5 ways to approach application integration if acquisition is imminent

Preparing for an acquisition? Mitigate the most common risks during business application consolidations.

“While you will need to move quickly, it is critical to clean and standardize data before you merge it into an acquirer’s system.”

—David Rye, senior vice president, Corporate Development, at Informatica

When one company acquires another, application leaders are often tasked with merging multiple duplicative systems running on distinctly different platforms and architectures. A two-pronged approach to mitigating risks can avoid short-term problems while laying a foundation for longer-term success.

Short-term tasks—including completing major business processes, such as closing financial books—should be wrapped up prior to initiating any data integration tasks. Longer-term planning should include a sound application rationalization and retirement strategy. Designing for an optimized application portfolio from the beginning can significantly reduce ongoing costs while simplifying the application environment.

David Rye, senior vice president, Corporate Development, at Informatica, likens the integration experience to navigating a minefield. “You know the potential danger is there,” he says, “but with proper planning and foresight, you can avoid serious damage—and aim to emerge improved.”

According to Rye, there are five critical areas in application integrations you should proactively address:

  1. Understand the processes and inter-application dependencies of the target business.
    “Too many people fail to understand the processes within the target company, and how the target company depends on these processes,” says Rye. For example, if marketing automation and CRM systems are decommissioned at the wrong time after an acquisition, sales leads can easily get lost. “It happens a lot,” Rye says. “The whole lead-generation process of the target company disappears, causing major sales challenges.”
  2. Map financial reporting timelines and plan for alignment before integration.
    If both companies have different financial systems, closing the books at the end of the quarter can quickly become a nightmare. “Imagine trying to compile your financials and finding a completely different order-entry or ERP system,” says Rye. “What if you cannot easily integrate the two before a critical deadline?”
  3. Classify and define data retention requirements to ensure compliance.
    Acquisitions naturally result in the decommissioning of redundant systems and applications. The problem is the data those systems hold may need to be archived and stored for longer periods of time. “A lot of that data will need to be retained for regulatory compliance—and some industries are very stringent,” Rye says.
  4. Be aware of hidden costs—know the TCO of redundant systems.
    You can easily accrue unforeseen costs if a redundant system continues to operate in production. For instance, “you have to plan for inevitable, realistic, and unforeseen expenses,” Rye says. “Running parallel systems requires people, software, and licensing. It may also require the additional cost of synchronizing those systems while they run in parallel.” Also, pay attention to support renewal dates and understand the contractual obligations if you want to cancel support before the maintenance expires.
  5. Build proactive data quality checkpoints into the project plan.
    “Data quality issues are also common,” according to Rye. “Customer data, for example, is often incomplete, with addresses that are missing or wrong. While you will need to move quickly, it is critical to clean and standardize data before you merge it into an acquirer’s system. That is the only way to ensure the data is useful to the merged business going forward.”

So how does Rye recommend sidestepping these landmines?

  • Do your due diligence. “If you can, take an IT team in to do discovery before an acquisition is announced,” he says.
  • Plan in advance. “Especially the budget,” he advises. “Expect extra costs and delays. Expect compliance issues. Build mitigation strategies into your plan.”
  • Seek help from technology when it comes to moving data. “There are tools that automate data archival, data retention management, data quality, and migration. Incorporating technology can drastically simplify and speed the acquisition process,” Rye states.

Read “10 Things You Need to Know Before Modernizing Your Applications” to further understand how to take on common challenges of an application and data migration project.

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