By Saverio Scheri, Senior Manager, KPMG Peat Marwick LLP
Summer 1998 - Married people don't always want to deal with their in-laws. Similarly, when major hospitality or gaming companies merge, their computer systems don't always interface with each other. It's usually not a case of IBM talking to DEC or to Tandem. More often, it is the application software itself and specifically, the sharing of data that creates a problem.
To effectively run a newly merged / acquired company, the data collected at each location must "roll up" in a uniform fashion. Different hardware platforms, different software packages, or even different versions of the same software can make this a difficult, if not impossible, task. For example, if the companies use two different reservations systems, taking reservations for the newly combined company can be impossible and could seriously affect efficiency, revenue generation, and customer service. This may require running two systems for an extended period of time and duplicating information in both systems.
After a successful merger acquisition is announced there is a short period of time in which independent operation continues. This time period can be used to begin preparations for the changes, but it hardly allows for any real progress to be made. However, without the proper resources, both human and financial, even these preparations can seem insurmountable.
Aside from the obvious challenges of getting all the properties to use the same software, there is the later issue of the customer database. This is, oftentimes, a company's most valuable marketing resource. But what do we do when there are two or more? Clearly, we must eliminate old data, remove any duplication, and focus on creating a single data warehouse.
But how do we handle merging with a company that kept little or no historical data? The amount of data maintained about a guest usually varies. Where one company may keep information about restaurants utilized, check-in times, check-out times, type of room requested etc., the merging company may only keep basic folio data. This could significantly affect the marketing ability and customer service levels of the acquiring company.
So how do we solve this interaction problem? We can hardly anticipate when a merger will be successful, and often a few senior executives are the only ones aware of the pending merger. That leaves little or no time to plan for upgrading or standardizing systems.
While executives are focusing their attention on high - visibility items like new target markets, increased revenues, and cost savings, they tend to overlook the complexities of integrating the computer systems. That task is left to the ClOs and MIS Directors. But when management realizes that it is going to cost millions of dollars to get all properties on the same hardware and software, and that it will be an extremely time - consuming effort, they are surprised, impatient, and often angered. So the ClOs and MIS Directors are left to try to accomplish this seemingly impossible task with little money and resources.
The most important step in successfully integrating the systems of the merging companies is to get the buy - in from senior management to commit the resources to complete the task. This will include substantial financial and human resources in the form of full-time employees or consultants. The extent of financial and human resources required will ultimately depend on the size of the gap between the two merging companies. If both companies run the same software applications and have similar business models regarding their data, the integration may utilize a relatively straight forward approach requiring a minimum of resources. However, in the real world this is usually not the case.
In order to present the information, senior management needs to determine the amount of financial and human resources required and the time it will take to complete the task, and must perform a technology assessment of both companies. This will inventory the hardware types and models and the software applications and versions for the two companies. An understanding of each company's business models for creating, maintaining, and using data must also be completed. At this point. some decisions can be made about which systems will be selected for use in both companies and what effort will be required to successfully integrate each company's systems.
In short, these system integration projects happen all the time because companies merge all the time. However with careful planning and adequate research, we can minimize the time, cost and pain involved.
The Real Estate Report is published by KPMG's National Real Estate, Hospitality, and Construction Practice. © 1998 by KPMG Peat Marwick LLP All rights reserved. For additional information email KPMG.
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