• Technology
  • McKinsey & Co.

Taming Postmerger IT Integration

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

To combine the efforts of various constituencies, companies should include representatives of all key groups — in this case, business units, product teams, and the technology team — on both the initial working committee responsible for developing a migration plan and the steering committee that implements the migration. These committees must debate every issue, every gap, and every routine to develop and implement the proposed migration. The process has four critical goals.

Confirm target product set. The first goal is to confirm the target product set for the merged banks. As much as possible, this process should be undertaken from the perspective of customers, with the ultimate goal of giving them the same banking experience they had before the merger or of enhancing that experience.

Choose a system platform. Next, the committees must decide which system platform will best support the combined product set and any planned new products. The chosen platform must have technology that not only is sustainable over the long term but also is able to handle the additional customers a migration brings and fit into the merged company’s goals for the overall system architecture. At the same time, the platform must not be so complex that the company will lack the necessary resources and skill sets to support and develop it. Risk must be minimized, and so must the impact on customers. The new platform must also take into account the views of the business units and be deliverable within the overall time lines for the merger.

Migration might seem like a good time to invest in best-practice systems and services, perhaps by replacing existing systems with more efficient or modern ones as gaps are uncovered. We disagree. Such an effort distracts management from the already demanding requirements of the merger. Instead, in the absence of strong reasons to the contrary, the merged bank should choose the better of the two existing systems.

Identify gaps between offerings and services. The third goal is to identify, in detail, all gaps between the offerings and services of the acquirer and the acquired companies and then to determine whether or not to close them. Any two banks, for example, will have a variety of different product offerings, access channels (the Internet, call centers, ATMs), payment methods and terms, and processing routines and standards (on a technological level).

If the target product set and system platform have been established properly, all of these product gaps will now be visible. One large bank discovered more than 1,000 of them when it first began the integration process. Since closing all of the gaps isn’t likely to be possible, the working committee and the steering committee should analyze each gap to determine if it must be addressed. For selecting gaps to close, a detailed decision tree can be helpful (Exhibit 2). Key questions include: “What do we lose if we don’t close this gap?” “Is there an alternative solution or work-around?” “Is this product really necessary?” “How long will it take, and at what cost?”

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