Mergers and Outsourcing Go Together -- but not Always

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Last month, I wrote about Gartner analyst Linda Cohen's contention that companies employ IT outsourcing to help prepare themselves for mergers. Makes sense to me, as getting an outside party to take over some of your IT operations should free companies to concentrate on broader business strategies and may help identify areas for post-merger cost savings and efficiency improvements.


The Outsourcing Weblog agrees this makes lots of sense. Outsourcing forces companies to standardize and codify their business processes, according to the post, an exercise that improves a merger's chances for success. This strategy is especially useful if prospective merger partners utilize the same IT vendors -- as is the case in a forthcoming merger between InBev NV/SA and Anheuser-Busch Cos., a deal I reference in my post. In fact, speculates The Outsourcing Weblog, careful observation of outsourcing contract activity could be used to help predict mergers.


In some instances, however, companies opt to bring formerly outsourced IT functions back in-house following a merger, a step taken by UK financial services organization Liverpool Victoria after acquiring three business divisions in less than two years. LV Group staff are working on a big-bang project that involves standardizing processes through adoption of the IT Infrastructure Library and making major infrastructure changes, reports IT Pro.


The LV Group's choice appears to be the right call, thanks to the complexity created by digesting multiple business divisions over such a short timeframe, the sweeping nature of the reorganization, and the desire to adopt ITIL.