The remaining three cases will not find their way into the annals of successful IT rationalisations. The stakeholders had, and still have, two unpalatable options.
The first is to replace all the platforms with a brand new one, at great cost and business disruption, but eventually delivering the long-awaited synergies and efficiencies. The second is to leave all the platforms in place, incurring ongoing cost and deferring synergies but avoiding disruption. The second option has been chosen in all three cases, more or less by default. Some mixed options, taking components from various old and new platforms, are theoretically possible but frightening in practice.
These cautionary tales go some way to explaining why cost-savings targets are not usually met, and illustrate what can happen when you sign off before completing the homework.
We’ve observed that mergers and acquisitions pass through six stages. Astute CIO will recognise these stages and can apply the learnings at the end of in this article.
Stage 1: Pre-merger Hype
Each participant extols the virtues of their IT assets, and the colossal benefits of consolidation onto their own platform.
Comments made during this stage may provide some useful guidance to set scope and objectives for the next stage. . .
Stage 2: Due Diligence
IT facilities -- especially data and applications -- are subject to cursory examination. Conceptual integration programs are developed based on sketchy details and personal agendas.
If you’re the CIO and you intend to stick around, this stage is career-defining. Due diligence effort has to be commensurate with the size of the problem.
We were engaged to lead the development of an integration strategy for what was probably Australia’s biggest acquisition, in an IT context, outside the banking sector. The eventual works program cost somewhere between $100 and $200 million, much to the surprise of the management, the board and the shareholders. Pre-acquisition due diligence amounted to less than four person-weeks, so due diligence costs were 0.01% of project costs -- you get what you pay for.
In another case involving two IT-centric businesses delivering web-based services, pre-acquisition due diligence for IT matters was, astonishingly, zero. If a proper due diligence investigation is to be conducted, it should be by independent experts with no stake in the eventual outcome. (If the investigators aren’t expert in the industry sector, they won’t be able to work fast enough).
Stage 3: Early Days
The business climate may be unclear, confused or combative. Key participants, including the CIO, are focussed on personal positioning.
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