George S. Bordo, Vice President, Enterprise Business Solutions
Peter D. Tripoli, Vice President, Integrated Solutions
Danet, Inc. (www.danet.com)
Often, telecom companies contemplating a merger do not spend enough time considering information technology issues that lie ahead. That’s a serious oversight, because the effectiveness of systems integration can help or hinder a merger.
While IT integration challenges don’t typically derail a merger, they can make it more expensive and difficult. Conversely, good, fast IT work that intelligently consolidates redundant billing and OSS and helps resolve the “people” issues can be a major advantage in achieving the efficiencies that convince customers and Wall Street alike that the merger was a good idea.
Take the example of a long-haul carrier that over time acquired a number of smaller telecoms. Because the company failed to consider system integration issues up-front, it found itself at a competitive disadvantage in most markets. It took longer to implement service requests, and internal costs to do so were high. Perhaps most damaging was the fact that it was charging customers more than competitors were. This company is now dealing with systems integration company-wide, but only after missing the opportunity to make an immediate positive impression in the markets it serves.
Regardless of the telecommunication services offered – local telephony, Internet, DSL, data, or enhanced services – thorough, well-planned systems integration will ensure that information systems function smoothly and cost-effectively and contribute to the success of the merger.
Here are six steps to follow to make a telecom merger an IT success story:
1. Define the overall mission of the post-merger company, and carry it out at the functional level.
Two companies merge because they want to accomplish something. That something must be at the heart of the new, combined information system.
Take the example of a post-merger company whose business mission will be to be the largest telecom service provider in a certain region of the United States and offer unmatched e-Care, i.e., a Web presence that allows customers to handle their own service needs via the Internet. That vision defines the immediate priorities: setting up operational centers, ramping up Internet capabilities, and supporting a full menu of E-care options. Defining the mission also promotes better-informed decisions as the new company sets about consolidating the intimidating array of systems that exist separately at each company, such as customer relationship management (CRM), billing, e-bonding and service request management.
To begin at the beginning – that is, to make integration decisions in light of the mission – may seem obvious. Yet, telecom companies merge all the time without asking themselves such basic questions as whether the new mission implies a Web-based model of customer self-care or more traditional call center. Is it any wonder that they end up with systems that, while functional, are far less effective and require re-tuning long after the ink is dry on the merger agreement?
2. Take inventory.
Nothing can be accomplished without a complete inventory of the hardware and software at both companies. That inventory, which should occur before the merger is completed, should answer these basic questions:
It’s not uncommon, for instance, to find an operating cost differential of 50 percent or more between two CRM systems.
When comparing software, remember to thoroughly investigate operational requirements from a personnel standpoint. Company A’s seemingly superior electronic bill presentment and payment software is no bargain if it requires three to four times as many people to run it as Company B’s does.
3. Start working on systems integration right away.
The day the two companies announce their intent to merge is the day to start working on systems integration. Don’t wait for the deal to be final. The downside risk is that the merger will fall through and a lot of hard work will go for naught. But which would you rather do: write off that relatively minor cost, or deal with irate customers demanding to know why their bills are late, payments are not being credited, and the Web site is down?
4. Provide the right enterprise systems.
In a merger situation, it’s tempting to jump right in and start coding – tying existing applications together or combining others without completely understanding the business mission and what is required to support it. While this approach may provide an immediate band-aid, in the long term it will not support the business mission. The long-term result will be a system that is much more costly to operate and less effective functionally. Doing the job right takes time in the beginning, but saves it at the end. The merged company may, for example, have to run parallel billing systems for three to four months just to properly compare them. Or it may take up to a year to write new software to handle data migration. But if time is taken – typically, six months to a year – to put together a process model that supports the new company’s business mission, the new systems will be far more effective than anything done in a hurry.
What’s more, spending time on the front end helps the merged organization deal with one of the biggest, toughest challenges in a merger: winning buy-in from the merged companies’ employees. Employees who feel that they have a say in the new systems, rather than having systems thrust upon them from above, will work hard to make the new arrangement work.
5. Be prepared for politics.
In a perfect world, merging companies would get together to understand the overall architecture of the two information systems, sort through redundancies and conflicts, and devise an approach that best supports the new business strategy. In the real world, however, everyone in a merger may fight for turf, including CIOs and their staffs. Software vendors, too, may lobby hard to make sure theirs is the surviving product. They not only want to protect the huge revenues they get from licensing and support and maintenance agreements, they’ve got to protect their reputations in the industry – nobody wants to be replaced by the competition. A realistic attitude about everyone’s vested interests will help get the job done.
6. Get objective, outside advice.
It’s no reflection on the talents or dedication of any company’s information technology staff to say that mergers often require the objective advice of a third party. An outside IT consultant who has been through the merger process with other telecom companies can often help the merged organization anticipate the inevitable problems, rise above internal politics and make clear-headed technical recommendations that support the post-merger vision and goals. Absent that objective perspective, it is all too common for a company to proceed ineffectively for years – ostensibly having merged, but actually operating as two separate fiefdoms fighting constant behind-the-scenes battles.
An outside perspective helps companies use their resources more efficiently and can be particularly useful in deciding how to redeploy IT professionals. Rather than allowing the new entity to plod ahead with a great many people assigned to running poorly integrated systems, the consultant can help pare down and coordinate the number of systems and staff them appropriately, thus freeing up the remaining IT personnel to focus on new projects. This means that the merged organization’s most talented people can concentrate on emerging strategies that actually make the new company more competitive – and isn’t that the reason to merge in the first place?
George S. Bordo is Vice President, Enterprise Business Solutions, and Peter D. Tripoli is Vice President, Integrated Solutions for Danet, Inc. (www.danet.com), which provides consulting and systems integration services focused on OSS and Billing and Customer Care for telecommunications service providers worldwide. Danet also provides strategic consulting, network planning, process reengineering, and regulatory roadmaps. They may be contacted at 724-933-3000.