Mergers are murder for the IT department

The mega-merger might promise efficiencies and new opportunities for businesses and their shareholders, it can severely tax IT departments already besieged by demands. This week's announcement of the merger of oil giants Exxon and Mobil marks the latest in a series of corporate consolidations throughout the business landscape and underscores the burdens - as well as the potential gains - facing their respective IT groups. 'I expect the suicide rate among IT professionals is about to go up,' says one senior analyst.

Although that increasingly common Wall Street favorite, the mega-merger, might promise efficiencies and new opportunities for businesses and their shareholders, it can severely tax IT departments already besieged by demands.

This week's announcement of the merger of oil giants Exxon and Mobil marks the latest in a series of corporate consolidations throughout the business landscape and underscores the burdens -- as well as the potential gains -- facing their respective IT groups.

"I expect the suicide rate among IT professionals is about to go up," said Ron Shevlin, a senior analyst at Forrester Research, in Cambridge, Mass. "Given what these guys are dealing with in terms of year 2000 and Internet-based applications, to throw into the mix such a huge merger [is a stiff challenge], especially in the oil and gas industry, which traditionally has seen very decentralised IT groups."

Potential conflicts between Mobil and Exxon IT departments are already apparent, according to a source at one of the merging oil companies.

"Mobil is a big Lotus Notes user. Exxon is an Exchange and mainframe e-mail shop. There are different help desks, hardware, etc. At any level you look there are going to be issues," the source said.

At the high end of the business food chain, such unions compound the legacy system integration tasks facing each company and introduce potential drains on productivity in the form of culture clashes, concerns about job security, and uncertain lines of authority, according to one analyst.

On the flip side, mergers can offer an opportunity to improve IT efficiency, according to one IT executive at a financial company that underwent such a merger, and who requested not to be identified.

"In general, you can streamline operations, if, for instance, you drop the total number of products you need to support," the financial company's IT executive said.

Also, the merged entity makes for a stronger bargaining position in dealings with suppliers and service companies, the executive added.

In such deals, redundancies in the IT departments themselves can spell cost-savings for companies, but can be hard to identify.

In the case of Exxon and Mobil, there is a "huge savings potential by doing some consolidation [of IT resources], [but] it gets a lot messier in the upstream areas where they rely more heavily on customized applications -- supercomputing sorts of things -- to do their drilling analyses and such. Putting all that stuff together will be a huge nightmare," Forrester's Shevlin said.

Layoffs could loom, because combining such massive IT centers produces relatively slight improvements in computing capacity, according to analysts and managers.

"When you get to that size, you do not get efficiencies in terms of combining software licenses and probably not in terms of hardware either because there is a point where you can't combine hardware above, say, a 10 to 12 machine setup," said Tom Oleson, research director of IT advisory services at International Data, in Framingham, Mass.

Among IT staffs, workers with expertise in client/server and Internet technologies have the least to fear, even if they are thrust back into the job market, the executive said.

However, the source at the oil company said Exxon's internal IT staff has relatively little to fear, because that company "buffers employees with contractors."

Ephraim Schwartz contributed to this article.

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