IT Integration Done Right It may or may not surprise you, but about 70% – 90% of M&As fail, for one reason or another. The integration of two companies into one functional unit inevitably involves great change. Culture, business strategies, and many other variables need to be adapted to fit new environments, people, and goals. Are you prepared to take on the pressure and complexity of an IT M&A? Our new M&A Playbook for IT is your roadmap to navigating the biggest IT integration challenges and driving business goals. In this strategy brief, find out: -The three common M&A pitfalls that CIOs must avoid -How to improve synergy, lower costs, and shorten time to market -How to determine the right level of IT integration for your company

1. Drive Your Business
The M&A
Playbook
for IT
Overcome the biggest IT integration
challenges and drive business goals

2. Introduction
It may or may not surprise you, but about 70% – 90%
of M&As fail, for one reason or another. The integration
of two companies into one functional unit inevitably
involves great change. Culture, business strategies, and
many other variables need to be adapted to fit new
environments, people, and goals.
This change can create numerous problems that lead to unhappy
employees, inefficiency, and abandoned projects. Unfortunately,
the IT department is one of the areas in which these changes are
most significantly felt. Given the intense pressure and uncertainty
present during mergers and acquisitions, it is important to
remember the end goal of IT: driving business goals.
By aligning technology integrations with core business objectives,
enumerating priorities, and basing decisions on data, companies
can have more successful integrations and emerge from the
transitions stronger and better able to face new challenges.
Companies need to have effective, tested strategies in place
to reduce risks and lead to positive outcomes. And thorough
planning with insight from M&A experts will be critical to success.
In this paper, we’ll discuss some of the major challenges faced by
IT leaders during mergers and acquisitions (M&A), and present an
effective framework to handle this change more effectively.
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3. Mergers and acquisitions
fail for many reasons.
In some cases, the
companies were not
a good fit — business
leaders just could not
decide on how best to
take advantage of their
combined strengths.
In others, it’s because
IT organizations became
too bloated and
inefficient. But one thing
is certain: too many M&A
failures are simply the
result of a lack of
planning and foresight.
Some of the most common reasons M&As fail include:
Poorly defined goals
Many companies undertake a merger or acquisition without
fully defining the goals of the process. Without pre-established
metrics, there is no way to know what success looks like and no
way to formulate actionable strategies to get there.
Ignoring cultural differences
Every company has a unique identity with unique ways of
doing things. When another company is added to the equation,
everything can change. New superiors, different rules, and
shifted values can create culture shock for employees and lead
to resignations, inefficiency, and other problems.
A lack of focus
The CIO has a particularly important role in ensuring that the
transition is a success, but many CIOs face an overwhelming
number of projects and goals during a merger or acquisition.
This can lead to a lack of focus that in turn leads to abandoned
projects and inefficiency.
Why
M&As are
a Source
of So Much
Failure
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4. Most complications around IT boil down to
the fact that companies often implement
technologies in vastly different ways.
For example, one company may rely on
third-party, cloud-based services to meet
their needs, while another may rely primarily
on an in-house, locally-hosted solution.
Software licenses, service agreements,
equipment, policies, and a wide range of
other factors must all be accounted for to
complete a successful merger or acquisition.
Usually, this means a number of projects have
to be undertaken to consolidate technologies
and form a cohesive foundation for the future.
Why Technology
can be One of
the Most
Challenging
Aspects of
Integration

5. To arrive at the right integration model,
companies must have a solid understanding
of how and to what extent they want to
combine resources and efforts. Integration
models run the gamut between holding and
absorbing — where each company is left
completely intact, or where the target
company is integrated into the parent
company. Deciding on an integration model
will form the basis for how the integration will
proceed and help CIOs prioritize their efforts.
Understanding
Integration Models

6. Holding
In this model, the target company is owned by the parent company
but remains a separate entity. In many ways, this is the simplest of all
integration models and will involve minimal transition effort on the
part of either the parent or target company. It will be necessary to
engage in efforts to assure workers that the merger or acquisition will
not result in significant changes for them.
Preservation
The preservation model is similar to the holding model in that the
target remains largely autonomous. However, this scenario does
involve a certain amount of integration and requires greater planning
on the part of the IT department. This model usually only involves the
integration of back-office technologies. Examples of this include
the parent company adopting the target company’s proprietary
software, or some service contracts being merged to produce
greater value.
Symbiosis
Symbiosis is an intermediate model between full integration and full
autonomy. In this scenario, companies will integrate wherever there
is an advantage to doing so, but nowhere else. This can be best
thought of as a partnership between two separate companies
sharing resources and working closely together toward common
goals. Technologies will likely be merged in many areas, and many
processes and policies will be shared, but there will still be some
degree of separation between the target and parent.
Absorption
This model represents full integration between the parent and target
companies. It involves the greatest amount of work to ensure that all
elements of the new company that can provide value are put to use
and that all unnecessary elements are terminated. Often creating
significant turmoil and work for the IT department, this process must
be carefully managed if it is to be successful. However, it also provides
the opportunity to form a more robust IT organization that benefits
from the strengths of both companies and potentially reduces the
long-term friction that might occur in other integration models.
Understanding
Integration
Models
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7. Determining
the Right
Level of IT
Integration
The first step in any M&A strategy is deciding on the
right level of IT integration. The choice will largely
determine the course of the acquisition and
have great implications for the success of the
IT organization.
Leaders should run a structured analysis of the situation and
ask themselves the following questions before deciding:
What are the overarching goals of the merger
or acquisition?
Ultimately, any merger or acquisition is undertaken to drive
some larger business goal. IT leaders must consider these goals
when choosing a target integration model. If the objective is
to acquire people and technology to meet the core business
needs of the parent company, substantial integration may be
necessary. If the target company is profitable in its own right
and can simply be another source of revenue, less integration
may be the right move.
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8. What value can integration add?
In many cases, technology integration may add significant value
through synergy, lower costs, and improved time to market. It is
important to carefully consider every potential impact of integration
and evaluate based on models and data. One of the most
important components of integration is identifying areas in which
the target company’s technologies, people, processes, and service
contracts can be combined with those of the parent company to
reduce costs, increase efficiency, or drive innovation.
What are the downsides to integration?
Although there may be many benefits to integration, there can
also be many pitfalls and downsides. Culture clashes, incompatible
policies, and overlapping systems can all create problems and
additional work for the IT team. In the case of a full absorption, there
will inevitably be a major increase in the number of projects that the
IT team must contend with, likely for a significant period. The added
costs and the potential for risk that this brings must be considered
when weighing the value of integration.
Determining
the Right
Level of IT
Integration

9. One of the most common sources of failure
in M&A is ineffective planning and execution.
Many companies fail to understand or properly
prepare for the immense change that the
transition will bring. This inevitably leads to
significant problems when the reality of the
merger or acquisition demands action from
business leaders.
Three Keys
to Successful
Integration
Planning

10. Proper planning is key to achieving the desired outcome.
But how? Here are three keys to remember:
IT and business leaders should work together
At the heart of successful M&A planning is a close collaboration
between IT and business leaders. In many companies, IT is not treated
as a core department and often does not align its goals with those of
the business. This is an ineffective model during normal operations and
can be disastrous during times of transition. For effective integration,
IT and business leaders must work closely together.
IT should be involved from the beginning
Given the importance of IT to modern business, and the very real risk
that technology integration can fail, it is critical that IT leaders be a
major contributor to all M&A decisions. Many business leaders are
apt to ignore the real implications of systems integration and service
contracts when the deal is being made, leading to potential
problems in the aftermath. By considering how the merger or
acquisition will impact IT from day one, plans can be made and
the deal can be structured in such a way as to avoid issues.
IT must consider business goals
Of course, this collaboration must go both ways. IT should align its
approach to integration with the broader goals of the business in mind.
Every decision should account for factors such as how it will affect the
efficiency of employees, the company’s service, its ability to generate
revenue, its effect on the company’s brand, its risks, and its costs.
By examining each element using these metrics, technology
executives can assess what will have a positive or negative impact
on the business as a whole.
Three Keys to
Successful
Integration
Planning
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11. Four Integration
Elements to Consider
To form the foundations of an integration effort that
builds on the strengths of both companies, these elements
should be examined thoroughly:
Synergy
The integration should combine pieces of each company
to form a more complete, more effective whole. This
involves the maximization of revenue streams by
embedding key products from the target company
into the parent company or vice versa. It also involves
recognizing that some elements should be left segregated
to achieve maximum cost effectiveness or efficiency.
Elements that should be considered include people,
operational elements, applications and services, and
enabling technology.
Time to market
As a combined entity, a variety of factors will change the
time to market for products and services. Leveraging skills
and resources from both companies can help expedite
development, testing, and production, allowing products
to be created faster and cheaper. In some cases, this can
also work in the opposite direction, as integration can
cause inefficiency and other problems.

12. Cost
The costs of any integration effort will be a major component in
developing effective strategies. Companies must examine the
expenses of a chosen integration roadmap, as well as the savings
it will allow, to make better decisions about what to keep
segregated and what to combine.
Innovation
Bringing together the varied talent and resources of two
companies can lead to a dramatic increase in innovation.
Companies may have the ability to develop new products faster,
combine technologies to create more effective solutions, and
benefit from an influx of ideas. However, it is also important to
take steps to make sure that innovation is not stifled by
incompatible culture changes or processes that aren’t effective
in a new environment.
Four
Integration
Elements to
Consider

13. Creating an
Integration
Plan
To decide on an
integration model and
ensure that the IT
organization is ready to
carry out the necessary
changes demanded
by the model, careful
evaluation and
planning is necessary.
Start with a baseline assessment
Designing an effective plan for technology integration that
meets broader business goals should involve the careful
assessment of both companies. This assessment should
identify any redundancies in people, systems, infrastructure,
applications, vendors, capabilities, and costs. It should also
identify opportunities to add value through integration or
collaboration and look for areas where there may be gaps
that need to be addressed. This process should be broken
down into the examination of several distinct components
for each company:
People and organization
Assessments must evaluate the skills, capabilities, and overall
organizational structure of both companies. Look for overlaps in
employee capabilities, potential power structure problems, and
any issues that could arise from cultural mismatches.
Processes
Each company has processes in place of particular maturity
levels and other characteristics. Learning how to mesh the way
both companies accomplish goals is a critical step in achieving
a successful union.
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14. Infrastructure and applications
A careful inventory of each company’s applications, systems, and
infrastructure must be made to look for areas of overlap and to
allocate resources most effectively. Other issues to address include
relative scalability of infrastructure, the suitability of adopting
resources to new tasks, and adherence to industry best practices.
Strategic alignment and governance
There should be mechanisms in place to ensure each company is
aligned regarding its goals and accountability. This will help avoid
conflicts of interest and problems in the power structure of the new
organization.
Financials
There should be a careful analysis of IT costs by function and activity
for each company. This allows the company to identify items that do
not provide value and a path to integrate most cost-effectively.
Creating
an
Integration
Plan

15. Create a timeline and project portfolio
After making an assessment and deciding on an integration model,
companies should begin creating a plan that includes a structured
timeline with milestones and metrics to judge progress. This allows IT to
prioritize projects according to the needs of the business and allows
for a more organized approach to integration.
Address risk mitigation
Technology integration inherently involves risk. IT leaders should look at
every decision in terms of the potential costs and pitfalls compared to
its benefits. This allows for planning that is based on logical analysis of
the facts and reduces the chances that the integration will fail due to
unforeseen outcomes.
Develop a structure for execution
Planning is only half the battle. Companies must also put solid
structures in place to ensure follow-through on any projects that
have been delegated. This involves ongoing dedication to the
integration process and requires a substantial commitment on the
part of IT management to ensure that early work is not undone by
later mistakes or lack of will.
Creating
an
Integration
Plan

16. Summary
To ensure that both companies thrive after the transition,
it is important to understand overarching business goals, what
the best integration model is for the situation, and how to
effectively implement the model. It will take thorough planning,
assessment, and strong executive will to ensure a smooth
transition.
Key takeaways:
• IT integration is challenging, and most mergers and
acquisitions fail
• Avoiding failure requires a commitment to creating a viable
integration plan and the means to follow through on it
• IT transition efforts must be aligned with business goals.
Business leaders should involve IT leaders in M&A decisions
from the beginning
• The integration plan is dependent on the integration model.
Every company must carefully choose what to integrate and
what to keep separate
• Each IT organization must be thoroughly assessed before
integration to look for opportunities, redundancies, and
potential gaps
• Companies must work across organizations and departments
to drive productive change
Integrating IT
after a merger or
acquisition is a
delicate process
that must be
handled with
great care.
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17. About WGroup
Founded in 2004, WGroup is a
management consulting firm with
a peer-to-peer approach to IT
optimization and transformation.
The team is composed of
consultants who average more
than two decades of experience
as former C-suite executives and
IT leaders, and the client roster
includes many Fortune 1000
companies across a wide range
of industries. WGroup is known
for on outcome-driven, service
provider-agnostic approach that
optimizes IT operations and
minimizes costs.
Visit us at
thinkwgroup.com
or give us a call at
(610) 854-2700
to learn how we
can help you.

18. Re-think IT
Drive Your Business
www.thinkwgroup.com
TEL: 610-854-2700