The merger and acquisition of Delta by Unity Bank forces the integration of two companies with different core competencies, Information Systems and organizational structures and cultures. The CIO of operations, Stuart Irving must decide on the best strategy that would maximize the benefits of the merger by leveraging synergies against the potential costs and risks. Following the recommendation of the IT Governance Institute, newly merged company should establish effective duopoly IT governance with special focus on strategic alignment. Executive and department level steering committees consisting of members of both companies should be granted decision rights with respect to strategic direction, resource allocation, and prioritization. Even though there are disadvantages to this decision that mainly come from increased difficulty of reaching compromise agreements, they are by far outweighed by benefits of immediate propagation of clear direction throughout both companies, leveraging synergies while minimizing risks, and effective change management process that utilizes core competencies of both companies.
Summary of Relevant Facts
Unity Bank, a small South African bank has acquired Delta Bank, a much larger US based bank for $310M, as a way of breaking into the US market. Unity’s Board of Directors has identified synergy savings as a result of the merging of various legacy IS systems of $60M, expected to be realized within 3 years. An Integration Team lead by Stuart Irving, Unity Bank CIO for Integration has been tasked to achieve this goal, in the climate of mergers failing to realize value for stockholders and stakeholders alike.
Integration of the two companies involves a trade-off between benefits resulting from leveraging synergies against the potential costs and risks that stem from differences in organizational structure and culture, incompatibility of IT systems, use of legacy systems, conversion costs and significant risk of disturbing operations of both companies. The CIO of operations, Stuart Irving, must decide on strategy that would prioritize necessary changes affecting organizational structure, software, infrastructure, and employees without affecting operations of both companies.
In order to facilitate smooth integration and aid the establishment of strategic direction without significant disturbance in operations, the newly merged company should establish effective duopoly IT governance with special focus on strategic alignment. Executive and department level steering committees should be granted decision rights, provide strategic direction and ensure that adequate resources are allocated to the IS organizations. Strategic alignment will be achieved by leveraging the stakeholders’ value drivers and achieving effective synergies between the core competencies of the two companies. Consequently, the suggested priorities in implementation of IT governance should start with strategic alignment, followed by risk management, IT value delivery, and performance management.
Our decision is based on the recommendation from IT Governance Institute and we believe will result in immediate propagation of clear direction throughout both companies, signal measure of order and control, assign decision rights to the representatives of both organizations, decrease employee resistance, facilitate effective change management, maximize core competencies of both companies, maximize use of technology and provide platform for synergy savings while decreasing the negative effect of the merger on employee morale and reducing integration risk by facilitating thorough planning. This decision comes with some disadvantages however, which we identified to be increased difficulty in reaching a compromise agreement as representative from both organizations are present in committees, increased possibility of conflict of interest between the members of committees with regards to policy, technology, and...
References: IT IG Board Briefing in IT Governance, 2nd Edition, IT Governance Institute, 2003, www.itigi.org
Keri Pearlson, Carol Saunders Managing and Using Information Systems A Strategic Approach, John Wiley & Sons Inc., 2010
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