CVS creates order, and savings, by integrating a big acquisition

2009 InfoWorld CTO 25 Awards: Peter Balnaves

2009 InfoWorld CTO 25 Awards

Peter Balnaves

CVS Caremark

After pharmacy CVS acquired Caremark Pharmacy Benefit Management in 2007, it soon became apparent that the merged company had redundancies and inefficiencies in its back-office IT operations that if fixed would not only save money but help the company grow. So CVS increased the IT budget 10 percent over three years to embark on the massive modernization and integration effort, which affected three datacenters, thousands of employees, and almost every IT operation in the company.

A particular challenge was that the Caremark and CVS businesses were different, with Carmemark focused on managing pharmacy benefits and customer service for health plans and CVS focused more on retail pharmacies. Thus, each business had legitimately unique processes and technology mixed in with those that could be standardized across the unified company. Scale was another challenge: The merged company fulfills or manages 1 bilion prescriptions per year, making it the largest pharmaceutical provider in the U.S.

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Although the goal of the effort was clear, CTO Peter Balnaves had to spend significant time with business leadership on the specific causes to get their buy-in to the high level of change needed on the back end: The three-year effort, now in its final year, cost $110 million for an organization whose annual IT budget is about $1 billion.

Balnaves also faced an IT staff that struggled to accept replacement of datacenter processes and toolsets. In some cases, people had to stop working with tools they had used for a decade or more. In the software development organization, several thousand developers had to learn new tools. These changes caused uncertainty, resistance, and productivity loss, and they required Balnaves to constantly beat the drums to promote the need for, and benefits of, the huge change effort. (The transformation effort itself employed more than 300 people from 12 companies in three locations.)

On the technology side, Balnaves and his team replaced the morass of technologies with a single set of standards, essentially remaking the IT operations. For example, CVS replaced about 170 management and monitoring tools across three datacenters, which required a precise approach to migrate from multiple legacy systems and ensure that the correct new processes were in place. Each datacenter needed a custom migration strategy to account for its unique mix of existing technologies.

Today, the basic systems -- e-mail, desktop support, networking, and so on -- are updated and unified across the company, with savings of 45 to 70 percent achieved in most areas. More important is that CVS Caremark now has a unified set of IT processes to run the business, as well as a unified IT organization.


Copyright © 2009 IDG Communications, Inc.