BOSTON -- One year ago, CVS Corp.'s purchase of Eckerd drugstores created the country's largest drugstore chain.
In addition to the challenge of integrating 1,298 Eckerd stores into the CVS chain -- changing storefront signs, transferring prescription medication patient information, changing the product selection -- the integration team was also instructed to ensure the purchase would increase CVS' profits, or at least lose no money for the company, by the end of the fiscal year. The post-acquisition chain now operates 5,375 drugstores.
"As you can imagine, it was not business as usual during those months," said Karl Taylor, senior vice president and CIO for Woonsocket, R.I.-based CVS.
Taylor paired up with John Murphy, director of finance for CVS, to share how cross-functional teamwork led to CVS' successful and profitable integration story in front of several hundred IT professionals attending this week's SIMposium, a technology conference of IT executives sponsored by the Society for Information Management.
CVS workers were trained in integration and conversion procedures and a set of best practices were created. Temporary contractors were then hired to perform most of the work under the oversight of the CVS staff.
The four-month integration of Eckerd stores into the CVS chain was completed Aug. 1, 2004. It required 228,000 hours of work, 1.5 million pounds of IT equipment, 1,200 miles of cable and 11,000 store visits, Taylor said.
"It was our fastest systems integration effort ever," Taylor said.
One key to the success of the integration project was setting it as the company's top priority and carving out staff dedicated solely to implementing it, Taylor said. It was an unusual step for an IT department where staff members are usually working on several projects at once. About 50 IT staff members, 25 finance professionals and several hundred CVS employees companywide were dedicated to the project. This meant some planned IT projects were delayed or stopped completely because of the reduced IT resources and of the integration of the former Eckerd stores in those projects.
"We were trying to manage IT while we were doing this," Taylor said. "And people tend to have memory lapses when they really want things done. So if this really is priority No. 1, some things have to wait."
Murphy pointed to cross functional communication as another important component in the project's success. For example, IT and finance staff members were paired together, so the IT staffers could understand and prioritize the Eckerd information they were integrating into CVS systems. The group held two meetings per week, from 5 p.m. to 8 p.m., for the entire cross functional team, with other meetings for smaller groups throughout the week. Sticking to the schedule was important because the status of one group's project often affected another group's project.
Marc Haines, a business professor at the University of Wisconsin-Milwaukee, said the constant group updates probably contributed more to the project's success than any particular idea or effort.
"It's difficult to say they were successful because they did this right, or they did that right," Haines said. "The main thing was probably the communication."
Both IT and finance were involved in the early stages of the process. Taylor sits on the executive committee that gave final approval of the Eckerd purchase.
Sam Dilliard, director of IT support for casino chain Harrah's Entertainment Inc., said he paid particularly close attention because his own company is in the midst of a similar integration project. Harrah's last year bought rival Caesars Entertainment Inc. for $9.4 billion. Dilliard is still working on integrating the two companies' systems.
"There are extreme parallels between their story and mine," Dilliard said. "I sat there nodding my head. It was good confirmation, a good checklist, reinforcement for me."
Even with the successful integration completed, Taylor and Murphy aren't resting on the laurels. Moderator Garry Lowenthal, executive vice president and chief financial officer of Viper Powersports Inc., asked the pair about what they are concerned about. The increasing competitiveness of the drugstore market, and keeping up with that competitiveness, worries Murphy, who said he constantly asks himself, "What do we need to do to stay ahead of the competition."
Taylor thinks about IT controls and the increasing importance they have as the company grows. He uses Sarbanes-Oxley compliance efforts as a way to strengthen controls. Security also worries Taylor, because of the large amounts of personal health information CVS pharmacy controls.
"Little worms and viruses make me very nervous," he said.