The following is a condensed Chapter from Software AG's upcoming white paper "An IT Manager’s Guide to M&A Planning".
There are three key elements that any M&A should focus on:
1. Minimize time-to-integrate acquired companies – This specific measure is very critical to assessing how successfully an M&A is being executed. A key factor that influences this measure is the actual integration of the IT systems from both the companies.
2. Identify waste and redundancy – One of the biggest tasks for the IT team of the acquiring company is to determine which systems to keep and which ones are redundant and should be retired. This goes back to the topic of cost savings and increasing the bottom line.
3. Integrate and automate common processes – The purpose of integrating multiple systems together should be about enabling business processes to run across existing as well as acquired systems seamlessly. Common processes such as order-to-cash should be able to run smoothly across the IT systems of both the companies in an M&A.
Application integration—An approach to successful business transformation
Bring on an M&A and you have an altogether new set of applications to add to your environment. This is where you start to cut through the chaos. The steps to taking that approach are:
1. Implement an integration platform as a common backbone – A common integration platform connects all your diverse applications to communicate with each other. If you don’t have an Enterprise Service Bus (ESB) framework in place, start considering one right away to cut through your chaos.
2. Prioritize your integration initiatives – This is mostly driven by business needs. For example, a new CRM system needs to be integrated with the ERP system to streamline orders in the new company. Do not try to “boil the ocean” by taking on all integration initiatives. Take a phased approach in addressing the most critical ones first.
3. Adopt or replace – Use a structured framework to decide if you want to on-board an acquired application or off-board a redundant one. This is only way to ensure that your IT portfolio of applications stays manageable, maintainable and cost effective.
Application integration strategies that help an M&A
A very popular way to set up an integration platform within a changing IT environment is to establish a loosely coupled architecture. This is achieved by not hard-coding any integrations of any application within another application. So, integration flows are established by popular messaging models, such as publish-subscribe where one application publishes its data change and any number of subscribing applications can receive that message and act upon that data on their end. This model allows for the scalability to adopt many new applications and at the same time provides extreme flexibility to remove or replace any application without any major upheaval of the environment.
On-boarding/off-boarding – Given that an M&A could bring about dozens of new systems into your environment, it is important to adopt an on-boarding/off-boarding model. Having established a loosely coupled architecture, you can adopt a phased approach to on-board critical systems immediately. Using the Value-Analysis Framework, you can also off-board any redundant application that you deem unnecessary. This keeps the IT environment lean and also helps in easy maintenance.
Shared services model – Another popular model to enable a loosely coupled architecture is to set up a shared services repository. Given that most of the logic within the breadth of your existing business processes and newer business processes are going to be repetitive, re-usability will help in speeding up the adoption of newer systems as well as in boosting developer productivity. This model will also help in long-term cost savings now that developers are writing less code for newer integration flows. Composite services can be quickly put together from existing services within the repository.
Integration Competency Center (ICC) – In order to ensure your enterprise adopts and follows the strategy you have defined, you need an ICC within the company to govern these integration rules and enforce them. “How to set up an ICC” could be the topic of a white paper by itself but the need for such a body within the company is utmost when you have so many moving parts during an M&A. An ICC can enforce developers, architects and other IT bodies within the combined organization to adopt key models, such as canonicals, shared services or a rules framework.
Stay tuned for the final chapter: "Data integration: M&A’s master data problem"