning, Benson and his IT staff were in the race of their professional lives. The experience, which still is unfolding, was complicated by Spectrum Brands’ pending move from Madison to a new headquarters in Middleton, and the usual technology and cultural factors associated with integrating two companies. The acquisition boosted Spectrum’s annual revenues by 33%, but it also doubled its global employee count from 6,000 to 12,000.
One might suspect it also would bring added IT capability, but HHI had no dedicated technology infrastructure. As part of the deal, Spectrum Brands had to pay a substantial monthly transitional service agreement charge to Stanley Black & Decker for the use of its IT department. That charge would only lessen as infrastructure was taken out of the Stanley Black & Decker network and brought into the Spectrum Brands environment.
Needless to say, Benson and his staff were under some pressure to quickly get out of that situation. His team spent four months developing an integration plan, but because the company was moving to another location, the IT department had little bandwidth to work with, and it had to rely on CDW, the primary consulting partner, to execute the plan.
By the time Benson appeared at Fusion, about 97% of the applications had been moved to the Spectrum Brands environment. The next step is to complete the integration of those programs into something useful for the Middleton-based company, a process that could take until the end of 2015.
Since Stanley Black & Decker ran HHI inside its own infrastructure, Benson had to figure out how to get it out because Spectrum did not own any of the hardware. In addition, the TSA was written for a year with a provision that changes the fee structure if the agreement still applied beyond one year, meaning Stanley Black & Decker could charge penalties for staying longer.
Benson had about eight months to execute the transition (given the pending move). “It’s kind of like taking the engine and seats, but you can’t have the frame of the car,” Benson said. “I’d rather have the frame of car and put the engine in there. The applications were ours and all the data was ours, but everything it rode on was theirs.”
To get the job done, he had to minimize disruption to the existing Spectrum business, which required bringing in CDW. Spectrum asked CDW to quote the entire transition program and provide the hosted data center in Minneapolis, which also serves as Spectrum’s third-party data center. Benson was already in charge of building out a new data center in the Middleton facility, so he asked CDW to move the HHI applications to the Minneapolis data center to run HHI as part of Spectrum Brands.
“At the same time, we are moving our world headquarters from Madison to Middleton, and my entire infrastructure team is building out a new data center in the new building in Middleton,” Benson noted. “So we have literally no bandwidth or resources. All we could do is oversee things.”
Fourteen years ago, Spectrum Brands was a $250 million company, but it has grown by acquisition and now reports $4.2 billion in annual revenue. With past acquisitions, it bought the target lock, stock, and barrel, and owned all the data centers and locations and servers. All that was within Spectrum Brands’ grip; for security reasons, Stanley Black & Decker wanted all the data in the data center within its own grip.
“They were very strict on what we could do and could not do,” Benson said. “We could not connect to them, but CDW could. That was very difficult. The anxiety and tension was left and right because it was just not a simple thing to do. You don’t own the components on the other side and have to migrate them over, so you’re at the mercy of what they migrate to you.”
Another challenge was to make sure Spectrum Brands had the right framework on the ground when it took over the management and support functions. There were decisions that had to be made on storage and servers and other pieces, and IT had to make sure each decision was aligned with the company’s strategic direction.
While most of the apps have been moved, there is plenty still to be done. HHI has different enterprise resource platform systems, and Spectrum’s plan is to move them on to its ERP system, an SAP platform.
Benson noted that HHI is a $1.2 billion organization that brings a level of complexity that has to be vetted. “One of biggest challenges is that we have to be able to get over hump,” Benson stated. “The fact is our employee and user counts doubled with HHI, from 6,000 to 12,000. When you double the amount of people and resources that your infrastructure teams have to support, that’s a pretty big jump. The users within their ERP systems are close to same number that we had in our ERP systems globally.”
Benson used Workday, which he called “our enabler,” to quickly consolidate employee systems. While having a system with a global footprint helped tremendously for these applications, recent transactions made the previous ownership less likely to invest in modernization, so there are some “green-screen” applications to support.
Otherwise, the legacy support is “very doable,” if complicated, especially when working with a company accustomed to running enhancers to their ERP systems. “We have a great foundation with SAP and the efficiencies we can bring to them,” Benson noted. “It’s a great, synergistic opportunity for Spectrum Brands.”
IT could happen to you
For Benson, 2013 was admittedly “a blur” and even more challenging than the period when Spectrum Brands was in bankruptcy. Steve Cretney, CIO of the Monroe-based Colony Brands, says unusual projects can happen to organizations, especially those embarking on an aggressive merger and acquisition strategy, on a moment’s notice.
“He [Benson] had a really good response of finding a partner, confronting the reality of where he was at, and going out and finding somebody he trusts,” Cretney said. “The hardest thing to take care of is technology, especially in this situation, where you have to do a carve-out. He had to find his way in and shape the edges with the people and the rules of the holding company.”
Brent Leland, co-founder of Cimphoni, noted that acquisition integrations are a melding of process and people and culture. IT gets into the process of having to “run the acquisition,” which requires a healthy respect for the synergies of two organizations. “It’s all about synergies,” Leland stated. “In a lot of cases when you go through an acquisition, what you pay for the company is really based on the synergies you can get.”
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