Five Lessons for Consolidating Data Centers At Merger Time

CIO — Three healthcare organizations in Hawaii looked at banding together in 2001 to cut administrative costs and deliver care more cheaply. Merging the constituent four hospitals, 18 clinics and three data centers, however, did not go smoothly, at least at first. The new organization, Hawaii Pacific Health, failed to save money and actually increased the costs of insurance reimbursements, because each of the three healthcare groups continued to handle their information in their own way, says Steve Robertson, executive vice president and CIO for Hawaii Pacific Health.

"We had this incredible Tower of Babel where we couldn't get the information we needed," Robertson says. "When you look what it took to get information out the door to the insurance company -- it took two dozen people just to get the patient information."

In 2003, Hawaii Pacific Health decided to revamp its health information system and merge its data centers. But at the time, that decision was a hard sell, because each board had to approve spending money and giving up some control over their information technology, Robertson says. The organization selected Hewlett-Packard to help them transition to a modern electronic medical record system.

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"A data center project is a very non-trivial exercise," says John Bennett, worldwide lead for HP's data center transformation solutions group. "It means the relocation of applications and data, the modernization of infrastructure and, at the same time, you have a business to run, so you don't want to disrupt applications."

In this case, the bet paid off. One success metric: Hawaii Pacific Health reduced time to reimbursements by 40 percent and the new servers cost 25 percent less to operate, Roberstson says. For companies looking to consolidate data centers—whether because of a merger or because they have one legacy system too many—here's some lessons from paradise.

1. Use a velvet glove but an iron hand

Consolidation of course means bringing together disparate information technology teams and getting them to work together. That's a tall order, says Hawaii Pacific Health's Robertson.

"We had three separate groups that had very strong opinions on what should be done, and we had layoffs going on because we didn't meet initial revenue expectations," he says. It makes for a hard work environment, he says. "The trust is not there during a merger."

CIOs need to focus on the people and not just the technology, he adds. However, management should decide on a path forward and not let people stray from the plan.

"Pulling those people together, you have to take an almost dictatorial approach," he says. "And you have to do it without losing the good people."

2. Prepare to measure success (or failure)

The complexity of data center operations means that the success or failure of the project might not be readily apparent. Information managers should agree early on a set of metrics that will define the project's achievments, says HP's Bennett.

"If you have the measurements, you are armed for success," Bennett says.

Because of the visibility of such projects, HP does extensive measurements and testing at the beginning so that efficiency gains can be calculated. For example, in many cases the vendor finds that companies are not using all of their assets with some servers, sometimes called ghost servers, sitting idle consuming energy. In some cases, as much as 15 percent of a data center may not be used, he says.

3. Fewer consultants equals less cost

While Hawaii Pacific used HP to help consolidate their data centers and information technology, using as few consultants as possible is the way to go, says Robertson.

"I think we have one of the best IT shops in the country," he says. "I think we did it right."

Using fewer consultants builds experience among team members and cuts a lot of costs, Roberston says. Hawaii Pacific spent 30 to 40 percent less than what the average information-technology rollout might cost, Robertson says.

In total, the CIO estimates that it took his team a little less than a year to complete the data center consolidation. "That was very aggressive," he says.

4. Your partners must understand the business

If you do work with a consulting company as a partner, make sure that partner learns what your business units want from the data center, says Vernon Turner, a senior vice president for IDC.

"You need to make sure that they understand the broader impact on the business unit," Turner says.

For Hawaii Pacific Health, one business impact was clear: Post data center transformation, the company saved about $23 million in reimbursed healthcare expenses that the company might not have collected with its old systems, because they did not send the right information to the right companies.

5. Beware the Big Bang approach

Finally, companies should not try to quickly consolidate data center operations, Robertson says.

"Some people take a Big Bang approach and turn everything on at once, and those typically end in disaster," he says.

Hawaii Pacific Health moved much of its information technology to the new systems in about a year; but as of 2009, the organization is "99 percent complete," with a few odds and ends to finish up, Roberston says.

For another CIO's experience with a tough data center consolidation, see "Extreme Data Center Makeover: Alcatel's CIO Shares Seven Critical Lessons from a Massive Consolidation".

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