Four Lessons for IT Integration After a Merger and Acquisition

Loraine Lawson

Wells Fargo CEO John Stumpf is quoted in an InformationWeek article this week as saying IT integration is a "top priority" for the company right now.

 

You may remember that last year, Wells Fargo bought out financial services company Wachovia, in a much-publicized deal that InformationWeek calls "one of the most closely watched acquisitions in the banking industry." For this company, IT integration isn't just "busines as usual." Stockholders and financial analysts are watching and their success or failure could depend on how well they manage to navigate merging these systems and the related business functions.

 

And it's a massive project. The article notes that in a typical year, an IT organization "might work on 20 to 30 percent of its software platforms in a significant way." But Wells Fargo-Wachovia will work on approximately 80 percent of its IT systems during the integration.

 

These reasons alone make it a compelling integration case study for stockholders, business people and those worried about the financial health of the country.

 

But for IT practitioners facing integrations in the aftermath of mergers and acquisitions, there is a better reason to read this article: The IT leaders involved talk frankly about how they're prioritizing and managing this massive integration project. In particular, they share how Wells Fargo and Wachovia are focusing their integration efforts on the strategic needs of the business.


 

This is particularly impressive when you consider that IT integration is usually an afterthought during mergers and acquisitions.

 

Here are four important lessons I took away from their story:

 

  • Establish an integration strategy that involves the business. As it turned out, Wachovia had recent experience with integration during M&As, so they applied that methodology to this integration. Each business unit must create a "target operating model" that outlines the unit's product plans, workforce size, location, technology needs and any unmet technology or product requirements. The unit heads then walk through everyone's needs as a group, prioritizing, looking for duplication, etc.
  • Keep it simple. Underlying the IT integration strategy was a simple assumption: Wells Fargo's system would take precedence, unless there was a clear advantage to Wachovia's system. They also decided to always opt for one or the other-and resist the temptation to invest in a totally different system or software.
  • Acknowledge the IT staff's emotions and insecurities. Face it: Mergers and acquisitions are scary for employees. You're always wondering when and where the ax will fall. And as Mike David, former CIO for Wachovia and now the head of the Technology Integration Office, says in the article, techies often feel their careers are tied to a particular software or system. This can make deciding which systems stay and which go very emotional for the IT staff. He tries to offset this by reminding IT their value is in their experience and knowledge about technology in general-not a particular system.
  • Establish key metrics to monitor your progress. Wells Fargo-Wachavio is tracking system availability, employee retention, budgets and operational efficiency to ensure integration isn't negatively impacting the business.

 

Thanks to their strategic approach to the integration, IT did manage to find some cost-saving synergies. For instance, Wachovia had recently built a brand new data center-so Wells Fargo didn't need to move forward with its original plan to expand its own data center.

 

Consolidating data centers also paid off when three Hawaiian health care centers merged, according to a recent CIO.com article, "Five Lessons for Consolidating Data Centers At Merger Time." The merge cut the costs of operating data center servers by 25 percent and reduced the time to reimbursements by 40 percent.



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