Q&A: CEVA Logistics

About the company

In 2006, global postage and delivery business TNT decided to sell off its logistics operations, which were acquired by US private equity firm Apollo Management.

In 2007, Apollo added a US-based freight management company called EGL to its portfolio, and combined the two to create CEVA Logistics. Today, the combined company employs more than 50,000 people in over 100 countries. Its warehouse management division boasts more than 12.8 million sq m of storage space.

Not unusually, CEVA’s business has taken a hit in the downturn, with second-quarter revenues – according to preliminary results published in July 2009 – down 6% year-on-year to 1.34 billion. But Peter Dew, CEVA’s CIO since April 2008, is confident that the opportunities for cutting cost out of the combined operations are ripe, as he explains below.

Before joining CEVA, Dew served for ten years as CIO of gas and engineering giant The Linde Group (formerly BOC), a company whose roots can be traced back to 1879. It was CEVA’s youth that attracted him to the role, he says, and the fact that IT is not just a back office function there.

“My background was more in back office IT, so what excited me about working in logistics was that IT is part of the solution; we sell IT,” he explains. “For me, the excitement was the opportunity to be part of the sales process.”

His appointment, Dew says, reflects the realisation by CEVA’s executives that information was central to its business. “I was brought in as CIO after the company decided that information technology was absolutely crucial to the success of a logistics and freight management company,” he explains. “There was a belief that what they needed was someone who had good global experience, was able to operate at the executive board level and had other industry experience to bear.”

In April 2009, Dew was appointed as group human resources director, as well as CIO. This may be an unusual appointment, but he argues that the leadership skills required for business functions are the same as those required for IT, which he describes as a Cinderella function – “It is kept in the back because it isn’t understood.”


Information Age (IA): When you joined CEVA, what was the challenge facing you as you saw it?

Peter Dew (PD): When you enter an organisation at a senior level, early impressions can be misleading. I have a standard methodology I use; the first month I listen, the second month I think, and towards the end of the third month I start to take action, which is what I did. I found that as a company we weren’t very joined up, and that reflected the legacy of both former companies.

And I found that there was a universal view across the company that things needed to change to make us the best. If you are in a CIO position, you have a number of levers you can pull that impact the business. There is the infrastructure, the applications, the IT organisation and how you align with your end-users, whether they are customers or internal users. At the end of the sixth month, we drew up our IT strategy, which focuses on each of these separate areas.

Infrastructure

IA: How would describe your infrastructure strategy?
PD: The wonderful thing about CEVA is that, given its non-joined-up legacy, the opportunities to delight the business with reduced cost through infrastructure consolidation were tremendous.

When I arrived we had 19 data centres, 2,000 servers, over 200 applications, 19 wide area networks and 30,000 PCs and laptops. As a company that sells IT as part of its solution, though, you have to be careful because too much of an emphasis on reducing the cost of production could ultimately impair your ability to provide innovative solutions to your customers. If you are a back office CIO, that is not always the case.

IA: What approach to consolidation are you taking?

PD: Our first stage of consolidation is to get the number of data centres down to six; the second stage will bring it down to one. We need to make sure that in our quest to save money through data centre consolidation we are not moving the applications so far from the end-users that we can’t serve them at the speed that makes business possible. As far as servers are concerned, we are looking at mass virtualisation, and we expect to get our 2,000 servers down to about 600.

In regard to the WANs, we would love to have one global telco but no supplier exists that can meet that requirement. So we are looking at ways we can cut cost while reducing the number of telecommunications providers, and to leverage technologies for voice, data and video consolidation.

IA: How far have you got with this strategy so far?

PD: We are on track. There is an investment required and obviously these are interesting times when it comes to making significant IT investments, but we are being pragmatic, and I’m very happy with where we are.

Applications

IA: What are the aims of your applications strategy?

PD: In the area of warehouse management, we’ve done a lot of work looking at moving to a single warehousing solution, which we deploy across the organisation and therefore benefit from economies of scale and economies of knowledge pools. We will be progressively moving towards a single solution [from Red Prairie] over the next three to five years.

On the transportation management side, none of the big package vendors would meet our overall needs, and we’re still working our way forward. We believe that, unlike the warehouse management, the transportation will be a little heterogenous, because different markets have different requirements.

Our emerging strategy there is moving more towards service-oriented architecture (SOA) with regard to our transportation management.

IA: How else do you intend to use SOA?

PD: We are also looking to deploy SOA in the freight management arena. During my ‘listen, think, act’ phase and in the formulation of the strategy we realised that the systems supporting our freight management business were not up to scratch, and that they would need either renovation or replacement.

However, when we looked at the business processes being used, we saw that there were huge discrepancies in them across the world. I felt that, as opposed to doing something that an IT person could do, such as a systems replacement project that would cost the company a reasonable amount of money and that I wasn’t quite sure would be successful, I was able to describe to my colleagues that we really need to have a business process focus.

I initiated a business process review, but I am now standing to one side because it needs to be a business project. If IT gets too wrapped up in these things, the business can often walk away. I sit on the steering committee but I don’t drive the project and neither should I.

That business process review will in turn lead to a renovated – not replaced – set of freight management applications. That means putting some lipstick on top that make all these applications work in the same way, with an enterprise bus that would manage the interface.

The IT operating model

IA: One of your more drastic measures has been to rename the IT department Information Services & Solutions. What was the thinking behind that?

PD: I have a pet hate. I think calling what we do IT undermines our contribution – we do very little technology any more. So in CEVA we are called Information Services & Solutions. ‘Solutions’ is what we provide for our customers, ‘services’ is what we provide to our internal users. It was very important to get rid of the ‘T’ and replace it with the two concepts.

IA: How have you organised IS&S?

PD:
We’ve totally reorganised the function into three global silos called Infrastructure, Application and Service Management. We have four regions which each have a VP for IS&S. Underneath them they have identical organisations made up of the head of warehouse management solutions, head of freight management solutions, etc.

IA: You have drastically extended the use of outsourced offshore resources at CEVA. Were the processes in place to be able to manage that?

PD: The human resistance factors have always been bigger than process issues. An organisation like [CEVA’s Indian offshore partner] HCL has all the processes they need. One of the things we chose to do was to replace some of our processes, which weren’t that great, with some of HCL’s processes. These included the whole application development process, some ITIL-based service management processes and some in the infrastructure area as well.

IA: How have the internal IS&S staff reacted to offshoring?

PD: I have always believed that if you get yourself through poor career management in a situation where you have allowed your skill set to become commoditised then you will be threatened. The challenge I give to all of CEVA’s IT is that if you feel you are in a rapidly commoditising space then you need to find a way to get into a space where you are not being commoditised. And I’ve noticed that after giving the speech about commoditisation, they’ve been taking much more of an interest in their individual development plan.

You must have a humanistic approach to employment, but if your company is under severe financial pressure, you have to find ways to deliver more bang for your buck.

Business alignment

IA: How have you encouraged IS&S to align with the business? PD: Business alignment is to me most important.

PD: Part of the alignment strategy relates to the reorganisation. The regional VPs of IS&S don’t work for me, they work for the regional MDs. I control the services silos, service management, infrastructure and applications. But as well as maintaining alignment with the business, it is also important to maintain alignment with our IT strategy. Our strategy lays out what we are going to do this year, what we are going to next year and in 2010. It is my constant companion. It’s very transparent and reasonably well communicated. I’m not sure how many people necessarily agree with it, but I find that, as a CIO, if your agenda is public then people tend to understand you.


Measuring success

IA: How successful has your combined IT strategy been so far?

PD: The strategy is still being implemented but our costs have already come down significantly, I think in the 20% range. Plus, 25% of the IS&S workforce has gone offshore in 12 months. We have reorganised, and we understand our direction. My one area of disappointment is that we are still having some service outages. If I’m disappointed at all, it is with our service resilience.

IA: What is the root of this absence of resilience?

PD:
19 data centres, 2,000 servers, over 200 applications, 19 wide area networks and 30,000 PCs and laptops.

Becoming the HR director

IA: Atypically for a CIO, you were recently appointed HR director as well. How did this come about?

PD: I was a CIO in a FTSE company [The Linde Group] for ten years, and there I was able to witness some great functional leadership not only in HR but also in finance and business development. Because I have been initiating and managing large-scale change for the past 20 years, I think some of the things I have learned make it appropriate to be the leader of another function. I don’t have in depth HR skills, but then I couldn’t tell you how to configure an NT or Unix server either.

Our CEO is in touch with the industry, he is particularly in touch with our customers, and he has a strong people sense. He sees that some of the attributes that make a good CIO could be brought to bear in HR.

IA: Which would you say is the most important of these attributes?

PD: Absolutely my experience in organisational change management, which I got from managing large SAP deployments. In a global function you need to get people aligned on the agenda. If you cannot do that, you will be forever in the middle of a conflict. Whether you are aligning IT or finance or HR people, it’s pretty hard if you don’t use some accepted change management principles.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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