12 Feb CIO Leadership: Before recession, Brady Corp.'s Curran got head start on shedding cost
Editor’s note: This interview with Bentley Curran, vice president of information technology and chief information officer for the Milwaukee-based Brady Corp., a global manufacturer of facility and personal identification products was conducted by Joe Vanden Plas.
WTN: I would like to start by exploring the ways that you and your IT staff are trying to provide value to the organization in this worsening economic climate. Is it all about the steps Brady has taken to reduce its cost structure (10 percent workforce reduction, continuous improvement through a business performance system), or are there things you still want to do on the revenue side and workforce performance side?
Curran: We’re taking the second piece that you talked about. We have aggressive growth targets. We’re very inquisitive as a company, but the economic times have caused the acquisition of companies to slow and private investors have pulled back just because their earnings are down and nobody is strong in a down economy. So our CEO, all the way through our organization, says we’re going to maintain our biggest growth initiatives, two of which are growth through the market spaces, which usually entails acquisition, and e-business, which is in my court. So those are some our biggest growth targets, and we’re keeping those strong. In fact, we’re probably putting more emphasis on those because we want to make sure we rebound out of this into a much stronger position.
It is a quiet time with acquisitions. In the last five years, we’ve had over 30 acquisitions, but in the last year we’re down to two. So we’re using this time to make sure we’re exploring new spaces and getting into areas that we can flesh out in a down economy and come out a much stronger company. So that’s the growth side.
E-business is in our direct marketing businesses and places we go directly to the customer, versus the traditional Brady model through distribution. So in the areas where we go directly to the customer, we’re trying to make sure we have all the things in place to gain [market] share right now; then when we come out of this, to make sure we stay in some kind of sustainable gain share in how we go to market with our products and customers.
WTN: So even though the pace of acquisitions has slowed down, you’re still open to the right synergy and fit?
Curran: Correct, and then really looking at the spaces we’re going to go into, and making sure our strategies are sound. How we’re going to enter the space, what companies are the targets, and we have a pretty good formula for fleshing this stuff out, getting to the financial stuff, and really getting due diligence done before the economy starts to pick up again because things change quickly.
WTN: Other than the integration of newly acquired companies, what role does IT have in identifying the right acquisition target?
Curran: This is one of the things at Brady that IT has been pretty involved in. We’re involved in the early part of the due diligence, even before the letter of intent goes out, to just kind of make sure we have a seat at the table and are talking about the business part of it. There usually is never anything IT related that stops an acquisition, but there are some big lessons learned of what systems you can integrate, what kind of systems integration you can have, potential structure changes, and how do we integrate to the organization? All of that stuff is up front. Each function has a voice within the early stages of acquisition. It doesn’t matter if you’re HR or another business function, if you’re sitting in a meeting and you’re sitting at a table, you need to be a business person and take your IT hat off and become a business person and make sure you’re providing as much value as you can at that meeting.
That’s a pretty common practice for us. Our due diligence is pretty thorough. I get involved in the financial due diligence as well as the systems. People in IT sit in on the region’s due diligence teams, and they are the ones that actually perform the due diligence a lot of times. It’s usually a team of people, including an IT person going out to the site pre-acquisition, if the target lets us come in. We just want to get as much information as quickly as we can.
WTN: In response to economic conditions, the company has announced a 10 percent reduction in its workforce. How is that impacting IT?
Curran: It is 10 percent. It was a pretty big swat, so we had taken out any open positions that we had that weren’t deemed growth related in the area. And then we also took out about 11 percent, so I actually took out more people, primarily in Asia where most of our volume is down the most significantly. So we’re consolidating more in Asia, and we just took an earlier stab at consolidating resources. In the U.S., it was probably the least impacted due to open positions, and in Europe it was marginal based on a couple of sites that we’re consolidating. It was based on business strategy more than it was based on just cutting. If an area is growing, let’s make sure that we don’t hurt the growth that this area is contracting. Let’s take a more aggressive approach.
WTN: How has IT worked on the cost structure issues? Is it primarily through reviewing business processes, or some other role in that area?
Curran: It’s pretty deep. We’ve had SAP in here for about eight years, and all of the bigger business processes that we have going on, order-to-cash and those types of things, are through SAP and we’ve been on a fairly aggressive SAP implementation path over the last three years. We’ve had about 26 go-lives in three years, which is pretty significant, to get our processes in order to get our costs down, and to get to more of a common model – even across different business models.
So we only have one instance of SAP, but we have three very distinct business models that run through it. We call them templates, and there is a core underlying it so when we go through and look at where our costs are, our SG&A, where our inventory levels are, and we look at purchasing cost, we prioritize where the biggest cost-saving opportunity is to put in SAP, and that’s where our SAP road map takes us.
We’re continuing to do that right now. We just went live this past weekend with another site in Boston and we have a number of go-lives planned throughout the rest of the calendar year.
WTN: So with SAP, you really had started the ball rolling on cost issues long before the economy turned south.
Curran: Yes, even in our fiscal planning. Our fiscal year starts in August. Last year, we saw a lot of the signs of this [poor] economy, so we kind of challenged ourselves to say, okay, we’re going to have a budget that we present. We’re going to have a budget with a 10 percent downturn. We’re going to have a budget with a 20 percent downturn. Each of our units has to come back and say how do we get to these levels of efficiency without just cutting? Our goal is to make sure we can keep this business running at a strong pace, even if there is a significant downturn. What do we have to do?
When we discussed it, people said well, do we want to defer any planned go-live? Do we want to defer business activity that is getting to these efficiencies but is painful during the process? Most of the answers – it wasn’t 100 percent – but most of the answers are that we want to continue with our strategies. They make sense in a good economy and they make even more sense in a down economy.
WTN: We’ve been told for several years now that there is a labor crunch with regard to science, technology, engineering, and math related positions, and that CIOs need to proactively plan for pending Baby Boom retirements. You mentioned the workforce reductions, but how has the recession impacted your workforce levels and your approach to meeting the organization’s technology needs?
Curran: We’ve been impacted by technology shortages for a while. Being on SAP and being in Milwaukee, we’re kind of unique. When SAP goes live at a bunch of organizations like Rockwell, and being in this area at the same time, it puts a strain on resources, but finding talent isn’t easy. There are creative ways we’ve been trying to do it. We’ve been partnering with MSOE [Milwaukee School of Engineering] and other colleges to make sure that we have a pretty good intern base. I would say most of my new employees have come from intern programs.
Our interns then become employees, and they become [Brady] advocates within that college or that region. So they are the ones that are actually going out on our recruiting sessions. We send some of our new staff into the colleges to make sure that we have a better pipeline of up-and-coming talent. I think the benefit to Brady is that we’re a very global company, so I have access to talent regardless of where it’s at. We have a physical manufacturing presence in India that helps with our talent pool for networking with some of our India partners. We actually have a person that was a Brady employee that started his own business (Zeon Solutions) and went back to India, so now we have a private industry person that knows Brady and is in India, so he can actually garner some of talent, especially in the e-business area. It’s difficult, but I think there are ways.
We kicked off a sustainability strategy in IT and were able to have our company adopt a sustainability strategy. Not only on the Brady side, but looking at our community organizations. How does Brady function within the organizations? Are our products environmentally friendly products? So our company is not just Brady anymore. It’s about how do we provide a work environment that is more pleasing to a prospective employee, not just about what we do and who our customers are, but how do we do it?
Some of the positive feedback that comes from our new people is they really like how we are not all about cost. We’re in a business. We keep a level of standards for our employees at a high level, no matter where we do business. So our plants in Mexico are some of the nicer plants, and they are still efficient, and they are still effective, and they are still cost beneficial. You always know when you’re in a Brady facility because it’s a level of environmental decency. We don’t do sweatshops and we don’t do those types of things, and we turn back doing that type of business because it’s not who we are.
WTN: And the younger employees appreciate caring about what goes on outside the company’s walls. It’s embedded in this generation.
Curran: We’ve built two schools in China in areas that we do business in because we know that China needs infrastructure. So our foundation put forward some money to build some Hope Schools and that helps Brady’s name in that local community.
WTN: Have the workforce reductions throughout the economy effectively ended the labor shortage by making more talent available; or even though that’s true, do the same competitive recruiting dynamics still apply?
Curran: I’d say they still apply. There is probably some talent available out there, but there just aren’t that many areas to fill right now. We’re not hiring that much right now. We’re hiring some here and there, but for more strategic purposes and trying to find that perfect person is still difficult. I don’t think it’s changed that much. I think it’s actually gotten more difficult. You have to wade through more resumes now and you have to go through a lot more people looking for the same opening, so finding the right person is a little more difficult.
WTN: One of your responsibilities is the e-business initiative, which involves both supplier and customer channels. Since Brady went down this road, overall sales have grown from about $500 million to $1.5 billion – tripling. Obviously, e-business is not the only factor, but I would have imagine a major factor. How much of your business is done online right now?
Curran: About one-third of our company is direct marketing, about one-third is Brady traditional through distribution, and about one-third is what we call the global die cut or OEM [original equipment manufacturing] business, which is you engineer-to-order specifically to a cell phone manufacturer. So there is no e-business in that market or that part of our business today.
Direct marketing is our biggest opportunity for e-business; it’s about a third of our company. Direct marketing is very mature in our company because it’s been a traditional market in the MRO [maintenance, repair, and operations] space and usually grows at GDP or less. We’ve been able to grow e-business faster than our direct marketing business has grown in the last three to five years. We’re doing better right now. We have a long way to go as a percentage of direct marketing business. The best performing e-business in our company is about 16 percent of their revenue. In some areas, it’s less than that, so our target is to get a much larger portion of our customer acquisitions though e-channels.
WTN: Is there a percentage that you’re targeting?
Curran: We’re targeting 50 percent in three years, so we’re pretty aggressive right now.
WTN: Take me back and explain your role in developing e-business, its evolution in helping Brady tap into global markets, and how the company expects it to perhaps mitigate the impacts of the recession?
Curran: Part of our strategy is to look for markets that are going to grow over the next 10 years, that grow faster than the norm, faster than GDP, and faster than the market they are in because of a niche that they have – we’re a very niche player company – or for a proprietary piece of technology, a proprietary product line. We’re looking for areas that have something that people will always pay a premium for, or always look for even in a down economy.
Those are the things that we’re looking for, and then finding how does our products and how does our footprint fit within those market spaces, and then go to the next level and say, okay, what companies are doing well here potentially, and what are the under-performers in this market? In other words, are there companies that are vulnerable because while they are in a good market with a good product, but they are just run poorly or they don’t have the mechanics or the discipline to make sure they can be strong. Or they don’t have the financial backing that we do to drive forward aggressively.
So we’re kind of looking for that sweet spot of underperforming companies in a high-performing market and their financial situation or whatever they are in has put them into a place where they are vulnerable or they are actually looking to get out of a business because it’s going to be so stressful for the owner, if they are a private owner, or the equity partners don’t just want to keep bleeding cash into the organization because that’s not what they do.
WTN: How much do customers like to design their own products online?
Curran: We have what we call our DYO applications online, design your own apps. It’s a growing part of our e-business offering, the design your own, but it’s probably a smaller piece of it.
More than that, it’s providing customers and a total package. What I mean by that is if somebody is looking to secure their plants with lock-out, tag-out equipment, we want to make sure that we have a total offer that we can provide them, and not just a sign or label to mark their plants or tags to put on their machinery, but more of a complete solution for a factory.
So we’re coming up with models for if you wanted an optimal compliance factory-facility, here is what it would look like and here is all the products that Brady can supply to facilitate that. So it’s kind of a one-stop shop for marking and identification and safety within a facility.
WTN: How much of your time does it take to evolve the e-business product?
Curran: E-business in my group, in the last year, that function has been given to me from more of a corporate perspective, so it probably is consuming about a quarter of my time right now, which is pretty high. Within my team’s business, it is known as one of my top three priorities. My trip to Europe is all about e-business this week, so right after this call I head out. I’m going all the different countries from Germany to France to the U.K. and to Belgium to meet with all the managing directors on kind of a white space brainstorming to see how can we make this engine go faster. We’re doing pretty well right now but we need to get to the next level, so it’s consuming a bit of my time.
WTN: How much of it is guarding against the Internet’s threats?
Curran: I think it’s two things. One, it’s our growth model. Right now, our traditional track marketers have the name list, the mailing catalogs, and the campaigns for acquiring customers. It’s the traditional big, thick catalog. You hope the customers buy and you hope they buy more than once.
We understand that the catalogs are diminishing in popularity. The e-catalog is really important, and getting into spaces that we have not traditionally been able to get to before because printing a catalog is expensive and there’s the impact on the environment and everything else – the mailing – it’s just a slow process.
Last year, when we broke into Sweden, we didn’t have any direct marketing in Sweden. Instead of mailing a catalog out to a bunch of prospects, we did it entirely on “e.” Everything was an e-campaign and everything was through websites, and that business is doing pretty well right now. We have little or no footprint in Sweden. We only have a few customer people that are actually in Sweden that we’re targeting and marketing the customers properly, but we can break into new geographies and regions with new products much quicker.
So it’s a growth engine. It’s also a little bit about protecting against our catalog business diminishing, but it’s interesting. It’s actually been pretty fun.
WTN: Have you made more sense out of the Payment Card Industry’s guidelines than anyone else?
Curran: We’re PCI compliant. We go through all of the compliance things we have to do. It’s a pain [laughs]. I think we’ve been blessed by the fact that we are a single instance of SAP, so our back end is pretty sound and with the encryption levels that we have, so I think we’re going pretty well. We’ve passed our compliance tests, so life is good right now.
WTN: Has the economy prompted you to change your decision-making process for large IT implementations like SAP?
Curran: I would say not only for IT but also for our entire company, the scrutiny and diligence is up a notch, especially if it’s going to be a cash flow project – if there is going to be a large outflow of cash with this project. What is the payback? Is the payback specific enough? So just the filter process got more stringent. We had a pretty good process before and if there is business ownership, that to me is the lesson learned in the last couple of years of doing an SAP implementation or anything large.
The business has to really drive the achievement of the benefits and be accountable for it. I could put SAP in but unless the business leaders are really accountable for delivering the savings they say they are going to get, it’s probably something we should put on the back burner for now.
WTN: What role does IT play in advancing innovative ideas? Is Brady giving innovation even more attention in this environment?
Curran: I like my group from an innovation perspective. I let them go here and there and say I’m willing to open up to conversation about white space ideas whenever somebody can bring a strong business case or something that we haven’t thought of before, inside of IT and also in the business.
My enterprise architect group brought me the idea of moving more to the software as a service model – this was last year. It was more from a cost perspective and a support perspective and also getting to the best-of-breed in a user community. I let my team go and they come back with some pretty innovative ideas. Then being on the executive team at corporate, we’re also challenged to come up with innovative ideas, so how do we get to world-class finance or HR, and working as a team we never look at anything that’s in place as something to hold us back and say, hey, how do we get that problem solved?
Is it IT with a solution? Is it a process change within a business unit? Is it a combination of both? Then we figure out whether we have the talent to get this thing done. What’s it going to cost? How does it stack up with our priorities? Then move forward.
My CEO likes to refer to me as the entrepreneur in IT because it’s one of those things we treat like an entrepreneurial business. I’m here to run the business of IT. That’s what I do.
WTN: Where is the SaaS project right now?
Curran: We completely went away from the SAP for CRM last year to Salesforce.com, so that’s implemented in North America and now we’re moving to Europe and Asia this spring and fall. With HR, we were looking for an HR solution and we went against the grain on that one as well and went to a solution called Workday, which is based out of California, right down the street from Salesforce. So we’re right in the middle of implementing Workday right now to completely transform HR.
The next step is we’re looking to go a complete SaaS model on our e-mail system. We’re in the negotiation phase right now of getting all of our internal e-mail out and looking to either a SaaS model or a completely managed, hosted solution by one of the big two vendors, IBM or Microsoft.
We’re not looking at going to SaaS because it’s a cool word. It actually has a pretty decent business case. Workday has a great business case. Salesforce.com had a great business case. Even if we had SAP internally, it still has a better business case to get product and infrastructure out of our day-to-day operations for these specific applications and move it to a vendor that can do it better than we can.
It’s not for everybody. It has its web services challenges and it has its newness challenges, but Salesforce went so well and Workday is in the early stages but all signs point to it going well. The e-mail system will be the next big decision that, if I look at my infrastructure, at the end of the day the only thing that’s going to be left is SAP’s core, which will probably be in house for a while, and all the bolt-ons that attach to SAP that run our day-to-day business.
A lot of those personal productivity applications, which we are virtualizing and consolidating as much as we can so the footprint in our data center is diminishing quickly. If I can get mail out, mail is probably the biggest infrastructure piece outside of SAP, especially with the e-discovery laws. We’re getting down to one year of mail right now on our system.
That was a big challenge last year that we undertook to get down to one year, and we’ll get down to six months of mail within the next two months here. So the beginning of March we’re going to be down to six months of mail in a system, and that’s all that people will have.
The Curran bio
- Joined Brady Corp. in 1999 as global information technology director, where he was charged with building and deploying a common technology infrastructure.
- Prior to joining Brady, he held various management and consultant positions for Compucom Systems and Speed Queen.
- Responsible for Brady’s global information technology organization, including e-business.
- A graduate of Marian University with a bachelor of business degree and an associate of science degree in electronics and engineering systems.
The Brady profile
- Brady Corp. is a global manufacturer of facility and personal identification products [signs, labels, bar-coding equipment) for the MRO (maintenance, repair, and operations) market. For the OEM (original equipment manufacturing) market, it makes identification products for printed circuit boards, and die cut components for mobile telecommunications and hard-disk drives.
- $1.5 billion in annual revenue.
- 7,500 employees, including 190 full-time IT workers (not including contracted employees).