Shake-up At Centrobe

Folio: The Magazine for Magazine Management, Dec 1, 1999 by Mary Harvey

In the wake of the latest management shift, Centrobe clients express concern and weigh fulfillment options.

In the two years since Centrobe Inc. was acquired by EDS, publisher clients say the Louisville, Colorado-based fulfillment and database giant has seen nothing but turmoil. And the latest in a long line of top management shakeups has some questioning Centrobe's stability and rethinking their own fulfillment options.

In late October, EDS dismissed Neo-data Services veteran Nicholas Cuccaro, president of Centrobe's Publications and Associations division for less than eight months, and replaced him with Louis Ivey, an account executive from EDS's transportation division. In March, Cuccaro had replaced Mike Beck, a 16-year veteran of EDS, who had held the position for just seven months before reportedly resigning.

Cuccaro's departure was "part of a broader, ongoing workforce reduction" by EDS, says Centrobe spokesman Bob Wientzen. But the move came just six weeks after the Piano, Texas-based parent company appointed EDS veteran Mike Litteli as head of Centrobe, replacing Bob McCashin, who had become president and CEO of Centrobe when EDS acquired the company. Littell's appointment coincided with EDS's restructuring of its 50 small business units into four business lines, including Business Process Management, of which Centrobe is a part.

"We're extremely disturbed by what's going on and sincerely wonder what kind of commitment EDS has to this business," says an executive at one of Centrobe's client companies. "Stirring up the management cauldron repeatedly in such a short amount of time is a very strong indication to the outside world that things are out of control."

Says an executive at a different client company, "People are very distressed and upset. The company has had so many changes, we think, 'It's Monday, there must be another Centrobe reorganization.'"

Yet Centrobe executives insist that the fulfillment business has maintained continuity. Biff Bilstein, vice president, client relations of the Publications and Associations division, says that throughout the last two years' changes, the division s management team has remained virtually unchanged. "Every one of [Ivey's] direct reports has had several years' experience in subscription fulfillment."

The company also insists upon EDS's commitment to Centrobe's Publications and Associations division, which represents about 3 percent of the parent company's total revenue. "EDS has no plans to sell the Publications and Associations division of Centrobe," says Bilstein. "They want to grow the revenue, reduce expenses and get profit margins in line with EDS's expectations."

Ivey was not available for comment, but Centrobe executives say Ivey assured clients of EDS's commitment to Centrobe's fulfillment business during a regularly scheduled management briefing in San Francisco in early November. At press time, Ivey was planning to meet one-on-one with various clients in New York to discuss moving forward, the company said.

In the meantime, however, publishers are expressing concern about service levels. "They can't process the mail as it is," says one Centrobe client. "They've got huge backups in the mailroom, and orders are not getting on file in a timely manner."

The concern was further heightened when Centrobe laid off about 30 employees in both Boulder, Colorado, and Des Moines, Iowa, in the last week of October. Bilstein says the layoffs represented less than 1.5 percent of the total Publications and Associations workforce, and that "each manager constructed the layoffs in a way that would not affect service levels."

By September of this year, EDS had already reduced its workforce by 8,200 jobs, to 126,000, as part of a campaign announced in April to trim $1 billion from operational expenses.

While some Centrobe clients say they are taking another look at their contracts, the question of where their business could go in an industry with a limited magazine-fulfillment capacity looms. Publishers say the fulfillment firms that could handle their business are already either at or near their capacity.

Indeed, most clients say they'd prefer to stay put. "The industry and Centrobe have had a symbiotic relationship in which both parties are reliant on each other for their survival," says Sarah Hiner, vice president of corporate development of Stamford, Connecticut-based Boardroom Inc. "It's two halves of a whole, and we want to see it continue."

And for large, multi-title companies in particular, the prospect of a conversion that could take well over a year is daunting. "A conversion is a pain in the neck," says one Centrobe client. "All things being equal, you want to avoid it at all costs."

Centrobe Chronology

1963

A.C. Nielsen Company and Esquire Inc. found Neodata in a joint venture.

AUGUST 1997

Neodata is acquired by Electronic Data Systems Corporation.

MAY 1998

Neodata name is dropped as company is merged into Centrobe, a new multi service company that includes three other EDS properties.