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By Edward Cone  |  Posted 10-15-2004 Print Email
: The Human Factor"> The Human Factor

The most critical part of any merger, says Stanley, involves the people who run all this technology. He used to meet with erstwhile Horseshoe CIO Jon Wolfe at neutral sites before the deal went through. Today he just walks down the hall: Wolfe, now a Harrah's employee, has an office two doors down from Stanley's at the company's Las Vegas headquarters. Stanley sees Wolfe, who is focused on integration issues, as a valuable asset. "He was with them for years, and he's got a lot of knowledge and industry expertise," says Stanley, to whom Wolfe now reports. "He's been important to us during this job."

Harrah's management does road shows, forms integration teams to get people involved, and uses retention and performance bonuses to keep them motivated. There may be cuts and attrition in IT staff over time, says Stanley, but no real bloodletting. "It's not draconian like it can be in areas like accounting, where you just don't need two people to do the work anymore."

Communication within Harrah's is critical, says Stanley, and he works to prepare his people for the task of integration. He tells his direct reports about acquisitions as soon as he can, often on the day a deal is announced even though not every possible deal goes though. "Sometimes I feel like the boy who cries wolf, but we've got to be a growth company that is prepared to scale up," he says. "We take our people through the business rationale, talk about what we might sell off and what the implications of that could be."

Whether or not the acquisition by Harrah's is approved by regulators, Caesars CIO Carol Pride will be a busy woman. Caesars Entertainment is a relatively new company. Originally called Park Place Entertainment Corp., the company acquired Grand Casinos and Caesars World in 1999. Park Place Entertainment changed its name to Caesars Entertainment in 2004. Pride was named CIO just days before the Harrah's deal was announced.

Pride seems sanguine about her likely departure in the event of a successful takeover by Harrah's. "Merger, no merger; we buy, they buy; that's just the nature of this business," she says. "Nothing really changes but the name on the paycheck."

Harrah's Take
Harrah's Entertainment Inc. has bought five rival casino companies in the last six years. Now it is upping the ante with its biggest deal yet, a proposed $9.4 billion acquisition of Caesars Entertainment Inc. The take so far:

Company | Showboat Inc.
Year purchased | 1998
Price | $1.05 billion
Number of properties | 4
IT integration status | done

Company | Rio Hotel and Casino
Year purchased | 1999
Price | $987 million
Number of properties | 1
IT integration status | done

Company | Players International
Year purchased | 2000
Price | $439 million
Number of properties | 3
IT integration status | done

Company | Harveys Casino Resorts
Year purchased | 2001
Price | $712 million
Number of properties | 4
IT integration status | done

Company | Horseshoe Gaming
Year purchased | 2004
Price | $1.45 billion
Number of properties | 3
IT integration status | underway

Company | Caesars Entertainment
Year purchased | announced July 2004; regulatory approval pending
Price | $9.4 billion
Number of properties | 28
IT integration status | prospective

Source: CIO Insight

As Pride knows, managing through regulatory limbo is a special challenge. "It's a royal pain, because uncertainty is hard," she says. "But I don't dread that we will be drifting, we've got fun and exciting things to do."

When mergers do happen, she says, "technology is not the hard part. The cultural issues make more of a difference." Under whatever future management Caesars may have, alignment will depend on human factors. For Pride, that starts with keeping people motivated.

Stanley sees the two companies as having different strengths: Harrah's with its strong marketing and customer relationship programs, Caesars with its back-end systems, such as human resources, that are essential to any company.

Says Stanley of Caesars, "Their technology is not as well integrated into the culture and the business of the company, so that's an area where we may find some opportunity to improve efficiencies." Harrah's may also get value from the table-game technology used at Caesars, which tends to draw a higher-end crowd to its properties than does the slots-oriented Harrah's casinos.

One big asset of Caesars is a customer information warehouse with what Pride describes as "multiple terabytes" of data on almost 30 million customers. "Our challenge is to pool and leverage that data," she says. Another area where Caesars has a clear lead is in retailing. "They have more stores, more amenities at their properties, and they have done a better job of integrating them into the operations," says Stanley. "We are looking at doing more of that, and that's a good thing that could come out of this deal." Harrah's is already expanding its understanding of the entertainment end of the gaming business via the Horseshoe acquisition, and Caesars could add to that momentum. The overall customer experience is a big part of the Caesars culture, says Pride. "Our advantages aren't specific to technology, but in the way we manage our customer service and our brand."

A familiar challenge for both companies is regulatory compliance for casinos spread across a maze of different states, all with different rules. "I couldn't have identical systems in all our properties if I wanted to," says Pride. "In New Jersey, it's a requirement to have systems in the casino building itself. Mississippi does things its own way, other states their way."

If things go as planned, Harrah's will be done integrating the Horseshoe properties before getting started on the massive Caesars job. And federal regulators, currently focused on the Mandalay-MGM deal, still have to have their say. Harrah's and Caesars are already making some changes to ensure the deal is approved—and have agreed to sell four casino properties to help smooth antitrust concerns.

Stanley says the slow process isn't all bad. "Hopefully I get a beach vacation in there somewhere."



 

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