While mergers and the IT challenges that follow get the attention, there have been some interesting cases of the reverse in recent years. IBM sold off its managed infrastructure business to form Kyndryl; German utility E.ON spun out its gas power activities as Uniper; and most recently, General Motors set up a new subsidiary, BrightDrop, to make electric trucks.
Another example is i-Pro, a maker of cameras for surveillance, public safety, medical and industrial applications, which started life within Panasonic.
Its journey to independence began in May 2019, when Panasonic sold an 80% stake in what would become i-Pro to an investment fund. Panasonic pulled several activities together—its security systems business division, an R&D unit designing compact cameras for industrial and medical use, a US subsidiary operating mainly in the public safety sector, and manufacturing facilities in China—and spun them out as an independent entity, Panasonic i-Pro Sensing Solutions Co.
The new company, since renamed simply i-Pro, had the right to use Panasonic’s name for three years, reminding customers of its 60-year history while it built its own reputation. For that time, too, it could rely on Panasonic’s IT team and its ageing SAP ECC systems while it built its own ERP in the cloud. But the clock was ticking.
“For those three years, we still worked closely with Panasonic,” says Rohan Ponnekanti, manager for business systems at i-Pro Americas. “We were using their IT systems, especially the SAP systems, and paying for Panasonic IT to help us with our day-to-day processes.”
IBM Japan was brought in to build a new global ERP system for the new company using SAP S/4HANA, which has an entirely different data structure than the older SAP ECC. The migration went smoothly enough in Japan and in Europe, which at the time was a small part of i-Pro’s activities.
Things were more complicated in the US market, though, which also included the public safety business selling bodycams, dashcams, and digital evidence systems to law enforcement.
Ponnekanti says he was initially brought in to work on the ERP migration globally: “They thought they’d save money having one guy handle everything,” he says. That meant dealing with a vast span of time zones from Japan through China and Europe to Texas, where he’s based. Those hours, and the scale of the challenge getting the US IT systems up and running, led him to refocus his role on the company’s American operations.
“Our company is headquartered in Japan, so all the major decisions were made there,” he says. IBM Japan handled migration of the data for Japan, China, and for the tiny European sales unit. “But when it came to the US, it was a large amount of data and complex business problems they had to deal with,” he says.
The initial plan was for Ponnekanti to liaise with the Panasonic US IT staff to negotiate the extraction of the relevant data from their legacy SAP system, so it could be uploaded to the new system using SAP’s S/4HANA Migration Cockpit.
“Usually when you’re trying to carve out the data, you go by a company code, which is the highest level you can easily carve out,” he says. “But here, everything is under the same company code so it’s more complicated. All our i-Pro data was completely blended in under Panasonic data, so there was no way to differentiate the i-Pro data and extract it. That’s when we realized we really needed a professional data migration company.”
Call the specialists
Ponnekanti turned to Miami-based SAP systems integrator LeverX, which has developed its own data migration tools to help with moves from SAP ECC to S/4HANA.
By now, in the latter part of 2021, Panasonic in the US and i-Pro Americas were separate entities, albeit with an owner in common. And although there was some cooperation between the two, there were limits.
What he wanted to do was have LeverX connect their migration tool to the Panasonic ERP system, analyze the data, and extract the relevant records for insertion into i-Pro’s new system.
He says Panasonic’s IT team wouldn’t let him, though, because although Panasonic agreed to give i-Pro access to the system, for various reasons, this didn’t extend to third parties such as LeverX.
After some discussion, Panasonic’s IT team came up with a proposal: It would extract the relevant data and dump it in Excel files for i-Pro to work with.
“Now the whole project timeline changes, because there’s a lot of manual work needed,” he says. Because of the delay obtaining the data, the migration project start date slipped from October 2021 to early January 2022.
Another big challenge was that i-Pro Americas had no IT staff at this point; Panasonic had held on to the rest of the team.
“I’m the only guy there and I have no team yet,” he says. “I’m still working between the IBM team, the LeverX team and the Panasonic IT team, so it’s quite complicated.”
The biggest challenge, he says, was to understand how to map the data from the old system to the new one. Ponnekanti only joined the company himself once the split was under way, and while he had business staff who had worked with the old SAP system, their knowledge of the application was from the outside in: They weren’t able to explain the technical details of the old data structures, and hadn’t even seen the new S/4HANA system yet.
That left the LeverX staff to figure much of it out for themselves based on their knowledge of the internals of SAP’s software, and their experience of similar migrations elsewhere. This led to some late nights as they cleansed the data, aligned the fields between the old and new SAP implementations, and then transformed the data, renumbering customers, products, and SKUs to meet the requirements of the new system. The overall success of the migration depended heavily on the part played by the team at LeverX, according to Ponnekanti.
By the end of February 2022, it was time to hand off an XML file of all the data to the in-house team in Japan for the first mock data migration.
“We had planned for three mock migrations, but due to the unexpected challenges we lost a lot of time, so we ended up only doing two,” he says. There were still gaps in the data, but most of those were fixed by the second rehearsal, in April, allowing the new system to go live on time in May 2022. There were still a few holes to fix after go-live, but it wasn’t a big issue when the business hit a roadblock, he says.
Learning on the job
With the system up and running, Ponnekanti set out to recruit a team of three to maintain and improve it, one each for the sales, supply chain and finance functions. He looked for staff with backgrounds in consulting, like him, who dealt with challenges for a variety of clients. By the time they joined i-Pro, there was no more access to the Panasonic IT team, so there was no formal knowledge transfer.
Instead, Ponnekanti says, he passed on what he learned during the migration process, and told his recruits to shadow the business staff, sit in their meetings on mute, assess areas of weakness, and try to come up with solutions.
He also started involving them in the global IT team meetings. “I wanted them to hear what was going on at the higher level, so they understand and get to know all the team members from Japan and Europe, and help each other out,” he says.
After about six months, they had built up the necessary knowledge, and today, he and the team are ready to start adding additional SAP modules as the business grows.
Where Panasonic had strict procedures and slow processes, taking eight or nine months to agree even minor changes to IT systems, Ponnekanti says, he’s aiming to build an IT organization that can act quicker. He wants it to take no more than three meetings to get a project going: One in the US to discuss the idea, one with an implementation partner to cost it out, and one with the global CIO in Japan to get final approval.
Don’t let a spin-out spin out of control
Ponnekanti has some advice for IT leaders considering taking on a similar role in other spin-out companies.
The most important thing, he says, is to get a detailed commitment from the parent company up front to provide the necessary access to IT systems and data—including for third parties contracted to do the work.
At the creation of i-Pro, he says, no one really dug into the details. You don’t have to get too technical, he adds, “but at least talk about the systems you’ll need access to, and be precise about what you need.”
Even when the level of cooperation between the old IT team and the new is laid out in a contract, it’s important to maintain that relationship because it’s not just about the data migration.
Finally, where company policy or security concerns run up against the bonds of friendship, and demands for data aren’t met, turn the tables. “Ask them what could they offer given the situation,” he says. Then you can start improvising from the solutions they propose.
CIO, Data Management, IT Leadership, Mergers and Acquisitions