Integration Woes Can Cause Serious Business Problems

Loraine Lawson

Failure to plan for integrating or replacing enterprise applications can cause major problems with corporate mergers or acquisitions, according to a recent vnunet.com article.

 

A 2007 Hay Group study looked at European corporate buy-outs and mergers and found 90 percent fell short of their objectives. While there are a variety of reasons why the mergers/acquisitions stumbled -- including mismanagement and cultural problems -- 75 percent of managers worldwide admitted they do not always consider how integrating IT systems will affect operations after the merger.

 

Ton Dobbe, a VP at a Netherlands-based enterprise resource planning company, sees a connection. He told vnunet.com:

"The expected benefits of a merger - shareholder value and economic scale - are often lost due to inadequate post-merger adaptation of enterprise applications. Legacy ERP systems in particular are very difficult and costly to change. It is typically companies in rapid change mode that suffer from this. "

That's a shame, because as Dobbe points out, this is one of the few areas of a merger that you can decide how to address before the deal is signed.

 

Dobbe also claims it might be easier to just migrate to a new system, which raises a valid question: Is integration always worth pursuing? Or is it sometimes wiser to rip and replace?

 


eWEEK recently featured an article Cars.com's decision to solve its integration problems by starting over.

 

Cars.com CTO Manny Montejano said the company had so many integration problems, they finally decided -- with the help of an analysis by a systems integrator -- to replace the whole infrastructure.

 

That's not a decision for the faint of heart -- but in the case of Cars.com, the situation was so bad, it was interfering with the business. The company could only deliver one project per year because there were just too many technology pieces, versions, vendors and sources, said Montejano:

"Even as we were writing very clean software on our end, we would have integration issues. Mitigating our integration issues became a finger-pointing exercise. I just wanted to be able to call one vendor to solve a problem."

Cars.com moved to an all IBM platform, with a service-oriented architecture. Currently, the company still uses a bridge to legacy systems -- but ultimately, the plan is to phase out all pre-existing systems.



Add Comment      Leave a comment on this blog post
Jun 17, 2008 10:23 AM Joe Wlodynski Joe Wlodynski  says:
We just completed recently a major domain conversion to Active Directory and the biggest problem was all Legacy Applications took extra time to convert. Due to the constant flux of individual departments (people quitting) who origionally built the applications, many times no one had any idea how it was configured. Also, the next problem was changes made remotely to older (slower) machines had to be done locally or "hands on" due to their peformance and unable to accept the change. Reply
Jun 19, 2008 11:22 AM Charles Rathmann Charles Rathmann  says:
Excellent article. Here at IFS, we know that this is a prime concern of our customers, and indeed, uniting acquired divisions into a cohesive company unit seems to be one of the prime drivers for adopting IFS Applications. The ability to easily expand the enterprise applications to newly acquired divisions is another chief concern, from what I have seen. Reply

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