Opinion: Why IT Integration is Critical to Merger Success

The colossal merger of Union Pacific and Southern Pacific in 1996 created the nation’s biggest railroad, one that today covers more than 32,000 miles of track, with 8,000 locomotives and more than 100,000 freight cars. Yet integrating the two railroad companies was something of a train wreck.

Difficulty combining the two railroads’ computer systems led to substantial service disruptions. The approach, according to Industry Week, was to gradually migrate Southern Pacific’s aging systems to those of Union Pacific, but this resulted in unanticipated parallel processing for more than a year, hurting the railroads’ ability to manage day-to-day operations. Railcars simply “disappeared,” with customers unable to locate their shipments. When staff at one of the railroads received phone inquiries, they would refer the calls to the other railroad. Customers, the magazine quoted one source as saying, “felt like Ping-Pong balls.” The resulting gridlock cost the nation’s shippers an estimated $2 billion.

Read more about Union Pacific: Union Pacific Gets Back on Track

Ten years later, we find ourselves in the midst of another record-breaking merger wave – yet the lessons of the past have not been learned. Sadly, the mistakes these two railroads made in the mid-1990s are being repeated today.

From our vantage point, viewing numerous integrations across industries, it is clear that senior management still tends to approach IT integration in a perfunctory, arms-length manner. This both tempts fate and misses out on the very real benefits a well-planned and effectively executed IT integration can bring.

Next page: Reasons for IT Integration Failures