At a recent lunch with old friends and IT associates, the topic of corporate acquisitions came up. We revisited some of the nightmares most of us had been through as IT executives who had been asked to merge the people, processes, and systems of another company into our own. We all agreed that consolidating those things through IT is one of the most difficult tasks any CIO faces. Fortunately, along the way, best practices and coping strategies emerge that can make the job easier—and even help you avoid many of the situations that haunt IT during the acquisition process. Here are 10 pitfalls to watch for.
1: System loyalty
Many IT'ers earn their stripes by becoming masters of technology produced by certain vendors. Understandably, they are less than thrilled about their career investments when another company comes in, acquires theirs, and wants to displace the technology they have honed their expertise on—especially when their own systems are better.
If the system choice has been made and is irrevocable, the CIO has to get on top of this. Regardless of their personal thoughts, they have to support the decision publicly and plan to work overtime with staff members who feel that their system has been dispossessed. There is no magic sauce for this, but communicating often and openly with staff, showing staff where they are going to fit in the new organization, and providing cross-training plans to get them new technical knowledge all help.
2: Staff revolution
This goes hand in hand with the previous point. Employees who feel dispossessed in a merger or acquisition can quickly become despondent if the CIO doesn't intervene and show them a new direction they can be part of. This can have a negative impact on the entire morale in IT. Even worse, it can lead to incidents of employees sabotaging systems and data, which can't be tolerated. The CIO should take firm and immediate action if disciplinary measure are required—but must temper this with sensitivity toward the needs of staff who are trying to acclimate to a new situation. These are difficult counter-strategies to balance—but the CIO must find a way
SEE: How to manage IT through a corporate acquisition (Tech Pro Research)
3: The losing CIO syndrome
One company merges into another, so the company doesn't need two CIOs—and one of them has to go. This is also a difficult situation for the one who remains because it is likely that the out-going CIO will have loyalists on staff. This is okay if the out-going CIO is fine with the decision and wants to retire or enjoy a severance package—but it creates problems when the out-going CIO is bitter or hostile and the staff knows it. Deciding who goes and who stays is upper management's decision, but the surviving CIO should be cognizant of those in the organization whose loyalties could be strained and strive to form healthy working relationships with them that begin with open communications.
After acquisition staffing decisions are made, those who remain breathe a sigh of relief because they still have their jobs. But they can also see where colleagues have lost theirs. Consequently, they may feel sadness or guilt. "Management by walking around" helps you take the temperature of various IT areas to see how employees are doing. Often, HR also has tools and suggestions for helping employees through this period of adjustment. The employees who remain on staff feel better if they know that the company is supporting their departing colleagues with placement services and equitable severance packages.
5: Vendor non-cooperation
When companies choose to continue one system and drop another, they don't just turn off a switch. Users on the system to be discontinued must be migrated over to the remaining system. System licenses must also be paid off to the end of their terms. The financial part of this is straightforward, but often the migrations are not. More than one acquisition war story has been told about a vendor of a "losing system" refusing to assist a company in the migration off the system and onto a new one. If you have a vendor like this, an industry consultant familiar with both systems can often help the migration effort. The CIO should immediately inform organizational superiors (and possibly the board) of the issue so that everyone has a heads up.
6: Failure to focus on customers
Customers of both the acquiring and the acquired company depend on these companies' systems and people to serve them—but when systems are migrated, customer service can be disrupted and customers can leave. Surprisingly, many companies don't see this. Instead, the focus is just on the IT part of the migration.
7: Risk Management
IT is on the acquisition check-off list because everyone knows that systems, people, and processes will need to be moved when one company acquires another. However, what is often missing is a risk management evaluation for these system and process migrations. The risk management exercise for acquisitions is often targeted more toward markets, financials, and branding. The wellness of internal operational shifts should also be evaluated, since failures can really affect customer loyalty and outside perceptions of corporate competence.
8: Board communications
The corporate board is a strategic body, so there is natural inclination to keep system and process migrations that are highly operational in nature off the agenda. But any major activity that could affect company performance should also be on the board's radar. The CIO should work closely with the CEO and other C-level officials to coordinate periodic board updates on how the system and process side of a corporate acquisition is going.
9: Disaster recovery and failover for migrations
System and process migrations can get complicated to the point that drop-dead deadlines will be missed. No system or process migration should be pursued without a failover safety net. Normally, this is failover back to the original systems of the company being acquired—until a successful migration can be achieved to the parent company's systems. Staff on all sides of the migration should be briefed on this possibility in advance so that if it has to happen (although you hope it won't), there is a plan in place that can immediately be acted upon without disruption to customers or the companies.
10: Your own messaging
On a personal level, most CIOs have mixed feelings about acquisitions. They might see an acquisition as a boon to the companies involved, but they also know that merging two IT organizations can result in job loss for some and system pain for others. Nevertheless, part of being a leader is understanding that everyone will be watching you for cues during this period of uncertainty. If you can't feel good about a migration or about the direction your company is taking, you might have to consider resigning. Fortunately, in most cases, CIOs do support and understand the need for an acquisition. It then becomes their job to instill the same sense of confidence in their staffs.
- Don't overlook dispute resolution when you negotiate vendor contracts (Tech Pro Research)
- 10 things IT needs to do during a merger
- Beyond the numbers: Don't overlook the people side of mergers and acquisitions
- Avoid rocky vendor-client relations during M&As by planning for bumps in the road
What obstacles have you encountered during the acquisition process? Share your experiences and advice with fellow TechRepublic members.
Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturing company in the semiconductor industry. Mary is a keynote speaker and has more than 1,000 articles, research studies, and technology publications in print.