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The Key Success Factors of IT and Operations Merger Integration

Posted in English Room, Opinion | January 25th, 2011

Introduction

Merger is a familiar topic in businesses world. It’s commonly happened as the consequence of competition to form a stronger competitive organization. As the result, there are many merger cases in several industries such as automotive, housing, financial institutions, etc. Consequently, merger will result in numerous diversified and complex projects to arise that must be overcome to manage the change and transformation, such as IT and operation, merger integration and so on. Therefore, the merged organisation has a big project to do planning phase and implementation phase for the merging process.

One of the important aspects in the merger process is IT and operation merger integration. Thus, this aspect can’t be regret because it can impact to the quality of customer service and organization process. Integration of the support system such as IT and operation system is important in merger process. It must be planned well before the operation of merged organisation.

This paper will examine the Bank Niaga and Lippobank merger cases. It will concern on the IT and operations merger integration. This aspect is really important because the speed of completing the merger depends on the speed of the IT & Operations integration. The IT & Operations integration timeline will also drive the timeline for most other activities.

Below is the overview of the case study and how Accenture helped to manage the IT and operations integration.

The Case Study

CIMB Group of Malaysia — the fifth largest financial services provider in Southeast Asia acquired two banks in Indonesia: Bank Niaga and Lippobank. In term of assets, Bank Niaga was the sixth largest bank in Indonesia whereas Lippobank was the tenth. To comply with the Indonesia Central Bank’s “single presence policy”, CIMB embarked on a plan to merge these two banks. The merger would create the fifth largest bank (CIMB Niaga Bank) by total assets of more than USD 10 billion and also among the top five in terms of distribution network in Indonesia.

Due to the IT-intensive nature of the banking business, one of the most important aspects of a bank merger is the IT and operations merger integration. The speed of completing the merger depends on the speed of the IT & Operations integration, whereas true “one-bank” service happens only upon completion of the IT & operations integration. The IT & Operations integration timeline will also drive the timeline for most other activities.

How Accenture Helped

Accenture was requested to provide integration services in the execution of the merger of the two banks. Accenture partnered with CIMB Niaga to provide the overall Merger Program Management Office.

Since Accenture’s scope covered mainly IT, it leveraged its proven “Merger Integration Framework and Methodology” to plan and execute the merger in two phases:

In the Planning Phase, Accenture worked with CIMB Niaga in defining the ‘To-Be’ Target Operating Model for IT, Operations and selected business areas of the merged entity. The IT & Operations integration plan provides a clear roadmap with the best options on how the integration would be achieved within the timeline required by CIMB Niaga
In the Implementation Phase, Accenture worked with CIMB Niaga to manage the execution of the merger integration activities to achieve Legal Day 1 and Operational Day 1, in line with the Target Operating Model and target schedule defined

Key Success Factors Analysis

A merger or acquisition, like other large scale corporate change, is an excellent opportunity to set a new course, both operationally and across the various support functions of the newly combined business. Across all functions, setting the course involves establishing clear leadership and role clarity during the transition. This empowers members of the integration team—including operations—to communicate effectively and take decisive action.

In the Planning Phase, Accenture worked with CIMB Niaga in defining the ‘To-Be’ Target Operating Model for IT, Operations and selected business areas of the merged entity. The IT & Operations integration plan provides a clear roadmap with the best options on how the integration would be achieved within the timeline required by CIMB Niaga.

Before continue to the key success factors, it is important to know the challenges that probably must be faced in the merger process. Some of those are:

Possibility of significant difference between the target market and existing bank customers, as well as different client behavior and expectations. The merged company must protect the existing customers and ensure that they don’t experience any deterioration in service standards.
The merged company must ensure that the existing customers experienced minimal disruptions and system downtime after the merger integration.
Differences in company culture pose an internal challenge. The staff of the two entities practiced very dissimilar working cultures with different priorities. The challenge is to keep all communication channels open and get the two groups to work together as one.
The operations of the two businesses need to be consolidated and operate on one system that could handle all requirements and transaction loads from both entities.
A fully operational merger has to be achieved on time and without any cost overruns, fully realizing the benefits of the acquisition.
Managing the critical Day 1 Operation as the launching of new system and milestone of celebration to customers and market. It is also good to monitor progress and drive the various integration teams.

Next, the paper will continue to answer the question about the key success factors in the planning phase that would make an impact in the implementation phase. However, the planning process is important key to achieve high performance. As the significant aspect, planning phase must deliver rational and clear information so that it can be implemented to reach the goals.

The key success factors in the planning phase that would make an impact in the implementation phase are:

Setting up merger framework and selecting the teams carefully. Before implementation phase, the company must build up a framework of the merger process. It is a vital aspect because it describes whole strategy of merger. Another important thing is about selecting the team carefully. The human resources aspect is really important to run the IT transformation and operation integration plan.
Establish high performance of Information Technology system. As a supporting system of organization, information technology system must be well prepared as good as possible. The merged company must give a concern on how to combine different systems to make an excellence IT system.
Determine the timeline and prioritizing the merger integration agenda. Time of completion is the main issue because the speed of completing the merger depends on the speed of the IT & Operations integration. In addition, the IT & Operations integration timeline will also drive the timeline for most other activities.
Testing and controlling the system. Before entering the implementation phase, the IT system and operation integration must be tested to examine the reliability. Thus, some testing must be done to make sure that the system has ready to be launched. If there is a problem in testing process, controlling is needed to make the system reliable enough.
Evaluating. The merger integration process is a bit like building a new home. The walls went up pretty quickly, but the detailed finishing and trim seemed to take forever to complete. Consequently, merger needs a lot of evaluation not only in the planning phase but also in the implementation phase.
Preparing the Critical Day 1 Operation. The merged company should prepare the first day of operation as the launching of new system of merged company. For that reason, the company must show off the good performance to the stakeholders, existing customers as well as potential customers.

Conclusion

In conclusion, IT and operation merger integration will face several challenges that must be overcome, not only in planning phase but also in the implementation phase. That’s why the merged company must organize the merger process from the planning and implementation phases. If it is done, the company will have good performance and maintain the customer satisfaction.