Advanced Computing in the Age of AI | Friday, March 29, 2024

2012 Could be a Tough Year for IT Orgs 

Looks like 2010 is going to be a banner year for mergers and acquisitions. Small- to medium-sized IT shops are especially vulnerable to the chaos and confusion that often accompany these corporate maneuverings.

discovery of mississipi 3

 It appears that 2012 is shaping up as an active year for mergers and acquisitions.  This activity will be enhanced if there are any signs by mid-year that the financial environment is improving – that there is light at the end of the tunnel.  

The trend will be further accelerated if there are polls suggesting that a more business friendly administration is heading for the White House.  Companies and boards of directors will be carefully watching for these signs in order to decide where to put the billions of dollars sitting on the sidelines waiting for the right time to move.

What will be the impact of this development on small- to medium-sized manufacturers? And more precisely, what will be the impact on their IT departments?  

Usually, what happens is that the larger entity gobbles up the smaller one despite whether the transaction is termed a merger or an acquisition.  This will normally result in the larger firm’s staff remaining while the smaller staff loses their positions.  

But not always!  Sometimes the smaller firm is acquired primarily for the technology or staff that has some special quality not present in the acquiring firm.  Because technology pervades everything we do, this is very common in the technology sector and, to a lesser extent, in the manufacturing sector.

Taking the Critical Path
The actual scenario for IT goes something like this.  The announcement of the transaction (especially in a publicly held company) will be the first time that anyone from IT on either side will be aware of the move.  Invariably, IT is kept in the dark since upper management does not usually perceive its importance in the process, and is afraid that a leak will occur before the deal is finalized.  

After the announcement, both IT departments scramble to understand what is necessary to accomplish the merger of systems that have been already assigned a conversion date.  Usually, IT becomes the critical path despite the fact that they were the last to know.

As a result, management will usually say that jobs will be retained in IT in order to get the maximum effort to achieve the combining date that is cast in stone. There may even be stray bonuses.    Invariably this crisis mode causes the entire IT automation agenda to be put on hold as all hands on deck work on the merging of the two IT environments.  

At some point, the two organizations usually determine that they will not have enough time to complete the transition. They will decide to operate both companies, for a time, as independent entities until the systems can be properly merged.  This, of course, will upset management since the merger team had used system integration as one of the synergies that made the deal attractive.

This delay will therefore affect later IT agendas since the merger work will continue as a top priority until the projected savings have been realized. It is then that the duplication of resources will be seen and staff adjustments will be made.

There is not much that IT can do presently to avoid this scenario except to make sure that senior management understands the need to bring IT into the picture as soon as possible in order for them to assess the needs of the systems and the time frames associated with the systems integration.  IT can also push to create excellent systems that will be the envy of the industry, so if a transaction occurs, you are on the winning side.  

Either way, a merger or acquisition project is exciting and stressful.  But look on the bright side – it's also a great addition to your resume.

EnterpriseAI