The Challenge of Change for IT

The effect of mergers on information technology

There are many issues that confront organizations during a merger or acquisition. One of the biggest challenges is managing the integration of two different information technology (IT) departments.

“When two organizations merge, it is important for management to have a clear and well defined vision of the end state,” says Tony Balasubramanian, a Calgary-based partner in the Consulting Services practice of PricewaterhouseCoopers (PwC). “Once that vision is established, it is about executing the plan to get there.”

Pre-acquisition due diligence is key. There needs to be an understanding of what the technology components and information systems include, what they cost and how they are organized across each company.

Today, technology isn’t just computers and servers. It can include telephone and security systems, outsourcing agreements, mobile devices, as well as human resources and sales force systems. Technology has a very wide footprint, making its way into just about everything that organizations do; integrating it all is challenging.

During a merger or acquisition, the length of time it takes to integrate everything will depend upon on the size of the organization and the level of complexity that exists in the technology solutions in use. Typically it should be done as rapidly as possible, says Balasubramanian. In an ideal world, everything would be integrated for the combined company for day one as a new organization.

“Organizations need to have a plan in place and the means to move forward swiftly with the integration, including retiring systems where necessary,” Balasubramanian explains. “You don’t want to let the process go past 100 days because things start to become permanent after 100 days.”

In the event that you have two organizations with very disparate systems, companies may choose to look at applications provided by a third party, for example cloud computing. Cloud computing is an emerging delivery model for IT services and applications provided to an organization over the Internet.

In addition to easing the integration of complex systems, cloud computing delivers cost-efficiencies because companies only pay for what they consume without having to incur expensive, up-front investments in hardware and software.

Merging companies could have their mail, office suite and application services all outsourced or provided by a third party through the cloud. “There’s limited infrastructure, implementation or long-term licensing costs,” he says. “Both organizations could migrate to cloud based services, and be fully operational on day one. Many technology vendors are now making their applications and technologies available on a pay for use subscription based service at this time, and we expect the trend to continue.”

However, cloud computing isn’t for everyone. For example, it would not make sense for two oil and gas companies with different systems at their refineries to make the switch where the highest performance computing is required or the systems are highly specialized for their local operations.

While technology is traditionally thought of as being about hardware and software, it is also about the people in the IT department who will be responsible for leading the combined unit. Organizations must focus on getting the strategy, structure and people aligned as rapidly as possible in order to be ready for day one. This means having in place a robust change management plan that includes communications and training to help prepare key personnel for the change.

“Technology is very much about the people who support it,” Balasubramanian explains. “Addressing the needs of those people early in the process and understanding where they fit from an organizational perspective is critical, and may be the most important element for a successful integration.”