InformationWeek

September 8, 1997

Best Way To Merge I T: Pick One Platform

Study: Best-of-breed not best approach

he "best of breed" strategy for choosing IT platforms when two companies merge is not the best approach, says a new study. It's often better to quickly make a decision to adopt wholesale the IT platform of one of the merging companies, says the report by Forrester Research in Cambridge, Mass., which surveyed 33 CIOs at companies that have recently undergone mergers.

"The most important thing contributing to the success of mergers is time," says Bob Chatham, a Forrester analyst. "Speedy mergers of IT platforms and strategies are most effective.

"The process of deciding `best of breed'-who's got the best accounts payable s ystems and who has the better human resources system, and figuring out how to get all of this integrated-that eats up time," Chatham adds. In addition, making a quick decision in favor of one company's systems typically lessens the pain for customers, alleviates long-range IT employee morale problems, and maximizes cost savings, he says.

United HealthCare, a $10.5 billion Minneapolis health-care provider, has acquired nearly a dozen companies over the last few years. Paul LeFort, United's CIO, says that in most cases, United's strategy has been to "collapse the systems" of the acquired companies into United's "main engines." Moving acquired companies' systems into United's infrastructure quickly has helped the health-care provider successfully complete the purchases, he says. In some cases, however, United has taken modules from other companies and integrated them into United's systems.

Chatham says speed is particularly important in industries such as financial services, where there's intense compe tition and a huge dependency on IT for the delivery of services. But in markets such as aerospace-where there are fewer competitors-executing a post-merger IT strategy can be less urgent.

The Forrester study, Mergers, Acquisitions, and IT, indicates that on average, companies save about 19%-and sometimes as much as 30%-on their combined IT spending one year after the mergers. Cost savings result from the consolidation of data center, network infrastructure, E-mail, and other systems. Other cost savings come from volume discounts and staff reductions, according to the report.

Chatham says merging companies often use the best-of-breed approach-choosing and integrating elements of each company's systems-in an effort to maximize synergy between the two businesses. But "when there is a marriage of companies with pretty much equally stellar technologies, the best thing is to choose one company's platform as the survivor," he says. "When companies go through the process to establish whose particular applica tions are better, a lot of staff alienation occurs. It's better to have everyone move on as quickly as possible."

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