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  • McKinsey & Co.

Taming Postmerger IT Integration

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

Select routines for data transfer. Finally, the company must settle on the best routines for transferring data from the original system to the new or chosen system. This plan is as important as detailing the product gaps to be addressed. It includes deciding whether to migrate manually or automatically.

A manual migration, which involves physically closing down a customer’s account on the old system and opening up a new one on the target system, will take much time and many resources and introduces the possibility of human error. However, an automated migration, while faster and more accurate, will require the IT staff to construct complex routines, with significant mapping in order to address all possible account relationship scenarios. Considering this trade-off, we typically recommend a manual migration for any product with fewer than 10,000 accounts and an automatic migration for any product with 10,000 or more accounts. We have, however, seen successful manual migrations of up to 50,000 accounts.

Although a product-by-product conversion may be technically appealing, the very real risk of customer confusion demands that any migration be broken into manageable pieces. For a company that has unique sets of customers and is supported largely by independent sets of systems, managing the migration offers a considerable advantage: in most cases, customers can be moved in geographic waves to allow physical branches to be rebranded easily, with customer sets created around typical transaction patterns.

Once the steering committee has worked through these four goals, it can begin to create a detailed migration blueprint that lists which synergies are sought, where activities interconnect, what resources are required, and anything else necessary to complete the migration. This blueprint — continually updated and revised — will allow the committee to understand the trade-offs and compromises it makes as it moves through the migration process.

Integrating IT systems is complex and time-consuming. But by involving representatives of all the key interest groups in mapping out an integration strategy, executives can better meet the needs and expectations of customers while at the same time vigorously pursuing the anticipated synergies of the merger.

Lisa Åberg is an associate principal in McKinsey’s Stockholm office, and Diane Sias is a principal in the New Jersey office. This article was first published in the Summer 2004 issue of McKinsey on Finance.

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