If you have ever attended a well-hosted MBA program or similar business education class, you may have experienced a learning and collaboration phenomenon where 10 or so teams set out to evaluate a particular case study and return to share findings based on their collective experiences. For attendees paying close attention to presented solutions, they walk away with more than their own team analyses and the strengths or findings of all 10 teams – collectively raising the knowledge of everyone in attendance. Every successful post-merger or acquisition (M&A) integration offers new, relevant perspectives about your industry, business operations, and related systems excellence. From my personal experiences, these topics have ranged from new customer and marketing strategies, philosophies in engineering excellence, and a wealth of manufacturing and field services strategies to best serve the market in booming and in competitive times. IT leaders have the opportunity to help generate value and collectively raise the bar for enterprise business processes when integrating a recently acquired company. M&A transactions are comprised of arduous multi-discipline tasks to complete due diligence and the transaction itself – this is before the labor-intensive process begins to integrate the newly acquired company. If M&A integration is not properly managed and handled carefully, it can be full of risk and disaster on both sides, but when managed correctly, it is an opportunity to expand and strengthen your system and technology offerings, in addition to the intended capacity, product, service, or asset purchase.
Industry Driving Forces & Market Consolidation
With increasing pressure for decarbonization in the industry, increased attention on ESG initiatives, the need to reduce the cybersecurity footprint, and the latest market pricing pressure to ultimately reduce cost drives us further into the depths of our information systems and related data sets. In January 2022, Haynes and Boone reported 293 oilfield services bankruptcies and 311 oil and gas producer and midstream company bankruptcy filings since 2015. This rapid market decline points to the extreme need for balance sheet strength, activity cost optimization, and opportunities for strategic M&A. ERP Systems remain at the core to describe the activities of key assets and related financial performance – all other systems are ancillary to these foundational components. Strengthen your enterprise information core by choosing your best applications and rallying around a common ERP system – the benefits will outweigh the cost and time of managing disparate systems.
Portfolio Optimization through Rationalization and Consolidation
Business systems are complex, especially for global organizations, and technology portfolio optimization is no small undertaking. M&A activity increases the number of assets and services under your scope of responsibility and in all cases requires careful consideration of the long-term life of assets. Disparate systems are often redundant, add cost and time to generating required information, slow deployment of new automation technologies and greatly hinder the ability to share transparency of activities in detail. These facts, for many in the industry, have created the appeal of centralizing and standardizing systems, especially ERP systems, in order to maximize agility in information technology. IT leaders must maintain their own expertise in application features, business processes, and partner with business subject matter experts to quickly and effectively assess product options, add process improvements, and consolidate redundancies wherever economical.
“M&A activity increases the number of assets and services under your scope of responsibility and in all cases requires careful consideration of the long-term life of assets.”
In 2018, Gartner reported that “a technology-centric approach to ERP – one that ignores employee engagement – is a leading cause of the 55% to 60% of ERP initiatives that fail to meet stakeholder expectations.” Therefore, IT leaders must take a stakeholder-based approach and deliver based on business objectives, process optimization, and strategy rather than a purely technology-based approach.
Recommendations for CIOs and IT Leaders in your ERP consolidation and process improvement journey:
1. Strengthen, encourage, and enable your integration, conversion, and process improvement teams to deliver your long-term objectives. As Jack Welch best stated: “Success is based on people first, and strategy second. Build a great team and you will accomplish things beyond your wildest dreams.”
2. Conduct periodic assessments of products to choose the best applications for your organization (ERP or otherwise). Products of yesteryear may not stay with modern times and are possibly under or oversized for your current organization.
3. Bring your best technology solutions to the table when onboarding a new company. This can be eye opening to staff that have not seen certain technologies in action and serves as a tangible benefit to your integration.
4. Likewise, invest time in reviewing acquired companies processes and philosophies to identify new strengths that generate value to the enterprise and enhance your system “standard product” core.
5. Tell the story with data in visual form at the management level and the functional level. When a new company first sees their contributions or activities appear in dashboards and data reports, it creates immediate transparency of fit and rank within the enterprise and serves as a communication piece to tie strategy at the functional, business unit, and corporate level.
6. Above all, communicate and show the net gain from initiatives. Ultimately, there will be upsides and downsides to any integration or conversion, but when staff see how they fit in the big picture and the value generated, all teams will move towards the common objective of generating enterprise value.