The Grill: Ramon Baez on outsourcing challenges at Kimberly-Clark

Priority No. 1 for this rising CIO is changing executive mindsets about IT.

Before he was named senior vice president and global CIO at Hewlett-Packard earlier this month, Ramon Baez spent five years as CIO at Kimberly-Clark. Reflecting on his tenure at the $20 billion personal paper products company in an interview with Computerworld, Baez recounts some of his early challenges -- including outsourcing negotiations that were going off the rails and a series of unexpected SAP service outages. As he moves on to HP, Kimberly-Clark's outsourcing relationship is on firm footing, its SAP system is running without a hitch and -- most important -- its IT organization is regarded as a strategic value center.

Just as you started as CIO in 2007, Kimberly-Clark's IT organization faced a big problem. What was happening? We were going through [outsourcing negotiations] that created all sorts of challenges. When you go through that, you have a lot of morale issues and you have to make sure you transition well and stabilize the environment.

What went wrong? The terms of the outsourcing contract for our global IT infrastructure had been misinterpreted by the provider. I knew that if I didn't get engaged right away, Kimberly-Clark was going to face the same fate that occurred at other companies where I had worked. Instead of the model being more efficient and effective, it was actually going to be more expensive and very bureaucratic and difficult.

What did you do about it? The first time the CEO of the outsourcing company and I sat down, I said, "We have to make a change." He said, "I get that. But before we do that, I want to know, do we really have a relationship, you and I?" His attitude was: If we don't have a relationship, let's just kill [the contract] now. He viewed our relationship as being for a lifetime, and that changed the attitude on both sides. We produced a new statement of work that brought the higher-level engineering work back in-house and kept the stuff that was more task-oriented outsourced. It's not so much about the contract but the relationship you have with the leader of the other company. If you don't have a good relationship, then you shouldn't be working with them.

What has been your biggest disappointment? It took much too long to get to transformation in our outsourcing arrangement. And just when we thought we were at the point where we would be transforming, things started breaking. In an outsourced environment, if something is not standard and not easy to follow, when things start acting up, you don't know why. The former team knew what those issues were. The outsource partner didn't.

You had some system outages as well, correct? We had some outages that were frustrating for me as the IT leader, and the CEO and our executive council were very disappointed in us. Outages are going to happen. What's important is that you turn them around very quickly. We didn't.

What was the problem? It was the way we concatenated a bunch of instances of SAP processes. Every time there was a new need or demand coming in, we just stuck another instance on it. Before we knew it, we had a mess. We had multiple providers making mistakes, we had people in our own shop making mistakes, and it caused a ripple effect. The architecture we had in place was too complex, and we didn't know that until things started breaking. Our team and SAP went through the pain points and simplified the environment. In 2010, we had a number of outages. This year, 2012, we have had zero.

The recession was hard on consumer products companies. How did you and your colleagues in IT respond to that challenge at Kimberly-Clark? If we were going to get to the other side of the economic downturn, IT needed to get better at how we deploy capabilities that support the goals and objectives of the businesses.

How did you make that happen? We created these things called business capability road maps. For example, every part of [Kimberly-Clark's] consumer business does trade-promotion management, but each region and country wants to do it a different way. We laid out these road maps, and IT leaders literally [were able to change] the conversation we were having with the business leaders in understanding what we should be deploying in order for them to hit their goals and objectives. We got everyone to agree to one solution and saved tens of millions of dollars.

Everyone talks about making IT a strategic value center, but you actually did that. How? When I came on board, business leaders weren't viewing IT as strategic. The company had decided it might as well just outsource a lot of IT. My boss, the CFO, viewed IT as a game-changer, so it was important to get people to understand how strategic IT can be. It's taken a while to get there, but when people saw what we built -- the whole capability road-mapping -- they understood.

Kimberly-Clark is about to launch a global initiative called Project True North to create a single set of standardized analytic tools for the business. What are the goals for that project? With Project True North, everyone will be using the same standard business driver metrics across the globe. For things like pricing analytics and certain types of marketing, we've been doing that consistently. Now [the company is] trying to go to that next layer and provide business leaders with people who are very knowledgeable about the business and understand the analytics. The first implementation will take place in October.

You do quite a bit with SaaS offerings. Is there a downside? People really don't know how hard it is to change the mindset from on-premises to software as a service. It isn't that the technology part is hard. It's that people made a career on these platforms, and when you change to SaaS, and all they're doing is integration work, IT people wonder, "What am I going to do next?" We still value them, but we need to retool them for what their next role is going to be.

Interview by Robert L. Mitchell

Copyright © 2012 IDG Communications, Inc.

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