"A CIO Should Approach Mergers With An Open Mind"

Prasad Jaligama a senior consultant with Infosys talks to Biztech2 and sheds light on how best to manage IT through an M&A.

What are some of the essentials that organisations should examine when entering M&A?

Typically, executive management looks at people, process and technology aspects in an M&A scenario. M&A involves consolidation and rationalisation of processes and systems. Companies are faced with the task of taking decisions on which systems to keep and which systems to be let gone off. This comes with an unwanted scenario of some people losing their roles and responsibilities and acquiring new roles. Companies need to manage this change effectively in order to keep the morale of the employees in a merged scenario. Process & Systems rationalisation both from an internal organisation perspective and an external stakeholder (customer, partners and investors) perspective needs to be handled effectively in order to present a single, unified view of the organisation.

What are the kind of challenges organisations usually face when they get into such a situation?

In an M&A scenario, organisations face challenges in choosing the right technologies for enabling the processes of the merged entity. Typically, the technology enabling the larger user base of the two merging companies takes precedence over the other.

For example, take the case where one entity uses Oracle applications and the other uses SAP applications for their internal processes. Both the technologies are quite robust and mature. The choice between the two is easier if the user base of one is substantially higher than the other. The problem arises when there is a 60:40 user base. In such a case, it may be prudent to look at the depth of the package offering in the industry. For example, SAP is strong in manufacturing domain, while Oracle is strong in services domain. So, a manufacturing firm may choose SAP as their enterprise package for the merged entity and a services firm may choose Oracle as the enterprise package.
What challenges CIOs and how should a CIO approach the merger?

CIOs also face challenge in striking a balance between short-term obligations and long term goals. In the short-run, there will be tremendous inertia for the IT users and business users to change from one technology / application to other. The organisation may continue to use certain applications because of the resistance to change. CIOs need to put in a training strategy in place in order to equip the users with the skill-sets to handle the new systems.

A CIO should approach the merger with an open mind. It is too easy to be dragged into political considerations and have a biased view of the merger. Change Management and Communication are the hallmarks of a good merger. The CIO should involve stakeholders from multiple functions across the merging companies and get their buy-in. CIO should communicate very clearly the vision for the merged enterprise. The charter should lay down the short-term and long-term goals of the merger of IT department.

CIO should also clearly communicate the rationale for taking some decisions. It should be clear that technology is only an enabler, while the people who use it make the difference. Business drives technology and decisions regarding technology should make business sense. CIO will have to evaluate the financial and change management related issues while making the decisions. The CIO may also have to revisit the partnerships with technology vendors in order to arrive at the right decisions.

During the merger of the IT departments, who should take the lead, the acquiring IT department or the target?

For a successful M&A, participation from both the merging IT departments is critical. A sense of partnership should prevail. Political considerations in the organisation can derail the M&A process. The CIO plays a key role in appointing the right programme managers for the transition to a merged organisation. These programme managers act as change agents across the organisation. Governance structure with roles and responsibilities should be laid down for an effective transition to merged entity.