A Framework for Understanding Post-Merger Information Systems Integration

By Alaranta, Maria; Kautz, Karlheinz | JITTA : Journal of Information Technology Theory and Application, March 2012 | Go to article overview

A Framework for Understanding Post-Merger Information Systems Integration


Alaranta, Maria, Kautz, Karlheinz, JITTA : Journal of Information Technology Theory and Application


Abstract:

This paper develops a theoretical framework for the integration of information systems (IS) after a merger or an acquisition. The framework integrates three perspectives: a structuralist, an individualist, and an interactive process perspective to analyze and understand such integrations. The framework is applied to a longitudinal case study of a manufacturing company that grew through an acquisition. The management decided to integrate the production control IS via tailoring a new system that blends together features of existing IS. The application of the framework in the case study confirms several known impediments to IS integrations. It also identifies a number of new inhibitors, as well as known and new facilitators that can bring post-merger IS integration to a success. Our findings provide relevant insights to researching and managing post-merger IS integrations. They emphasize that researchers and managers of post-merger IS integration should pay particular attention to the IS and organizational merger contexts; the need to build relationships and collaboration between the merging parties; power struggles; and, perhaps most importantly, understanding and treating post-merger IS integration as a complex, messy, and evolutionary process.

Keywords: mergers & acquisitions (M&A), post-merger information systems (IS) integration, post-acquisition integration, case study

INTRODUCTION

Mergers and acquisitions (M&As)1 are a prominent tool for corporate strategy, with the worldwide value of deals exceeding USD 2,400 billion in 2010 (Reuters 2011). As a result, thousands of firms face the challenges of postmerger integration, defined as "blending together of organizational components" (Shrivastava 1986; Mehta and Hirschheim 2007). Such integration is often problematic, and faulty integration is a significant cause of merger failures (Shrivastava 1986; Haspeslagh and Jemison 1991; Habeck, Kröger et al. 2000).

Information systems (IS) integration is noted as one of the crucial issues in overall organizational integration and, ultimately, for the success of the merger (I/S-Analyzer 1989; Merali and McKiernan 1993; McKiernan and Merali 1995; Weber and Pliskin 1996; Chin, Brown et al. 2004; Wijnhoven, Spil et al. 2006; Mehta and Hirschheim 2007). Consider the following real-life instance:

On March 4 2007, 500 US Airlines passengers missed their flights at Charlotte-Douglas International Airport and altogether thousands of US Airways passengers suffered long delays. Some passengers claimed they had not been able to speak to a ticket agent after waiting for more than two hours. This happened because of a problem with the reservation system and the fact that the automated kiosks did not work. The underlying reason was that on the same day, the airline was trying to combine the reservation systems of US Airways and America West, two years after their merger in 2005.

Post-gazette.com (March 5, 2007)

This example illustrates the importance of post-merger IS integration in practice and how problems in IS integration may result in delays, lost opportunities, decreased revenues (cf. Stylianou, Jeffries, and Robbins 1996) or huge capital costs (Merali and McKiernan 1993). Remarkable counter-synergies can be hidden in information systems (Robbins and Stylianou 1999).

The merger situation poses special challenges for IS integration. It is affected by organizational differences (Weber and Pliskin 1996), and, during such restructuring, value sets are altered and power is redistributed. These make IS integrations in mergers fertile ground for employee resistance (Haspeslagh and Jemison 1991), cultural clashes (Weber and Pliskin 1996), and power struggles (Metha and Hirschheim 2007). These problems are aggravated by the fact that, instead of having to deal with one set of various stakeholders and intra-organizational subcultures, the decision-makers need to manage at least as many of these problems as there are merging organizations. …

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