Posted by: Sasirekha R
Acquisition, EA, Enterprise, Enterprise Architecture, Governance, Merger
Established EA and EA Governance ensures effective Mergers and Acquisitions
Mergers and Acquisitions (M&A) are typically done with the objective of gaining particular assets and / or to gain to a new customer base. To be effective, it is necessary to carefully consider the operational ramifications and the potential business and technology issues bringing the two organizations together.
Forrester clearly points out that the key best practice in handling M&A is to “Use business and IT capability maps developed before an M&A to accelerate due diligence and planning”.
The typical problem faced when two organizations have to merge is in rationalizing their systems, especially so as each side tend to take a view that their systems and processes are superior. There are cases where a long time (a couple of years) is spent in comparing each and every system/application with their counterpart and decision taken on an individual basis. In addition to the time and effort, the end result tends to be a sub optimal one, as the decisions are taken at each part and not looking at the “whole”.
Enterprise Architecture establishes core principles and guidelines at the:
- At the business level, the EA strategy helps align with the organization’s operating model, strategy, and IT objectives, guiding IT transformations by providing a business-centric view of the enterprise from a functional perspective.
- At the application tier, the EA strategy ensures a minimal amount of overlap among information systems, laying the groundwork for a comprehensive set of applications that work well together, are easily integrated and don’t duplicate efforts.
While the Business architecture – business drivers and processes – enable the business managers to share a centralized vision for executing specific processes, application and technology guidelines enables the technology managers to make decisions.
Using the already established EA Strategy and guidelines as the baseline for making decisions – makes the decision making objective and less tedious. This approach helps in two counts:
- In synthesizing information systems in an efficient and economical way
- To foster harmony among employees of both the organizations.
Using the business architecture multi-level approach, it can be determined if the new entity is similar, subset or superset of an existing business component or if it is a totally new business component (in case of total diversification). The next step is to determine how to combine the business processes, applications, and infrastructure assets.
Depending on the extent of commonality in the business and the applications, the major scenarios are:
- If the processes, applications and technology platforms are reasonably in alignment with the established EA guidelines, then combining them to the existing environment would be pretty straight-forward.
- If the processes, applications and technology platforms are not aligned with the established EA, then the new entities have to be converted and combined with the existing environment.
- If the processes, applications and technology platforms are in such a way that they cannot be combined (typically in case of total diversification), then the Enterprise Integration Architecture guidelines have to be used to easily integrate these applications.
In the event of combining business processes, then the business levels have to be used to determine the sequence of the areas that are combined. Typically the HR (employee related) and Finance (accounting) get done, followed by client facing processes (so that the client have a consistent experience), and finally merging the other process areas.
In the event of the new processes, applications and technology components of the new entity have to be retained and integrated with the existing environment, then using the Service-oriented integration becomes essential. SOI’s key benefit in terms of handling heterogeneity, providing interoperability and service location independence makes it the right choice for integrating systems – that were not planned to work together.
In addition to having EA baseline, it is essential to have EA Governance in place which handles Architecture compliance as well as architecture change management. As a result of M&A, for optimal results, the established EA may have to be changed – and the decision making approach and authority to be defined and established much earlier to be really effective in handling such scenarios.