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What does a smooth, post-acquisition ERP transition entail?

Continuing to use existing ERP systems and enlisting ERP services support are just two key areas that CIOs must focus on after a company is acquired. Here's more.

An ERP transition is tough in any circumstance. That's doubly true for the CIO of a company that has just been...

acquired. He faces the uphill task of ensuring there's minimal business disruption during and after the merger. Doing some advance groundwork in the following ERP areas may help, especially when the new owners and their newly acquired company are using different ERP systems.

In such a situation, typically the CIO acts on behalf of the previous owners to acquire as many of the ERP systems and licenses and as much of the associated data as possible to become independent post-sale and ensure business continuity. The new owners are also interested in ensuring amicable and smooth separations from the previous owners. To that end, they often let the CIO of the company they just bought play a central role in managing this transition to ensure he has the necessary knowledge, expertise and experience of the newly-acquired company.

Retaining existing ERP systems

The CIO of the acquired company can negotiate with the parent company to continue using its own ERP systems. Doing so will ensure there's minimal business disruption for the acquired company, no new ERP system implementation and no training required on the newly implemented ERP system.

ERP licenses management

A parent company often gets a significant corporate discount on ERP licenses, as it buys the licenses from the ERP vendor on volume. The CIO of the acquired company should work with the original parent company to ensure the transfer of ERP licenses from the global account to a local or national ERP vendor and preferably at the same discounted price the parent company had been paying. It's important to ensure that the national or local ERP vendor is authorized to sell ERP licenses and has certifications, such as SAP's Partner Center of Expertise required for selling SAP licenses.

If the newly acquired company foresees that it will need additional ERP licenses to meet their future business needs, then CIOs can ask the parent company to also transfer these additional ERP licenses to the national level at the same discounted price.

Infrastructure

Often, the entire ERP infrastructure of the original parent company is located at one on-premises location or even with one cloud provider. To create a smooth ERP transition, the CIO of the newly acquired company will need to work on managing an independent IT infrastructure and may consider on-premises, cloud or hybrid options to minimize time, cost and effort involved.

ERP support services

Just like infrastructure, it isn't uncommon for the parent company to have one central location or one ERP services provider that handles and troubleshoots all the functional and technical requirements. The CIO of the acquired company has a number of options. He can consider either using the same ERP services provider, but now at a local or national level, or he can engage a local ERP services provider that offers a similar or higher service level. As a last option, the CIO can consider building an in-house team of experienced ERP consultants to manage business continuity. As it's often not known how much ERP support will be required post-sale, the CIO can check the history of the ERP -- and other -- support services taken in the past as a benchmark, add a cushion in a range of 15% to 20% and plan accordingly.

Effective communication management

After the sale, it may be that all internal and external communication with customers, vendors, service providers, and financial and legal authorities will have the new company name and logo on all official and business communications. As part of the ERP system transition, this often requires updating the custom-developed objects in the ERP system, such as purchase orders issued to vendors, sales orders issued to customers and annual income tax filing reports.

Implementing effective change management

The CIO of the acquired company can initiate their own change management initiatives to inform all the internal stakeholders of the acquired company of their plans to smooth the ERP system transition and other changes and what, how and where to seek IT support in general and ERP support in particular.

Minimizing custom development objects

Post-sale, a CIO needs to limit requests for custom-developed reports and other objects to keep budgets and scope in control and keep the ERP transition smooth. A CIO will likely need to adopt the same policies and procedures used by the parent company to ensure there are enough business controls in place.

Avoiding innovation ventures

After a sale, the CIO of the acquired company should -- or will be told to -- wait on innovation projects until there is a better understanding of culture and the new owners' IT vision that will bring all merged companies under one umbrella.

This was last published in January 2018

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