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Making mergers, divestitures work for CIOs

Ali Bandukwalla, Pavel Krumkachev, Shalva Nolen and Rajat Sharma | June 13, 2008
Even the most seasoned IT executives worry about an integration's budgetary impact and recognize the advantages of quick completion.

Resolution: Keep It Quick and Simple

The team relied on experience, patience and rigor to overcome these challenges and consolidate and integrate the two organizations' IT systems within just eight months. The team used an ERP application to support the combined employee force with day-one, HR-related services. Integrated order management, finance and support functions soon followed to provide uninterrupted customer service and support. Although productivity and revenue metrics weren't possible, the team recorded the following achievements:

-- ERP instances were consolidated 90 days after the transaction closing.
-- Integration synergies met and exceeded estimates.
-- The team rationalized its IT applications portfolio.
-- The integration supported business synergies and end-state plans.
-- The restructured IT organization successfully supported the newly merged company.

Several critical factors led to the successful IT integration:

-- Limiting the integration's complexity by adhering to an "adopt and go" philosophy;
-- Involving the IT organization early;
-- Clearly communicating expectations for quick integration;
-- Proactively retaining and involving key IT leadership resources from each organization;
-- Using a loosely coupled, modular integration architecture to limit dependencies, expedite application and data consolidation, and provide flexibility and scalability for future M&A initiatives.

Scenario: Establishing a Newly Divested Business Unit

After a company divested one of its business units, the carved-out entity needed the IT infrastructure to support the requirements of more than 400 employees and multiple global locations. The CIO's task: managing the expectations of legacy business users while aligning IT with corporate strategy. The CIO also needed to prioritize the software projects essential to business process improvements and increased revenues. At the same time, an outsourced IT infrastructure required a focus on security, regulations, vendor and cost-management issues.

Challenges: Juggling Priorities, Triaging Tasks

This divestiture involved a number of common challenges for carve-outs:

-- Pre-divestiture confusion about employee and vendor roles, timelines and post-deal status;
-- Strained resources due to simultaneous "business as usual" requirements and divestiture activities;
-- Planning and executing cost reductions for IT infrastructure, data centers, networks, databases and software licenses across multiple global locations;
-- Ripple effects of providing long-term support for dozens of services in the carved-out business;
-- Isolation and security of data for regulatory purposes.

Resolution: Supporting Staff, Decreasing Complexities

The CIO cited the following critical success factors in this effort:

-- Establishing a robust project and program management office early in the planning process;
-- Addressing employee-retention issues early and often;
-- Proactively minimizing the number and complexity of system customizations;
-- Building a repository and certified catalog of services that would help facilitate agreement among stakeholders on the choice of service offerings;
-- Leveraging several crucial projects to demonstrate IT's value to executive management.

Lessons Learned: Be Prepared, Have a Plan

Because so many companies are likely to be involved in MAD activities in coming years, CIOs should prepare their organizations, even if the companies aren't currently engaged in any deals. The scenarios above show that it's important to:


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