Weathering the perfect M&A storm: smart risks pay off
John Dancy is taking a break and boy does he deserve it. After successfully navigating what has to be one of the fastest combined spin-off/mergers in modern IT history, CSRA was recently purchased by General Dynamics. His story about standing up a completely new IT capability for a $5B business in just 5 months includes a quick move to cloud, a new app rationalization strategy, and fostering a culture that embraces risk.
John, your last two years at CSRA were action-packed. Would you share with readers what the heck was going on over there?
Well, back in 2015, through a series of events, CSC (Computer Sciences Corporation) decided to spin out their public-sector business. CSC was a huge corporation with both commercial and public-sector businesses, and for any number of reasons, it made sense to have the public-sector business stand alone.
It's a typical transaction that many CIOs and business leaders have been through many different times. The thing that made this transaction unique was the speed with which the company wanted to do the spin. But even more unique than that is that when we did the spin-out, the board and the executive management team decided the new company should stand alone completely.
Typically, in these kinds of transactions, there’s a transition services agreement (TSA) that would help the new company leverage the former company’s systems until it can create a standalone IT capability. No one would ever really expect that in five months you could stand up an entire IT capability ready to support a multibillion-dollar company. But the executives decided that we would spin with no transition services agreements. That created a very unique situation in which we had to go from having no networks, no data centers, really no standing IT staff, to standing alone within five months.
That sounds really challenging. What was driving that decision?
I can't speak exactly to what was in their minds, but I believe there was a strong desire to let the commercial arm of the company chart its own course. I think the key driver was to have two completely separate organizations so that each had the flexibility to do what they thought was most important for their customers and long-term success, including future decisions about M&A activity.
For me, the spin created a really urgent need to move quickly and stand up a capability. That was the burning platform that drove us, for instance, to make a strong move to the cloud. Ironically, I had actually ordered servers and I had just completed negotiations for a co-location and data center, but none of that equipment was going arrive in time for us to actually create a corporate IT capability. So I had to move to the cloud in order to host our systems.
The spin created a really urgent need to move quickly and stand up a capability. That was the burning platform that drove us, for instance, to make a strong move to the cloud.
Former CIO, CSRAOK.
So you’ve got a plan…
Yes, but right in the middle of this process, I also found out that not only were we going to spin out a $4 billion division from CSC, we were also going to do a same-day transaction in which we would purchase SRA International. My initiative then became both a separation and an integration project requiring us to take SRA’s IT capabilities and pull those into what would be a larger standalone company (CSRA, which combines both company names).
That changed our approach. The no-TSA approach basically had us doing everything and anything we could to be able to function as a standalone company. We needed to deal with the aftermath of integrating Financial, HR systems, and so on after the transaction happened.
So, to answer your question, “what was going on,” I have to say we were in the middle of a perfect storm.
What was the aftermath like?
After the transaction happened, we were able to step back and take a look at everything that we owned and chart out a new position for IT within the company, an initiative called "Customer Zero." I knew that the legacy systems the company was running on carried a lot of technical debt. There were inefficiencies. My software portfolio was twice the size it needed to be. And working with the executive team and with the board, we decided that to integrate the company, we would basically build a brand-new IT capability.
CSRA is an IT services firm, and we relied heavily on a whole network of technology partners to go to market. We decided to leverage those partners' technology to create our IT capability, and to let our internal IT capability stand as a proof point for everything that we were proposing for our federal government clients: strong adoption of cloud technology, software-as-a-service products, all sorts of advances in cybersecurity, etc. We actually stood up a capability we believed was a great role model for how to modernize in a heavily regulated environment.
John, what was going on in the market at large at the same time?
Especially in the public sector, CIOs all around me are facing the exact same sort of challenges with legacy systems that support business processes that may or may not be efficient. They're trying to figure out, "How do I make a move to an infrastructure or a capability that's much more agile and that can match the pace of the demands of the business?” Or in the case of the government, “…that keep pace with the agencies that are demanding newer and better capabilities?"
Did your Customer Zero strategy—being the model for the people that you're trying to sell to—ultimately give you a competitive advantage?
I can tell you that in my dealings with government CIOs, it led to more candid conversations. It set us up as much more of a trusted advisor because when we talked to CIO customers, we had very real experiences that we could share with them. I was always very honest in terms of what worked well and what had not worked well—with making the strong move to the cloud, for instance—and that resonated very much with people who were experiencing the exact same struggles that I had.
Cloud is a big move for IT leaders in the public sector. Why?
Especially for the federal government, it's how do you move to the cloud and secure it correctly. The biggest reticence is understanding how to properly architect and deploy a cloud environment that you can secure and fortunately, we cracked that nut.
How did you do it?
Well, one way was by working very closely with the cloud provider. Basically, the way we architected it, the cloud became an extension of our entire network and data center environment—to the point where we were able to treat the cloud environment the same as we would within our data center. In fact, we didn’t even think of the cloud as being anything different than on-prem. That's how tightly we were able to integrate the architecture into our capabilities.
Most people, when they think of cloud in the government market, they're still thinking of it as infrastructure-as-a-service. When we look at the breadth of products and capabilities that are out there with public cloud providers, the challenge is how to operate IT differently. And that means taking full advantage of the entire cloud platform to drive adoption of methodologies like Agile and DevOps with the goal of making IT as responsive to their agency's mission or business's requirements as possible.
There's a whole new world that opens up once you get to that environment, and I think the key is going to be the cultural and organizational change it takes to really take advantage of those tools and move with the pace of your customer, internal or external.
Besides cloud, what’s another example of a technology you upgraded or enhanced as a result of the spin with CSC and the merger with SRA?
Well, one of the companies was a heavy user of Lotus Notes, which, let’s just say, is not viewed as one of the most modern communication and collaboration systems. Within three months, we moved off of that to a Microsoft environment. And we did it partly because, heck, if we're going to walk in and talk to somebody about the need to modernize their system, the last thing we want is to have them see us working on old technology. We understood that our systems, our IT capability, and how we operated as a company were part of our brand.
From a leadership perspective, where did you start building a standalone IT capability?
There are a lot of facets to that. We tried to be as pragmatic as possible and maximize anything new and modern. But I knew when we stood up our new organization, we were nowhere near as efficient as we could be.
The software portfolio itself was quite large from the two legacy companies. Leading up to separation, because of the volume of work and the short time we had to do it in, I met with every business leader and basically sat with a huge spreadsheet in front of us and went through every financial system we had to identify what we called a "minimally viable" portfolio. We asked ourselves, "Okay. Out of all these systems, which ones do we absolutely have to have to run the company?" That initially reduced our software portfolio—it was the first cut.
After the transaction happened, we took a hard look at the entire portfolio with an "adopt and go" approach. Basically, we looked at similar capabilities within different systems to figure out which system had the best operating model for the company and the best capability, and then we chose that system and started a conversion effort from one legacy company into the other.
For example, CSC and SRA used the exact same financial software, but it was implemented very differently. After working with the CFO and Controller, we settled on one implementation of that software and spent about a year doing very careful data mapping and conversion programs to migrate off of one legacy company's applications into the other. That was a big step.
The other thing I challenged my team to do was to consolidate around SaaS as much as possible. I didn't want to be writing a lot of code that we were going to have to maintain for years. I told them, "I ought to be able to rattle off all of the systems that we have and count them on 10 fingers or less." That became our rallying cry. For instance, we completely renegotiated our Microsoft Enterprise license agreement and we used that product set as a way to retire legacy software and use new modern SaaS products like Office 365.
Another good example? Human capital management. Both companies used Workday but in different ways. One company used SAP for payroll. The other used Workday for payroll. We also had an Oracle-based talent management system and another software as a service talent management system. Working with the CHRO and the CFO, we decided to utilize Workday for all three of those functions. And by the time we were done with that integration, we had one really strong platform to use for the corporation.
John, I know you are a TBM (technology business management) advocate. How important was it to embrace the TBM mindset to survive this perfect M&A storm?
As soon as I became the CIO at CSRA, I knew TBM was something I wanted to pursue. I knew digital transformation was going to be hard and resource-intensive. And I knew I was going to need to have continuous conversations with my peers to explain the value and the payoff of the work that we were doing.
At the time of the spin, we needed to drive costs out and explain our investments to peers, because there's always competition for budget. But I wanted to change the conversation from, "Why do you cost so much?" to having the CFO and the CHRO participate with me in making decisions about what corporate capabilities to build and in the investment decisions needed to take the company forward using IT. We needed a new lexicon for talking about the value of those systems, and I saw TBM as the perfect way to drive that dialogue.
Tell me about the impact of M&A on the culture of IT. How did you build your team as you built this new IT capability?
The impact on the culture was pretty amazing. There’s nothing like having a CEO who really gets technology and loves it, who wants to see really cool things come out for the company.
There’s nothing like having a CEO who really gets technology and loves it.
Former CIO, CSRA
Also, the speed that we worked at during the lead up to the spin-merge actually had a huge impact on the culture of my organization. Because we had to move so fast and we took so many crazy, creative steps to accomplish what we did in five months, it changed mindsets about the team’s freedom to act, be creative, and try new things. We're a lot more risk-tolerant than many of our peers. But I believe in taking smart risks. To me, it's about understanding what the risks are and admitting failure early if an idea doesn't pan out, the only consequence being that you've learned a valuable, not a punitive, lesson.
Ultimately, we became this really cool environment where everybody was excited about the vision for the company and their ability to deliver something new. And, you know, we had lots of toys to play with, which makes it awfully easy to attract and retain great talent.
What's the biggest risk you've taken and what did you learn from it?
The biggest risk was the very first move that we made to the cloud. We really didn't have other good options and when we started we weren’t certain how it would work out. Enabling cloud was the only way that we were going to successfully complete the challenge laid out in front of us. And the second we started down that path, it was an all or nothing proposition. We were either going to succeed magnificently or fail magnificently.
With the pace at which we were working, we actually phased in the stand-up of the systems for the company over a series of 10 weekends. The last weekend was the most nerve-racking because we moved the systems out of the parent company environment into our own environment, and we did a payroll run. And it wasn't until that weekend was over and we knew that everyone had been paid correctly, that we could relax. A little.
What do you want your lasting contribution as a CIO to be?
Boy, there are so many different ways I could go with that. Just proving that the kinds of things that we accomplished in the last three years in this market can actually be done successfully feels good. Building and leading a team of talented, dedicated technology professionals is both rewarding and a legacy that will remain now that CSRA has been purchased by General Dynamics. Those things have value and lasting impact in terms of how well a company can serve its customers or a government agency can serve their mission and their citizens.
I was fortunate to have been put in the position that I was and given the support I received from the CEO, my peers, an amazing IT team, and the rest of the company. The combined spin and merger created the burning platform that set us off on this journey. I don't think there's a need for that burning platform anymore. The time is right for people to start making these kinds of moves and taking on these kinds of challenges.
More than anything, I am grateful to have been given a shot to take this on and do it well.
Howard Rubin on IT Benchmarking and TBM
Howard Rubin President and CEO, Rubin Worldwide