Christophe Deslandes joined KapStone Paper and Packaging Corp. in 2007 as CIO, and got what he calls "a once-in-a-lifetime...
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opportunity." The newly formed company had grown overnight that year from nothing in annual revenue to $300 million when it bought its first paper mill.
Deslandes had 18 months to get KapStone off the seller's legacy IT systems and replace them with an architecture and infrastructure that could support the new company's aggressive growth-through-acquisition strategy. By 2008, Northbrook, Ill.-based KapStone would acquire a second mill and more than double its revenue, and other acquisitions are on its horizon.
"We didn't have a website. We didn't have a domain name. We didn't have an email system. No network, no enterprise resource planning, no nothing. We were starting from scratch," Deslandes said.
Getting off legacy IT systems is no walk in the park under any circumstances, but it is especially intense when the systems belong to a competitor that is charging you dearly for their use. For Deslandes, the race to meet that 18-month deadline (and actually beat it by three months) turned out to be a continual balancing act between IT innovation and risk, between building a platform for growth and keeping costs under control, even between enthusiasm and caution, he recalled. "Sometimes enthusiasm can lead to mistakes because people have a naïve view of what it takes to put systems like this in place."
Modular systems, not outsourcing
Paper manufacturing is a capital-intensive business. The mills run 24 hours a day, 7 days a week, 365 days a year. KapStone loses $35,000 per hour, per papermaking machine when a mill goes down, and it has five machines. Outsourcing might be fine for payroll or email, but it was not an option for a tactical operation that cannot afford to be down. Nor is it an option for systems integration, a task many companies can offload to the big IT service providers.
2007: Kapstone makes its first paper mill acquisition in January, becoming a $300 million company.
- Deslandes joins as CIO and is given 18 months to migrate off the mill's IT legacy systems.
- Decides on innovative modular "best of breed" apps and a conservative infrastructure.
- Starts training for IT team.
2008: Kaplan Makes second acquisition in December 2008, growing to $700 million in revenue.
2009: Upgrades ERP and other apps to accommodate second acquisition by March 2009.
2010: Focuses on governance, Sarbanes-Oxley Act compliance, security and metrics.
2011 and beyond: Developing methodologies and took kit to hand off future acquisitions to project managers. -- L.T.
"I can't afford to do that, because we're going to be doing acquisitions for a living. I have to be good at it," Deslandes said.
KapStone didn't have time to build something very complicated, Deslandes said. In addition, it was difficult in 2007 to predict where the pain points would surface as the company grew. Would it need more storage? A new line-of-business application? More email?
"You don't really know. We had to build our systems in a way that was very modular," Deslandes said. "What we ended up doing is buying a best-of-breed application for basically each problem we're trying to solve."
The company, for example, went with one of the two top applications for papermaking and the leading application for procurement, Deslandes said. One of the few buying decisions made before his arrival was going with Microsoft Dynamics AX for financials "rather than trying to do everything in SAP," but that was just fine with him.
"Then as you grow, if you do outgrow one of the applications, you replace the piece of the puzzle that is no longer adequate without having to rethink the whole structure. Or you can bring in other pieces to the puzzle, if you into a slightly different business," Deslandes said.
In fact, KapStone's IT department upgraded its financial ERP application and replaced a human resources app in the middle of the company's second acquisition, spending about eight months to get it all done.
"You don't do that if you try to do everything in one big system," Deslandes said. "The caveat is that you have to be very good at making all of these applications play together. So, we had to develop a very robust system integration practice."
Training, training and more training for the IT team
Companies put businesses on the block for a lot of reasons, to be sure. Before unloading a business, however, they usually are more focused on improving the balance sheet than in, say, investing in legacy IT systems or the people responsible for running them. Deslandes needed a team that was proficient in systems integration, but of paramount importance was the willingness of the team to work at breakneck speed to get off the seller's legacy IT systems.
Deslandes lucked out on one score: Enthusiasm was not a problem with the IT teams he inherited. The people who came on board were excited to be rescued from a working environment where they felt ignored or operated as a cog, and made part of an entrepreneurial effort. "The main thing is everybody was happy to do something new," he said.
Getting the teams up to speed was another matter. Something as simple as migrating from Lotus Notes to Microsoft Exchange was a challenge. Certainly the new ERP platforms required that staff get tutored. "We lavished a lot of money on training them on these new technologies. We told them, it's going to be different from what you use but we will train you," Deslandes said.
Although peers caution him that his investment in people simply trains them for their next job, Deslandes disagrees, arguing that the team building has paid off already. He has a team that not only can handle an innovative modular architecture but also is ready and able to apply virtualization to a deliberately conservative infrastructure without incurring undue risk.
The future of legacy IT systems
As for the future, Deslandes is spending more time on governance, security and formal risk assessments, business continuity, and metrics, he said. In the early years the overriding metric was whether the company could become self-sufficient. "It was really about delivering something stable and minimizing the risk because we couldn't afford to fail. It didn't have to be great," he said.
Going forward Deslandes is looking at "all the quality metrics," such as ROI and the number of processes an application uses. He is looking at the IT Infrastructure Library's Service Catalog framework.
"I think the vision is that the CEO taps on my shoulder and says, 'We've got another acquisition. Can it be up and running in three months?' And I'm going to say, 'Yes, we can,' and essentially not have to deal with it because I have the methodologies and the tools in shape where I can hand it to a younger project manager and say, 'Here's your tool kit, go and do it.'"
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Balancing IT innovation and risk to get off legacy systems
Under deadline to get off IT legacy systems, a new CIO goes modular