Leveraging IT With Mergers--And Divestitures - InformationWeek

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Leveraging IT With Mergers--And Divestitures

P&G's Purchase Of Gillette Creates I.T. Powerhouse

Procter & Gamble Co. and Gillette Co. have long been on the front line of supply-chain technology adoption. Last week, P&G said it will buy the smaller consumer-products company for $57 billion. As a combined company, they'll have more resources to roll out collaborative supply-chain initiatives. With Gillette, P&G--the world's largest consumer-products company--could force rivals to step up their adaptive supply-chain initiatives to stay competitive.

Perhaps better than others, P&G and Gillette have led the industry in their data-synchronization and radio-frequency identification initiatives, not only with leading retailer Wal-Mart Stores Inc., but across the ocean with German retailer Metro Group. Both consumer-products makers participate in item-level RFID tagging at Metro's "store of the future" in Rheinberg, Germany. The store lets Metro and key suppliers develop and test under real-world conditions how RFID applications perform and how consumers respond to them. The store is outfitted with smart shelves, RFID self-checkout systems, kiosks, smart scales, and other leading technology.

Even with their tech expertise, P&G and Gillette face major challenges in merging their IT systems. Both companies run mySAP ERP, but the business processes mapped into their IT infrastructures aren't configured similarly. Executives must decide what processes and systems to keep, says Nils Herzberg, a senior VP at SAP. Generally, "integration between two companies could cost tens of millions, but that significant investment won't be taken unless there is a positive business case," Herzberg says. Benefits would include stronger sales, lower operating costs, increased customer satisfaction, and real-time insight into inventory transactions.

From one customer's perspective, P&G's acquisition of Gillette was welcome. "We're dealing with one less supplier with more volume," says Roger Lekberg, senior VP of supply chain at supermarket chain Safeway Inc., "so from a pure supply-chain standpoint, the less suppliers you have to connect with the more efficiencies you gain."

Laurie Sullivan


Back To Basics For Citi, Amex

Two blockbuster deals last week, Citigroup Inc.'s sale of its Travelers life and annuity unit to insurer MetLife Inc. for $11.5 billion, and American Express Co.'s spin-off of its American Express Financial Advisors unit, point up a back-to-basics philosophy among financial-services industry executives that's in sharp contrast to the financial supermarket vision embodied by the merger of Citibank and Travelers seven years ago.

For Citigroup, the deal signifies a step back from the notion that banking and insurance products could be peddled at the same time through branches, call centers, and over the Internet. The IT needed to execute that vision, including middleware to connect Citibank and Travelers systems to each other and to multiple delivery channels, was substantial. "The relationship-based architecture, as opposed to the product-based architecture, is very cumbersome to execute," says a former high-ranking IT executive in the financial-services industry.

Citigroup and American Express will be free to concentrate on their core strengths. "These deals will eliminate some of the clutter that builds up in large diversified corporations," the executive says, "clutter in their strategic thinking and in their technology and operating platforms."

Steven Marlin

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