Integrating Management Information Systems Following Organizational Mergers or Acquisitions Fred Niederman, Saint Louis University Elizabeth Baker, Virginia Military Institute University of Missouri, St. Louis February 2009

Outline of Program Purpose Background on mergers Role of MIS integration in mergers The dependent variable Method Initial findings

Purpose “Studies and experiences have shown that a major reason why many mergers and acquisitions fail is because of problems that occur during the implementation stage of the transaction. Information technology (IT) has emerged as one of the most critical aspects of integration and successful implementation.” (Popovich, 2001) “When dealmakers are trying to knit together a transaction, managing all the details can seem like death by a thousand cuts. But experts insist that deal principals must look beyond financial and other models when evaluating deals and include information technology (IT) on their short list of concerns.” (Shearer, 2004)

Background Mergers are frequent Mergers on average reduce shareholder value

Role of MIS Integration in Mergers MIS is one of several factors that can unravel a merger, but don’t guarantee success Reasons MIS contributes to success Sheer value of MIS assets Support for business process Before, during, and after the merger Support for data/information as decision basis MIS personnel as important knowledge repository

The Financial/Economic View Are mergers a good thing? Overemphasis on the mean, neglect of the variance Difficulties pulling merger effects from other effects Question addressed to government policy and, perhaps, investors Not so helpful for merger implementers

Levels of Integration Continued Partly Fully separatelyintegrated combined

Culture and Personnel Timing and informing Retention of key skills Service orientation Decision making

MIS Integration Strategies Continue both groups Integrate at summary level Dismiss one group Move transactions and support to dominant system Select “best of breed” At various levels of detail Move both groups toward new platform Particularly in moving to ERP from two “legacy” systems

Theory Bases Strategic integration/match Hirschheim and Sabherwal; Henderson and Venkatchraman Resource based lens Focus on assets and their combination Attribution theory Focus on “spin” in evaluating outcomes (Vaara 2002) Not in the literature Absorptive capacity Transaction cost and agency theory Structuration

Prior Empirical Research Sallie Mae 14 lessons Brown, Clancy, and Scholer, 2003 Multiple cases Not much evidence of strategic alignment as an issue Meera and Hirshheim, 2007

The Elusive Dependent Variable Embedded system and multiple levels of analysis Is a good MIS integration of significant value when other elements of the merger fail? Financial measures HR style measures DeLone and McLean System, information, and service quality Use and user satisfaction Net benefit

Method Qualitative Sparse prior development of definitions, constructs, and measures Units of analysis Firms, mergers, individual experiences Data collection through interviews Saturation, diversity in positions Analysis through grounded theory approach

Grounded Theory: What is It? An inductive method of qualitative research designed to build theory from ground up Emphasis is on theory as the output of the research Uses sampling to obtain the richest data for theory development Emerging concepts derived inductively from the data Patterns recognized abductively A rigorous and structured analysis process is used to derive the theory

Initial Observations 10 interviews Fortune 500 companies 2 specialists in IT integration 3 CIOs 3 “on the ground” workers 2 retired CIOs

Initial Observations Interview complexity Many mergers and varied observations Size matters Success measured informally Personnel -- wide range of approaches Cultural fit critical for firms and for MIS Timing Learning

Questions? Comments?