Opinion: Why IT Integration is Critical to Merger Success - ' Reasons for IT Integration '
(
Page 2 of 3 )
Failures">
There are two primary reasons for this. First, IT-enabled synergies tend to be fairly long-term benefits that require tremendous complexity to be achieved. For example, while many merger integration programs, such as sales-force integration and seamless order processing, are targeted to take place within the first six months of the close of the deal, a fair percentage of IT-enabled synergies require substantially longer, perhaps 18 months to 24 months past deal close.
These longer-term efforts include standardizing and converging enterprise data and application platforms, such as ERP and supply chain, as well as de-layering or eliminating organizational duplication and complexity. When faced with projects of such magnitude, senior management sometimes demurs, shifting its focus instead to synergies the company can achieve quickly.
The second reason management fails to fully embrace IT integration is that it usually requires significant investment – potentially hundreds of millions of dollars – in areas such as rationalizing applications portfolios, migrating customers and products, and building new capabilities that combine the best of both companies. (Ironically, once explained, Wall Street will tend to accept these one-time costs.)
While we can sympathize with the pressure management feels to deliver savings, at its heart this approach is dangerous – putting the entire transaction at risk. We know this quantitatively as well as qualitatively. Our own Booz Allen analysis has found that about 15 percent of the synergy to be captured from a merger comes directly from savings on IT operations. With another 25 percent stemming from business operations where savings are dependent upon IT, the simple fact is this: $2 of every $5 in merger synergy comes in some way from IT.
A renewed focus on IT integration is clearly needed. Chief Information Officers and other senior IT executives need to make sure senior management is aware of those areas where IT integrations tend to stumble.
Next page: Common Integration Mistakes
test
Expert Voices 
