The Issues

There are many problems when IT is not involved from the outset of negotiations through finalization. When IT does not understand the entire strategy, it cannot provide the most effective, right-sized solutions. For example, if the alliance is already proven, and needs to be set for a long-term relationship, IT should invest considerable time so things are done correctly from the beginning. However, if the alliance is merely to be tested before the requirements are known, IT should invest less time, and the technology processes should be set up more quickly.

On the one hand, the two IT departments involved in the alliance will have technological differences. Even if both organizations use the same basic technology, and have similar business applications, both must make changes in order to build a working environment. Because smoothing out the technological differences between the IT installations will take time and patience, IT representatives should be brought into the process as early as is practical.

In addition, it will require time to resolve the cultural differences between the two organizations, so they can reach a common ground. Therefore, the sooner IT from both sides can start planning and working together, the better it will be for everyone involved. Dealing with production problems at the same time as blending the cultural and technical aspects will only make an already tension-filled process worse. Involvement and input will be rushed to meet immediate requirements; and compromises will be made, requiring later IT rework.

Because IT staff members are generally analytical and critical thinkers, they tend to point out problems, instead of seeing new-found "challenges" and providing solutions. If IT is brought in early, it can raise issues and bring solutions at the same time. As a result, the business area will more likely realize the value of IT involvement, and start to include IT more naturally. If, however, the proper business/IT relationships are not established from the start, the two areas will have difficulties working together.

Unforeseen costs will also arise when IT costs for the alliance are not researched and accounted for in the financial transaction. The cost of software has increased in the last 10 to 15 years as vendors realized the value that software adds to business productivity. In addition, vendors continue to enhance and create product functions and features leading to upgrades. There are also more productivity tools available, which have become necessary in day-to-day business. And the many platforms that software is designed to run on also contribute to the continued rise in costs.

Third-party processing provides one real example of how software licensing can delay or add significantly to the cost of an alliance. Thus, after the deal is executed, the original company might continue to run the application on its mainframe to benefit the new company, thereby creating a third-party processing arrangement. Because software contracts often do not address third-party processing, there will be additional fees.

In addition, each software contract must be systematically inventoried and negotiated to ensure that application software packages are properly run and maintained. This also requires the IT departments to begin working together as soon as possible, and developing plans for the transition. Once developed, the plans must be communicated to everyone who will be involved in the changed environment.

The organizations can thus save money by fully understanding what will be required on both sides. In addition, appropriate planning and communication can mitigate the high frustration levels resulting from the changes.

Since IT staffing is critical to the success of an alliance, the organizations must pay special attention to retaining the necessary IT staff, particularly in light of the current IT market. The organizations should focus on those staff members who support the current systems, who work on the business transition, and who build the new linkages. The organizations might negotiate "stay" bonuses for existing staff, hire contracting firms to continue to run the applications, or combine the two strategies.

If organizations can retain their staff, training will generally not be required to keep the systems operational. However, additional skills may be required at appropriate intervals for transitioning the business and building new linkages, including specific languages, tools, or platforms.

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