Sometimes Less is More: IT Optimization in M&A

Companies grow in many different ways, depending on their industry, strategy, and market dynamics. Every business, regardless of its sector, strives to achieve its goals by increasing operational efficiency, entering new markets, or launching innovative products and services. However, the paths they take to reach these objectives can vary dramatically.

Different Paths of Business Growth

Some companies grow organically, meaning their expansion is gradual and sustainable. In practice, this involves opening new factories, distribution centers, or offices in various locations as the market matures. This approach minimizes risk, as the company can make changes and expand at a pace that is comfortable and manageable. Examples of companies that have grown in this way include large retail chains that have gradually expanded their geographic reach.

On the other hand, some companies experience dynamic, leap-like growth, which is particularly evident in the automotive industry. In this sector, growth often involves launching a new project, which may require the construction of a new production line or a sequencing warehouse. In such cases, growth is more dynamic and intense, but also riskier, as it requires significant capital investment in a short period.

Another method of expansion is a rapid strategy of mergers and acquisitions (M&A). This approach allows companies to grow quickly by acquiring other businesses, which can bring significant benefits, such as entry into new markets, acquisition of new technologies, or increased market share. However, this process is complex and comes with numerous challenges, both business and legal.

The Unique Challenges of the M&A Process

The M&A process is a complex operation that involves many aspects, from financial to legal and cultural. Every company undergoing such a process aims to restore the operational efficiency of the newly acquired company as quickly as possible and to maximize the benefits of economies of scale. Expectations are high—the merger should bring benefits not only at the strategic level but also at the operational level. However, to achieve this, effective management of many different areas, including the integration of IT systems, is essential.

There is no one-size-fits-all method for conducting Post-Merger Integration (PMI). Consulting firms offer various approaches and frameworks that can be tailored to the specific needs of a company. Some of these frameworks are very general and flexible, allowing for a personalized approach to the client, while others are more detailed, offering specific steps and checklists to follow.

One interesting approach is the LeanIX methodology, which, in addition to the framework itself, also offers tools that support the visualization of tasks. Visualization may seem like a minor detail, but in the context of managing system architecture, it is a crucial element that facilitates communication and decision-making.

Two Key Areas of Integration: People and Systems

Every PMI methodology addresses two main areas: people and systems. The first area involves managing human resources, communication, responsibility, and collaboration. The second, which I want to focus on here, is the integration of IT systems.

IT system integration is one of the most complex aspects of the PMI process. For this process to run smoothly, it is necessary to make the right choices from the very beginning. The key is to identify which systems are essential, which can be replaced, and which can be eliminated.

System Categorization – The Foundation of Effective Integration

The first step in the IT system integration process is proper categorization. This may seem simple, but in practice, it can be challenging, as many systems perform more than one role. An example is HubSpot, which functions as both a CRM and a Marketing Hub, allowing the marketing team to manage campaigns. On the other hand, PipeDrive, another popular CRM, lacks built-in marketing functions, which necessitates the use of additional tools and integrations.

To effectively manage this complex ecosystem, it is worth creating a matrix of key functions within the enterprise and assigning specific tools to it. This scheme allows you to easily identify which systems are redundant and which can play a key role in the newly formed structure.

System Redundancy – A Pitfall to Avoid

One of the most important challenges in the system integration process is avoiding redundancy. Fewer systems mean not only lower costs associated with subscriptions or server maintenance but also reduced costs for integration and future changes. Every additional system in the IT architecture is a potential source of problems that can affect the functioning of the entire organization.

Maintaining a clear and transparent system architecture should be a priority not only for the IT department but also for other departments within the company. A unified ERP system allows the company to limit costs associated with potential changes, such as those resulting from new legal requirements. For example, the European Union is introducing a uniform system for issuing electronic invoices. If the company has a single ERP system, a one-time integration with the government portal for registering invoices is sufficient. Each additional ERP system will require individual adjustments, generating additional costs and necessitating greater resources in the IT department and helpdesk.

Scaling IT Teams

The IT system is both an asset and a liability. Therefore, the IT budget should be tied to the number and type of systems, as well as the necessary competencies for their maintenance and development. Absurd job postings seeking programmers with knowledge of PHP, C++, Cobol, and Salesforce often result from a lack of alignment between the number of systems and available IT resources.

Decisions about system selection and integration should be made with consideration of both technical and business aspects. It is also worth considering whether all systems will be maintained and developed by an internal IT department or whether this will be outsourced to external companies or individual contractors. This analysis should be jointly prepared by the operations and IT departments and should include information from HR about the availability of new employees with the necessary competencies and the costs of potential training.

Future-Proofing – The Key to Long-Term Success

During the integration process, it is important to think long-term. Will the selected systems be able to meet future challenges? What needs might arise in the coming years? When planning the integration, it is worth considering potential scenarios for the company's development and ensuring that the IT architecture will be prepared for them. A long-term perspective helps avoid problems related to the need for frequent system changes, which can be costly and time-consuming.

Consolidation and Standardization

IT system consolidation can lead to the standardization of processes across the organization. Standardization enables easier management of operations, cost reduction, and improved efficiency. It allows companies to better manage their resources and respond more quickly to changing market conditions. However, to achieve these benefits, it is essential to take the right steps during the integration phase.

Agility in Change Management

In the business world, change is inevitable. Companies must be ready to adapt to new conditions, technologies, and market demands. Therefore, it is crucial that agility is an integral part of the IT system integration process. This allows companies not only to better manage current challenges but also to be prepared for those that will arise in the future.

Conclusion

Integrating IT systems during the M&A process is a complex task that requires thoughtful strategy and meticulous planning. The key element is understanding the principle that "less is more"—simplifying system architecture can bring numerous benefits to the company, both in the short and long term.

Decisions about system selection and integration should be made with consideration of both technical and business aspects and with an eye toward the company's future needs. Only then will the integration process be successful, allowing the company to fully leverage the benefits of mergers and acquisitions.

If you would like to learn more about IT system integration and best practices in this area, feel free to reach out in the comments!