Barney’s New York. Polo Jeans. Nine West. Most people know the brands better than they know the company behind them – Jones Apparel Group. With annual revenues of $4 billion, Jones Apparel ranks as the apparel industry’s largest manufacturers. However, during the past decade, the company fueled its sales growth through a series of acquisitions.

Since 2000, Jones Apparel has invested more than $55 million in technology to streamline a series of disparate systems resulting from the acquisitions, and to bring in new technologies to create high efficiencies in new and existing businesses. This move has helped the company stay on top and reach its bottom line.

Jones Apparel’s CIO, Paul Lanham, previously the CIO for Ames Department Stores, has spearheaded a long list of initiatives, ranging from standardizing back-office processes to consolidating and upgrading the infrastructure. Lanham recently sat down with Enterpriseleadership.org to discuss how he works to get IT to leverage the size and scale of this company to increase sales margins.

EL: Can you provide me with an overview of how your IT department is organized?

PL: Jones Apparel Group is a decentralized company. Most of the operating companies function independently. Each operating company has an IT department that reports to my pyramid with a dotted line to the principal in the company. The Nine West IT department reports directly to me.

We don’t have the traditional corporate IT department. We set up a joint venture with an Indian off-shore firm, HCL Technological Retail Business Solutions, to handle the development of corporate software projects. In addition to being a CIO, I’m the CEO of HCL, which also develops software for the external marketplace as well.

So, combined, the operating companies have about 163 IT personnel who reside at their respective organization. HCL has about 90 employees.

EL: During the past 10 years, Jones Apparel Group has acquired about 11 companies with a variety of different brands. Have you consolidated systems?

PL: We’ve got some core production systems, which are similar to an ERP system, but our industry doesn’t use this term. For example, Nine West, the footwear company, has its own apparel system. Our moderately-priced shoe company uses a different system – Ascentis. We don’t have a core single SAP-like production that manages all of the brands, but we’ve consolidated on a couple of packages where we have single incidences in the various divisions. And I’ve consolidated on a single financial platform – J.D. Edwards – for Nine West.

EL: You are quoted in a trade publication as saying, “You leverage the size and scale of the company to increase sales margins.” Can you explain how you do this?

PL: We’ve done a great deal to centralize infrastructure services during the past three years. We collapsed 10 data centers down to one,  and centrally manage everything from back-office services up to our financial systems. We’ve centralized and have master agreements with vendors that handle all of our ancillary services such as disaster recovery and help desk. Also, we use Symantec for security, EMC for storage, and SunGard for disaster recovery.

Because we’ve acquired many companies, we made a decision to do what we call “rational integration” for front-office systems. Keeping Ascentis saved us the expense of restructuring, but we moved some companies on to a core production system.

Our corporate strategy is to buy companies, not only to buy the brand, but also to attempt to integrate the merchandizing and sales talents of these companies. We give them a great deal of autonomy in some cases, and none in other cases; our decision depends on the acquired company’s structure. I often tell executives of these companies that hardware and software never made a brand great.

EL: Do you have any governance in place?

PL: We have a separate arm for IT audit compliance, which stays in synch with efforts such as Sarbanes-Oxley compliance, and other disparate elements that fall under change management. At last count, we had 140 projects on the table. This group makes sure we meet the components and standards for these projects, but doesn’t do any formal project management.

We also have an executive committee that assesses the strategic value and return value of projects. The committee makes decisions on which large-scale projects get done first. This committee consists of key corporate executives and division executives who focus on both technology and operational strategy.

EL: Have you gone to best practices such as Six Sigma or CobiT?

PL: We’ve depended on the! We’ve actually consolidated that effort in sync with Sarbanes-Oxley; when we started getting out of the financial realm and into IT, we saw that there weren’t any stringent guidelines. So, we attached ourselves to Control Objectives for Information and Technology [CobiT] to make sense of what we wanted to do first. Whether it’s IT governance, project lifecycle management, security, or infrastructure, we have those tenets firmly in mind. CobiT has helped us make sense out of the entire Sarbanes process without allowing us to be inundated with information from auditors. Six Sigma isn’t a factor in our company.

Our joint venture, HCL, like most of the Indian firms, ascribes to a specific CMM Capability Maturity Model (CMM) level. We’ve requested the CMM level 3; HCL marks it level 5.

EL: You wrote a chapter called “Leading IT Retail” for the book, CEO Leadership. Can you summarize what the reader will learn from this chapter?

PL: The theme of truly aligning IT with the business has become predominant for a CIO’s success or failure. In fact, the term “business alignment” first appeared about eight years ago when the CIO job title became accepted. And this theme continues down to the infrastructure side. It comes down to relationships – how well you interact with your peers.

There is a gap between IT people who’ve progressed through the IT ranks versus business people who gravitated to the CIO role. If you talk with recruiters, the hardest task they have is to find a business person who is a true technologist. Many IT professionals aren’t trained to think like MBAs. People selected a profession such as IT because of specific traits – perhaps they have the personality or skill sets for it.

So, it becomes difficult to find a CIO who has the right mix of business and technology acumen. There are risks if you put a business person in charge of IT without any technology underpinning, and there are risks if you put a pure technologist who is from another company into that role – that person will have a 50 percent success rate. Typically, the people who progress through the ranks only succeed if they are with the same company they started with. They have a fighting chance of understanding the business and creating those relationships over time as opposed to being thrust into that role in another company.

EL: What are the biggest risk you have taken in your career and what did you learn from them?

PL: Prior to Jones, I took a big risk at Ames Department stores when I developed a specific point of view about a $15 million POS implementation  with a very aggressive timetable. We had an aging platform that needed to be replaced. We decided to go with a client server platform from a smaller firm that did a lot of our customer software work. This decision came with a lot of major unknowns. In the end, we purchased about 9,000 terminals.

EL: Linux has become a popular platform for POS applications. Since Jones has a lot of stores, have you considered Linux?

PL: We’ve made a decision to stay away from it. The cost considerations look attractive. However, I fall in the camp of looking at things holistically and I want a vendor that can back a large installation. I don’t think the current Linux distribution vendors can deliver what we require. I’m waiting for Microsoft to get serious about POS.

EL: You are doing offshore software development. Do you think this activity cuts into employment opportunities for IT professionals in the US?

PL: Before you go offshore, you need to be aware of all the hidden costs associated with it. IT has what’s called a blended rate – people have to be here physically for this work, all the infrastructure has to be built around it to support them. A lot of people have the misconception that you can get IT programming for $18 an hour. That’s not the case.

I tell my IT peers that I take the global economic viewpoint. India is feeling a lot of pressure from China. India is progressing through a lifecycle that is driving the price of services up, and we’re in the same boat. But we all have our value-add. Before offshore became a major thrust in our technology economics, we experienced a shortage of programmers in the mid 1990s. We wondered why schools weren’t turning out as many graduates as we needed. Offshore was one of the outlets that helped us fill the gap. I tell people that jobs will always be here at a certain level, but employees have to bring a higher level of value-add.

When I was CIO at Ames, we had a hard time finding people who wanted to work without a lot of dissension on the projects that came up. Some wanted to work in specific areas, such as the Web; others wanted to take on a specific job function, such as a storage administrator.

Technology is feeling what other industries, such as apparel manufacturing, felt 20 years ago. It’s now nationalism versus global technology. I remembered when I outsourced a specific function to IBM Global Services; people got emotional about having to train an IBM person to do their job. That’s one of the hardest things about being a CIO.

EL: Have you read either Harvard Business Press books, The CIO Leader or Does IT Matter?

PL: I’m familiar with Nicholas Carr’s book, Does IT Matter? In fact, at a conference, I sat on a debate panel with him. He didn’t take a very aggressive stand about debating the tenets of IT, though in his book, he comes across as a mad dog. On the other hand, I agreed that some hardware and software components are commodities. Deployments of SAP and Oracle no longer have the competitive advantage they did 10 years ago.

I did, however, debate very vigorously about the apparel manufacturing business being behind in the level and type of investment. An early adoption window for certain technology can provide retail companies with a competitive advantage. For example, Wal-Mart is an ecosystem of a distribution system.

Anyway, Carr’s book has a great title and makes for great debate material between CIOs and their internal executives.

EL: It seems to be harder to be a CIO in retail than in other businesses. You are dealing with real estate – stores, distribution, POS, and various layers in the channel.

PL: The retail and apparel industry invests less money in growth than many other industries. You can have a hard time justifying expenditures based on the measure of gross percent of revenue. To this end, retail and apparel have the least capital technology expense when compared with other industries. Real estate and people make up the biggest chunk of retail expenses. My worse nightmare in retail is a widespread POS outage. It happened to me once. I called that day Black Friday.

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Elizabeth Ferrarini is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.