• Technology
  • McKinsey & Co.

Taming Postmerger IT Integration

Lessons from the IT-heavy banking sector can bring balance to this critical task.

To manage the trade-offs, companies must manage integration with one eye on the synergies they want to realize from it. In other words, they must quickly identify target products, systems platforms, product gaps, migration routines, and specific customer sets — and then create a detailed and comprehensive migration plan for the integration team to follow meticulously. The result should be a complete overview of the way a company plans to get from today’s environment to the future one. The best plan will explain in detail how the company will realize every anticipated source of synergy (Exhibit 1).

A Question of Leadership

As difficult as it is to get the timing right, sorting out the needs of separate and powerful interest groups can be even tougher. In retailing, for example, such groups include the merchants who create promotions, the information technology staff, and the operations employees who manage the customer interface — with all of them jockeying to manage or influence the integration process. In banks, these groups include business units, product specialists, and IT, but most banks simply relinquish control to the tech specialists in IT. Not surprisingly, tech specialists tend to push for the best solutions from an IT perspective; indeed, important business decisions about the combined entity’s product offerings may be based on how easy or difficult they are to implement technologically. In contrast, a business unit that takes the lead may become overly protective of its customers by limiting any changes that might affect them or its business practices — and not worrying about the enormous technology costs it may be incurring.

At banks, we have found that product specialists, despite their inherent biases, are best suited to play a balancing role in this triangle of players — not business units or the technology staff, as others have suggested. (Bradford Brown and Vikram Malhotra, Tying the Knot: IT Systems in a Merger,” The McKinsey Quarterly, 2003 Number 4, pp. 128–38.) In most banking organizations, the product units are responsible — during business-as-usual situations — for maintaining and developing a profitable portfolio of products in line with the needs of customers. These units therefore serve as the focal point for balancing those needs (defined by the business units) with the cost of meeting them (dictated by the technology side). As concerns about the cost of merging systems yield to the benefits of customer retention and revenues, the leadership of the product units will be all the more beneficial for companies.

When the technology side claims that upgrading the IT systems will be too complex a task, for example, the product side can ask: “Exactly how complex will it be?” “What resources are required?” “What are the implications for other IT projects?” and similar questions. When the business units worry about the revenue implications of failing to provide a given product, the product specialists can demand to know its true revenue impact and profitability, get information about other, similar products that are available, and so on. Ideally, the product side mediates by taking the group, product by product, through the portfolio rather than allowing the discussion to progress only on a project-by-project basis or to become focused solely on customers.

Discuss

Your email address will not be published. Required fields are marked *