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Presentation from the CIO event held by WinWire Technologies with KapStone
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© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Leveraging Microsoft Technologies to Enable M&A Growth
By
Christophe DeslandesChief Information Officer
KapStone
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
About
KapStone was started as a Special Purpose Acquisition Corporation (SPAC) for the purpose of building a domestic paper-and-packaging business through acquisitions.
Stated goal to grow to $2B - $5B range within 2-5 years.
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
KapStone Today
● 2 Kraft paper mills+ 1 lumber mill
● Headquartered near Chicago● Publicly traded on NYSE● ± $800MM revenue● 1,600 employees
● IT team: 30 full-time, 39 FTE
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
KapStone Timeline
4
2005 2006 2007 2008 2009 2010 2011
FoundedAs S.P.A.C.
FirstAcquisition
SecondAcquisition Small
Divestiture
ERPGoesLive Corporate
AppsComplete
ThirdAcquisition?
ERPProjectBegins
ERPUpgrade
ListedNASDAQ
ListedNYSE
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Part 1
Building a Company
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Initial Challenges
As of Jan 1, 2007:
$270MM business
No IT infrastructure of our own
18 months to migrate from seller’s systems
IT staff: 7 + 1 non-IT transition manager
Most applications already selected but no plan to integrate them
Challenge: traditional ERP model doesn’t fits well in a process industry
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Leading industry-specific apps for proprietary processes• OE/MES, CMMS, wood
procurement, lumber mill, costing, CRM
Standardize on Microsoft stack• Logical choice given our
Microsoft ERP• MS Dynamics AX ERP for
standardized processes• Financials, HR,
corporate purchasing, discrete manufacturing
Build a strong system integration practice• To integrate our apps• To migrate our
acquisitions
KapStone’s Approach
Collaboration and Analytics Backbone
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Configuration
Technology Stack
ERP CMMSOE/MES FiberCRM Lumber
Presentation, BI, DMS & Collaboration
Orchestration
DBMS/BI
Platform
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Risk Mitigation
To facilitate system integration, we enforced the following requirements for our apps:
Windows®-basedSQL Server®-basedActive Directory authenticationRobust integration layer (BizTalk, SOAP or XML preferred)For cloud services: SOAP/XML interfacing
Clearly define the process boundaries between systemsi.e. once a transaction becomes $$$, feed to ERP!
Maximize support from Microsoft
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
All interfacing and integration is done through BizTalk Server.We support a variety of formats.
BANKS
System Integration Model
ERP
CMMS
OE/MES
Fiber
CRM
LumberRail
EDI VAN
XMLXML/MSMQ
XML
Text Files
XML
BizT
alk
Conn
ecto
r
X12
BizTalk
Connector
Bus. Activity Monitoring
Leverage BizTalk BAM to create self-service interface management portals for end users.
XML
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
What About the Front End?
● Integrating multiple apps has many advantages:– Flexibility– No or little customization– Easy to upgrade
● And one big disadvantage:– Multiple, loosely linked reporting sources
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Reporting Approach
Like most companies, we start with static reporting, but also…
● Document the app’s data dictionary & build views● Leverage the static reporting work to build BI cubes● Involve the vendor in cube design (or use theirs first!)● Bring in experts to design cubes as needed
ERP/CRM must be system of reference Common taxonomy is paramount!
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
PerformancePoint
Our Journey into BI
ERP
CMMS
OE/MES
Fiber
Lumber
SSRS
1 – Started with static reporting – documented data dictionary!2 – Built OLAP cubes for each app (or used vendor’s)3 – All cubes are based on SQL/SSRS4 – Support various reporting technologies5 - Migrate to dynamic reporting in SharePoint
© 2010 WinWire TechnologiesWinWire Technologies, Inc. ConfidentialActive Directory
Customer-Facing Infrastructure
SSRS
1-waytrust
replication
auth.
Active Directory
data
customer-sideintegrationplatform
customer
DMZ
webservices
transactions
Active Directory
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Benefits of KapStone’s Approach
● Cost competitive:– SAP: $5,537/user/year1
– KapStone: $2,371/user/year2
● Upgradable:– Little customization = quick, cost effective upgrades
Upgraded AX in under 6 months in 2009– Any system can be replaced or upgraded without affecting others
● Agile:– Ability to add new systems quickly
Added Avantis in 6 months in 2009– Ability to integrate new acquisitions
Sources: (1) Panaya Inc. 2009 SAP® Support Practices Benchmark Survey(2) KapStone 2009 ERP support budget exclusive of depreciation
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Part 2
Support Growth Through M&A
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
The M&A Market is Heating Up
“The volume of mergers and acquisitions grew in 2010 by 25%.(…) A survey of top bankers (…) expect deal volume to increase by at least 15% in 2011 from the previous year.”The Wall Street Journal, January 3, 2011
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
M&A Challenges: 10 Things to Remember
Typical M&A challenges for IT:1. IT isn’t always “in the loop”2. Acquisitions are often behind on IT investments3. Pressure to get off seller’s systems quickly4. Pressure to consolidate financials & BI quickly5. Don’t always know where IT growth will be6. Manage Communication7. Security is a big concern8. IT must take the lead on non-IT activities9. Must be compliant within 12 months10. Acquisitions lead to divestitures
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
1. IT isn’t always “in the loop”
Too often CIOs are not brought in early enough when a deal is negotiated.
Tell your Board and CEO that you must be brought in Day One. Ask them if they’d want to know the true cost of merging IT
asset before or after negotiating a price! Be ready with:
– migration cost models– system documentation (especially interfacing)– methodologies– app & technologies portfolio– standards
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
2. Acquisitions are often behind on IT investments
Businesses being sold tend not to invest much in IT!
Be ready to upgrade servers right away Be ready to roll out new desktops (real or virtual) right away Acquisitions are a good opportunity to get out of unwanted
support contracts upgrade Day One!
Technologies to leverage:Hyper-V server virtualization, Terminal
Services, desktop virtualization
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
3. Pressure to get off seller’s systems quickly
In case of a divestiture, some apps may be running on the seller’s infrastructure.TSAs are costly.
Negotiate rights to transfer licenses or run temporary instances Go after low hanging fruits (email, DMS) Migrate legacy apps to virtual instances in your datacenter Technologies to leverage:
Hyper-V virtualization
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
4. Pressure to consolidate financials & BI quickly
Consolidation of financials and operating KPI are essential.
Aim for Day 30 Upgrade from Excel-based consolidation:
Leverage middleware Automate consolidation (at least on your end)
Technologies to leverage: BizTalk, SQL Server, SharePoint
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
5. Don’t always know where IT growth will be
What will grow the most: email? Storage? Transactions? Network? Apps? Desktops?
Buy yourself flexibility ahead of time with clustering: Exchange BizTalk SQL Server Terminal Server Hyper-V consoles(you can have a 1-node cluster!)
Virtualize all other apps for easier migration to bigger hardware
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
6. Manage Communication
Loose lips sink ships – and acquisitions!People recognize due diligence when they see itKeep them in the loop but control leaks Social media isn’t making this any easierNegotiate a communications plan with the CEO
The IT staff will be very concerned about their futureCommunicate honestlyCommunicate early and often Listen to their concernsExplain that there will be changes and whyMake the case for delayed downsizing
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
7. Security is a BIG concern
Security practices may not be up to your standards.Some employees may be disgruntled.
Insist on antivirus being up to date as a condition of sale Lay down the law on Day One:
Password complexity rules Computer Use policy Firewall rules Server protection & configuration management
Engage an independent security auditor Technologies to leverage:
SCCM, Forefront Protection Server Script Kit, Visual Studio TFS
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
8. IT must take the lead on non-IT activities
Many non-IT M&A activities result in IT work:– merging COA– AP, AR, HR, CRM ETL– customer & item masters
If not coordinated, this results in headache and rework for all
IT PMO should volunteer PM leadership Share your collaboration tools with the other departments Provide testing sandboxes Technologies to leverage:
SharePoint, Hyper-V virtualization, MS Project
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
9. Must be compliant within 12 months
Pick your poison: SOX, PCI, HIPAA, SEC, …You’ll have at most 12 months for the new unit to be compliant!
Plan for robust and well documented integration, even if temporary
Implement Change Management, Access Control and Configuration Management policies on Day One
Technologies to leverage: BizTalk Server, SCCM, Visual Studio TFS
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
10. Acquisitions lead to divestitures
Acquisitions often lead to divestitures:– due to regulatory constraints– to finance M&A activities– for business alignment
Plan for future divestitures: Have a methodology! Virtualize divisional apps and integrate them through
middleware to allow for easy decommissioning Technologies to leverage:
BizTalk, Hyper-V virtualization
© 2010 WinWire TechnologiesWinWire Technologies, Inc. Confidential
Key Takeaways
● Build a flexible infrastructure● Know your systems and know your cost structure● IT must take a leading role in M&A activities● Leverage your existing infrastructure to quickly and painlessly
absorb acquisitions