24 August 2014
By Paul Fick, Chief Technology Officer, Jasco
Electronics Holdings
Mergers and
acquisitions are useful when it comes to helping organisations to achieve
business objectives. However, this strategy has the potential to create
enormous complexity when it comes to consolidating the operations of the two
disparate organisations involved in the merger or acquisition. Each business
will not only have its own premises, but also its own human resources (HR) functions,
not to mention disparate ICT solutions including Customer Relationship
Management (CRM), Enterprise Resource Planning (ERP) and financial or accounting
systems. Running two complete sets of solutions across each organisation is
often not cost effective, and can cause further challenges down the line. In
order to leverage maximum effectiveness and business benefit from a merger or
acquisition, it is typically advisable to consolidate ICT infrastructure. While
not always a simple task, proper planning, preparation and some forethought can
reduce the complexity that is associated with the consolidation of disparate
ICT solutions and infrastructure.
Mergers and
acquisitions are often used by organisations to gain access to expertise,
additional profits, new markets and customers, technology and technology partnerships,
or processes and infrastructure, or a combination of these. Understanding the
reasons behind the merger or acquisition is the first step in ensuring
successful consolidation of ICT, as it is vital to ensure that during this
process, operations are not disrupted, nor is the merged or acquired company damaged
or destroyed. When it comes to consolidating ICT, the deal structure itself
also needs to be considered – was it a clean acquisition that will allow for a
complete merger into the purchasing organisation? If not, it may be necessary
to keep infrastructure separate indefinitely or for some time. In this
instance, it is vital to still capitalise on synergies wherever possible. In addition,
it is necessary to understand whether or not management and control needs to be
centralised. If so, more integration will be required.
One of the most
obvious challenges with running two sets of ICT infrastructure is the cost
duplication in terms of the licensing, support, maintenance and infrastructure
required to accommodate such a siloed approach. In addition, if infrastructures
are run separately, the end result will inevitably be disparate systems that
may not provide easy exchange or consolidation of information. Support becomes
a challenge, since often two different skills sets are necessary, requiring two
different support teams. In this scenario it becomes impossible to leverage
economies of scale in terms of people and systems, and it is more difficult to
capitalise on volume purchasing. In addition, the integration and consolidation
of financial, business support systems and operational support systems is not easy
and often downright impossible.
These challenges
can cause a number of issues for the business. A siloed approach to technology
inevitably causes lack of visibility due to the difficulty in obtaining a
complete, consolidated view of the organisation. In addition, ICT plays a
supporting role for the business. If IT systems are not properly integrated and
the systems do not work in similar ways, this will have a negative impact on
operations and business efficiency.
Converging
separate ICT solutions and infrastructures requires careful planning and
execution in order to ensure the most successful outcome. Firstly, gaining an
understanding of both businesses and the merger or acquisition deal is
essential in order to understand whether or not systems should in fact be integrated,
or should remain separate. From there, the various systems should be mapped,
along with processes, to enable a greater understanding of the systems and
infrastructure as well as the reasons for them. Any possible synergies should
also be explored, and the cost impact of convergence must be fully understood.
In addition, it is vital to have a roll-back plan, in order to ensure that
historical information or the ability to access such information is not lost.
Above all, during any consolidation, the ability for customers and other
stakeholders to communicate with the business must be preserved, as well as its
internal communication ability, otherwise it will lose revenue, reputation and
possible future business.
If planned and
executed properly, over off-peak periods, or during evenings and weekends, the
downtime associated with such a consolidation can be negligible, minimising the
negative impact to operations. In addition to careful planning and
implementation, return on investment (ROI) must be carefully monitored. In
general, the ROI is positive from the consolidation of ICT infrastructure,
however such a process must never be done blindly. Without the right
consideration, the consolidation could end up costing more than running the
infrastructures separately. It is also vital to maintain the support of the
people within both the purchasing and the acquired organisation. Soft issues
such as lack of communication, lack of change management and lack of
stakeholder management can destroy any perceived ROI.
A converged ICT
infrastructure can provide a number of benefits, including often-significant
cost savings as well as greater systems integration, leading to improved
information availability across the merged organisation. Consolidated ICT is also
easier to run and maintain, and supports operational excellence through more
efficient project management, improved financial reporting and planning, as
well as more accurate budgeting and forecasting. In order to ensure the best
outcome for current and future mergers and acquisitions, organisations should
always plan carefully, document the process, ensure that lessons learnt are
articulated and embedded in the process documentation, and above all ensure
they do not make the same mistake twice.