For an integration to run smoothly and hit savings targets,
following an acquisition or merger, only one company's IT systems
can survive, a Royal Bank of Scotland executive claimed this
week.
Royal Bank of Scotland and NatWest are midway through a merger
announced last year.
Mark Fisher, chief executive of Royal Bank of Scotland, said the
group is on target to meet the savings it planned when it acquired
NatWest last year.
IT savings of £350m are expected over the first three years of the
merger, mostly from eliminating duplication and improving
efficiency.
With the complexity of business applications and the bespoke nature
of much corporate software IT can stall mergers and takeovers.
Speaking at the Banking and Finance E-Business Conference in London
last week, Fisher said directors need to make an early decision on
one company's IT infrastructure as the backbone for the merged
company and be prepared to scrap much of the other's systems.
"The conventional wisdom is that you should go through process by
process and see which system is better," Fisher said. "But if you
do this you are taking different pieces of a jigsaw which don't fit
together."
The merged NatWest Group will be based on the Royal Bank of
Scotland IT platform. Many NatWest IT systems have already been
scrapped, Fisher said.
IT staff at the new bank have been told to focus on meeting the
deadlines of the merger, rather than tweaking systems to improve
performance.
"Our IT department has been organised around the job of
integration," Fisher said. "There will be minimal changes to
functionality."
Merging companies still neglect IT due
diligence
Mergers are failing to deliver cost savings
because companies are failing to carry out IT due diligence,
according to research last month.
More than two-thirds of companies surveyed by the Bathwick Group
said they had not carried out technical due diligence before
committing into a merger. IT due diligence assesses the risk of
acquiring or investing in another firm by valuing tangible assets,
such as hardware, and intangible assets, such as intellectual
capital.
Scottish consultancy Vestech last year launched a one-stop due
diligence service to audit IT investment and systems for corporate
finance deals.
Nick Huber
nick.huber@rbi.co.uk