Case Study

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Cardinal Health Streamlines Business Operations to Facilitate Growth

Industry Focus

Healthcare products and supply chain services

Size

Annual sales of $91 billion; distributes one third of all pharmaceuticals, medical, lab and surgical products in the U.S.

Networking Solution

MPLS-based IP VPN supports new enterprise software platform and forms the foundation for a comprehensive IT consolidation and restructuring

Business Value

Consolidated infrastructure helps improve customer service, reduce operating costs and support the company's transformation into an integrated healthcare solutions provider

About Our Customer

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $91 billion, global company serving the health care industry with products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety, productivity and profitability, and deliver better care to patients. With a focus on making supply chains more efficient, reducing hospital-acquired infections and breaking the cycle of harmful medication errors, Cardinal Health develops market-leading technologies, including Alaris® IV pumps, Pyxis® automated dispensing systems, MedMined™ electronic infection surveillance service, VIASYS® respiratory care products and the CareFusion™ patient identification system. The company also manufactures medical and surgical products and is one of the largest distributors of pharmaceuticals and medical supplies worldwide. Ranked No. 19 on the Fortune 500, Cardinal Health employs more than 40,000 people on five continents. More information about the company may be found at www.cardinalhealth.com.

Situation

Rapid growth through acquisitions gave Cardinal Health the ability to serve a broad range of needs for its healthcare customers, but its operation as a collection of relatively independent divisions created complexity. An array of information technology platforms, call centers and networks accumulated as the company grew, making it more difficult to incorporate newly-acquired businesses. Cardinal Health needed to bring its operations together to capitalize on the synergies among them and present one face to its customers.

Solution

Cardinal Health has instituted a broad corporate initiative to transform its business and provide even better service to customers. The integration of its sales force and businesses is designed to strengthen customer relationships, streamline operations and support global growth. These business advances are supported by a sweeping information technology transformation. Cardinal Health has moved from multiple networks to a scalable MPLS-based IP Virtual Private Network (VPN) that will support its domestic and global growth. Dozens of call centers have been brought together in two major sites, multiple data centers are being consolidated into two and Cardinal Health is adopting an enterprise-wide software platform. Still years from completion, the transformation initiative has already produced millions of dollars in cost savings.

From Customers, a "Moment of Truth"

As the U.S. healthcare system has grown, Cardinal Health has expanded even faster. Through a series of highly targeted strategic acquisitions, the company enhanced its portfolio of products and services and extended its ability to serve pharmacies, hospitals and physicians, growing into an $91 billion company that supplies one-third of America's medical supply and pharmaceutical needs. The companies Cardinal Health acquired could deliver just about any product or service a healthcare provider might need. As Cardinal Health moved into the 21st century, however, company leaders took a new look at how its legacy of acquisitions was affecting its customers.

"The first realization that we needed to do something differently came from our customers," said Jody Davids, Executive Vice President, Global Shared Services and CIO for Cardinal Health. "We were buying companies that sold to a similar set of customers. Our customers would come to us with a stack of business cards and ask who they should be talking to about what. That was our initial moment of truth when we realized that we needed to do something differently."

Cardinal Health was performing well as a collection of companies, but leaders believed it could do even better by integrating operations, unifying its sales force and consolidating the various voice and data networks, contact centers, information technology platforms and enterprise software systems accumulated through its acquisitions. "Our customers started asking us to help them understand the value of all of these products that we had fitted together," Davids said. "They wanted us to start talking to them about solutions."

In addition to meeting that customer need, consolidation promised to reduce operating costs, smooth the integration of newly-acquired businesses and facilitate Cardinal's plans for global growth. "Operationally we looked fine for a corporation with a lot of companies with multiple logos and different missions and objectives," said Davids. "However, our external benchmarking efforts showed that we could save money by consolidating back office functions. We couldn't get there the way we were operating. So we set a plan in place, looking first at our customers."

Looking Outward and Looking In

Presenting a unified face to the customer put sales people in a new role. Instead of a few items, they would bring a much larger Cardinal Health portfolio to their customers. They needed more knowledge about the product and service lines and a much broader understanding of their customers. How could they get a comprehensive view of all Cardinal Health was selling, and who was doing the buying for a customer as complex as a major hospital?

"To bring all the information together in one place used to require an incredible manual effort: phone calls to a dozen different people, each producing their own spreadsheets that needed to be consolidated," said Davids. "This new approach meant a complete revamping of our technology environment."

A unified approach to the market required a standardized approach to information technology. "We needed to get technology to a state where it would actually enable our vision," said Davids. She and her organization set four goals: Build a world-class technology organization; Consolidate the IT infrastructure; Build a world-class application development capability; and Streamline applications.

Cardinal Health selected AT&T as one of the three technology companies supporting this strategic multi-year program. In a first step, Davids replaced a hodgepodge of special-purpose networks with a single AT&T any-to-any MPLS-based IP network. "We didn't architect our old network, we acquired it," she said. "As we acquired companies, we tried to make it all fit together. Having multiple networks was a barrier to moving information seamlessly around the company."

Today the Cardinal Health network is all new, designed to support the company's plans for growth. "We are a big company but we have tremendous growth aspirations," Davids said. "We really were interested in getting something that could scale with us. The network becomes the foundation. It's the pipeline that all of this information needs to run through."

Cardinal Health is also consolidating its data centers, moving from 42 sites to a final configuration of two. Help desks are being reduced from 15 to two, while help desk toll-free numbers will be slashed from more than 30 to a single number. While Cardinal Health is still in the process of decommissioning its legacy systems, the company's new sales force automation system has gone live. A common financial system to serve the entire enterprise will be next. Though much work remains to be done, consolidation at Cardinal Health has already reduced IT spending by a total of $50 million.

IT Enables a Business Transformation

Davids makes it clear that her focus as CIO is not simply on technology, but on her business. "This isn't an IT transformation," she said, "This is IT enabling our business transformation. I am not doing this just so that I can have a great technology environment. A program like this needs to be supported by strong business drivers – business executives need to understand what we are doing and why." The reasons are many and compelling.

When its consolidated infrastructure is complete two to four years from now, Cardinal Health will be well positioned to keep growing in its U.S. home market and abroad. Future acquisitions will be added to the standard systems and networked together far more readily than before. "It's the combination of the network with the rest of the technology," said Davids, "so that when we acquire a company we clearly have one set of technologies to integrate it into. In the future this will be a more streamlined process."

Beyond growth for Cardinal Health, Davids sees important benefits ahead for healthcare professionals and their patients. "Ultimately the customer will see one company selling one set of solutions, delivering on a consistent basis at the right price point. They will be able to get their products and solutions when and where they need them," she said. "Everything we are driving toward is about making healthcare safer for patients, and making the healthcare environment more productive for healthcare delivery professionals. The products we provide impact people's lives on a daily basis. We can't miss a beat."

Voice of the Customer

"Everything we are driving toward is about making healthcare safer for patients, and making the healthcare environment more productive for healthcare delivery professionals.

– Jody Davids, Cardinal Health Executive Vice President, Global Shared Services and CIO