Smart IT Spending Helps 'Stairmaster' Firm Stay Fit and Nimble

Q: Provide a little background about the company and yourself

A: We started as Bowflex, this fairly revolutionary product in the late 80s. It wasn't until the mid 90s that [CEO] Brian [Cook] started the direct-marketing model and got the money by going public on Canadian stock market. Since then the Bowflex product has really taken off. We expanded into other markets with the purchase of Nautilus in 1999 ... The most recent acquisition was Schwinn four months ago now and we just acquired Stairmaster. I've been with company two years. I came in as CIO. I was previously at Electric Light Wave, a commercial local exchange carrier phone company, also in Vancouver. I was director of IT there.

Q: How will the economic downturn affect the pace of technological change and change management in IT?

A: Overall --I'll go out on a limb here-- I think it will probably force some speedier changes in information technology. There's a term we use: a plug-and-play model for IT, or what's technically known as distributed N-tier. It's where you have a loosely coupled IT architecture with the user interface being browser-based and the business logic in independent layers and a data layer or layers -- it could be more than one. So there are three tiers. With that architecture, the information technology of the business can react faster and at much less cost than client/server or earlier technologies. The Web model is seamless throughout the organization. It's not like over here in accounting and finance we use client/server technology, but I have a Web business, which is the traditional thought of the Web being B2C. The entire infrastructure of the organization is set in a loosely coupled Web architecture.

It's something we have started to adopt. I predict I will be able to reduce the IT cost in the long run ... If you look at the industry --retail, manufacturing, etc.-- somewhere between 2 and 4 percent of total revenues is spent on IT. Of course, that's significantly different for technology companies. Direct Focus is not a traditional retail business but that's how we're compared. So using those industry numbers--and of course they vary--but what my CFO and CEO have picked as a standard for us [a measure of like companies] is 2 to 4 percent of revenue is spent on IT. I believe I can reduce that by a percentage point and still increase IT's capability to respond to my business community very rapidly.

Q: In what time frame are we talking about?

A: I started the project last year and it will be done this year, so about 12 months. To complete a re-build of the IT architectural structure to our vision is to have a very nimble IT organization.

Q: How are you doing that?

A: We spent a considerable amount of time evaluating the typical buy versus build and we looked at quite a number of CRM, ECRM, ERP, supply chain, etc., commercial off-the-shelf packages and selected two: a CRM and ERP package. [Editor's note: Hall declined to name the products.] Right now we're having extraordinary difficulty with their professional services. In terms of getting them installed, the teams ... don't seen to have my best interests at heart. They want to tie me to their services, their products, their way, and I want a plug-and-play model so that I as a company can move rapidly to add new products, company acquisitions. In addition to off-the-shelf, we are also building custom software for -- we term it order management, but we have four custom ground up software development teams working on software that's unique to the business. How we integrate the commercial packages and the custom packages so we have a seamless single user interface throughout the business that's entirely Web [will be the challenge.] We will be a first with exception of 3 percent of the businesses in the world, I'm told.

A single user interface means if you are a call center rep, or an individual in the warehouse receiving product, or a B2B partner, you will hit our systems via the Web. The way I'm building the business, according to the team lead for Deloitte & Touche, which is helping us install one of the off-the-shelf packages, 97 percent of companies they deal with are not doing this.

Q: What is occupying most of your attention these days?

A: Acquisitions, right now. The goal is to be able to take advantage of an opportunity if it comes. We're not looking to go out and take over anybody but in this case Stairmaster went into bankruptcy ... so the opportunity for our business was very good. It adds to our business line very well, so it's a very, very good fit.

Q: But it must pose big headaches for you. What would be an example of one of the challenges you're facing?

A: The example with Schwinn was, it had two major areas: bicycle and fitness, so the question was, how do we break up the bicycle business from the fitness business, which we bought, and still maintain a level of sales, spare parts and keep individuals, and [deal with] the resulting turmoil in IT with what's left with servers, boxes, etc. We've done pretty well stabilizing and it looks very good. We have some software and networking and hardware replacements that haven't occurred yet and one major software upgrade that needs to occur to get the fitness business ready for the future. But I have to take into account what we build and the growth. Are we going to double, are we targeting doubling, do I have capacity to integrate an acquisition? We have to replace and upgrade items for Schwinn fitness. We have to ensure we are doing so with an eye on growth. I will have not quite as difficult a time with Stairmaster because it's not a breakup; we're buying it in total.

Q: What's your view on implementation of new technologies and bleeding edge versus a more conservative approach?

A: I've been fairly conservative in the past prior to coming to Direct Focus, but from my description of distributed N-Tier [architecture], I'm finding with the consulting company and software company I'm dealing with that this is bleeding edge to them. I guess my view is I don't ever want to be on bleeding edge -- I don't mind bleeding edge if the business can justify the need for the kind of flexibility and capability that newer technology offers. Then they should aggressively pursue leading edge. Otherwise, be conservative.

Q: How large is your IT department and what skills are you in most need of right now?

A: Forty people. Right now we're doing great in hiring but the Portland/Vancouver area happens to have the highest unemployment rate in U.S. right now. It's allowed me to hire some very highly skilled LAN/WAN engineers, Web developers, software engineers. I have one help desk opening and one software engineering opening and I have several very good candidates and offers are being made so it's quite unique compared to year ago or more.

Q: How do you approach the software/vendor selection process?

A: Our methodology even though we're a small company is ... the folks we hire are extraordinarily highly skilled and qualified and when we deal with vendors we do a lot of up-front due diligence. Take the enterprise application integration tool [we're looking at installing]. The reason we're going for that is it's easier to plug in either custom or off-the-shelf software assuming it meets a certain set of standards and [EAI software] allows me to monitor all messaging of software and applications and queue it if something breaks so the whole system doesn't break. ... There's seven of us in IT that do research such as white papers, Internet, interviews, so when we looked for this EAI tool we did quite a bit of due diligence up front to find out about the companies and products and then we took the best three and let them know they're competing against one another and find out how they can best meet our objective. We pick Big Five companies to help us in the due diligence process. In the RFP process, depending on what I have going on at the time, I do it or outsource it. The selection of top five or top three candidates is our selection.

Q: What are the ingredients of a good vendor relationship?

A: Partnership is the term everyone uses today, meaning there has to be a closer relationship with the revealing of information between the two companies across the board. Part of that relationship is the two companies understand the philosophy and the mission and ultimate goals of that company's IT department ... I can tell you that right now of the vendors I'm dealing with--and I deal with a lot--vendors are batting 1 percent of holding up their end of the partnership. They talk like they want a partnership, they give you all the great words, you sign the contract and then it's almost one way. ... I don't mind spending money to get there, I just want to get to my business's goal, not theirs. I'm having to hold very, very firm reigns on where we're going. It's like trying to have a stagecoach with 16 horses and one of these is trying to take you down a road you laid forth and others are going in a slightly different direction. I'm extraordinarily frustrated with vendors, contractors, value added resellers, the companies we're buying software from.

Q: Who do you report to and what goals have been set by you or by upper management for the coming year?

A: I report to the president and CEO. The goals for this year are to grow the business 25 percent. We have a potential acquisition this year ... I want to stabilize the current acquisitions and integrate them into Direct Focus. We want to release at least one major new product line in the commercial, direct and retail areas. Those are some of the goals for the company. I have list of about 20 goals for 2002 ... that I display publicly because I bring people in and it's a partnership and they should know what we're doing.

Q: What are some of those goals?

A: We're building a second computer room to support a call center consolidation with 250 seats. We are looking at wireless applications for sales reps, and we're going to do a test of Web TV for the direct marketing [group], which will be a challenge technically. Building a storage area network is another. And we have a couple of portal projects. That's all I'll say.

Click through to Page 2 of Wayne Hall's interview, where he discusses:

• Using the Web to communicate with customers
  
• Finding and retaining talented IT staff
  
• What skills served him best on the way to becoming a CIO
  
• What keeps him awake at night