Posted on Wednesday 31st October 2012 10:56
How Random House and Penguin should handle the imminent amalgamation of their IT systems.
In a deal announced earlier this week, Pearson and Bertelsmann are set to own around 25% of the global publishing market when the publishers Penguin and Random House merge in the latter half of 2013. Random House owner Bertelsmann will own 53% and Penguin owner Pearson will retain 47%. It will mean a large upheaval for the companies themselves, and the industry as a whole. Technically too, the unification of two publishing houses on this scale will require a significant amount of care and work.
Any M&A means a complex transferral process between two IT departments. This typically entails extracting, understanding and loading as much data as possible from one company’s systems, onto the other company’s equivalents. In this case, content and product packages, customer lists and details, back orders, pricing matrices, and eBooks must all be migrated across. Additionally, cover images, production details, discounting strategies, royalties (including contracts, ledgers and rules), marketing materials, sales ledgers and, perhaps most crucial to an business, sales history and forecasting also require migration, with minimal loss of access during the process itself, or wholesale loss of data or content.
Given the potential gains for both Penguin and Random House (the golden rule with Mergers and Acquisitions being that if companies can successfully unlock value 1+1 becomes 3), the successful transferral of systems is of paramount importance, especially as system incompatibility is a common means for stalling a merger. Below are my top tips for smooth transition:
Audit first, merge later
To compete with the rigours of transfer, both companies must make sure that their IT systems are in the best shape possible. Like athletes carb-loading before a race, IT departments should get their systems in order: lose extraneous baggage and ensure organisation protocols and procedures are uniformly adhered to. In doing so, companies will most effectively take stock of the extent of the project before them, and potential flashpoints have a chance to surface prior to action rather than during. This is also a time to identify any outstanding issues of, for example, IP law, and to segregate and aggregate content as required, ahead of the merger extraction juggernaut springing into action.
There’s no such thing as a single currency
It’s the equivalent of going on holiday to America with Euros in your pocket. During a merger, however similar software seems, there will always be inherent differences. Companies are selective in their usage, implementation, organisation and documentation of technical support. Compatibility, or lack thereof, is a major issue, but perhaps more challenging are the models and increments with which companies interact with information – be it by project name or author, ISBN, retailer or price point, international sales, yearly or monthly. Even codification or abbreviation can hamper effective system transferral. Merging IT systems at this level requires an awareness of possible problems in these areas, and as much local information as possible from the departments themselves. This can prove particularly challenging, given the fear of redundancy and reluctance to work with new systems. Persistence, conscientiousness to the point of obsessive attention to detail and an inquiring mind are necessitous to effective transition.
There’s still no such thing as a single currency – but you’ll have to make one
Problems and irregularities of company idiosyncrasy extend far beyond data transcription and storage, and this is one of the main areas where IT merges require precision…and patience. It’s often difficult to merge two systems, made more so when information is variously deemed vital or unnecessary. Managing an IT merger means deciphering what really is useful – or isn’t, and imposing a universal system that adheres to those rules. And remember – companies have history and required documentation which are often forgotten during a merge…and tends to resurface in an urgent requirement a mere moment after permanent deletion! Further to this, rolling data and merging accounts with those already in place is a time consuming activity, which must be accurate to ensure that data is not lost, and historically useful information is saved. Similarly, honour-bound agreements that stand outside traditional policy must be managed on an individual basis. Again, the support of extant employees is vital.
Don’t forget the practicalities
Companies shouldn’t underestimate the duration of a merger, specifically the scale of work required in an IT systems merger, and the time requirement from current employees. Honest assessment of time, with some degree of flexibility, must be communicated in order that parties are not disappointed, or that later stages of the merger process are not delayed due to an underestimation of the complexity of technical work required. Managers must be made aware that staff from across the company may need release from their duties in order to focus on the requirements of the merger procedure. Current staff are the most valuable resource available during a systems merger, and provision for their time must be made.
In short, foresight, patience and attention to detail are crucial to the migration of a company’s IT systems. Yes, it’s a time-consuming activity that necessarily involves an amount of hedging one’s bets, but it’s massively valid in the long run. Mergers and acquisitions typically result in company growth which far exceeds organic growth, and is an excellent means of streamlining costs. Current forecasts suggest that Penguin Random House could have revenues from the USA of $1.5billion and a further £400million for the UK market. That’s not to be sniffed at, and certainly makes a little hard work look worth it!