The Importance of Enterprise Architecture to Mergers and Acquisitions
By Prithpal Bhogill and Bob Covington
Published May 2011
Creating a strategic roadmap and accompanying information architecture to streamline corporate acquisitions
Part of the Oracle Experiences in Enteprise Architecture article series
When most of us hear the name Smucker's, we think about jams and jellies. But thanks to an active Mergers and Acquisitions (M&A) strategy, The J.M. Smucker Company is now one of the fastest growing companies in the consumer packaged goods (CPG) industry. Its family of brands includes Smucker's®, Folgers®, Jif®, Crisco®, Pillsbury®, Eagle Brand®, R.W. Knudsen Family®, Hungry Jack®, and many more.
The J.M. Smucker Company has grown through mergers and acquisitions from a $500 million company to a $5 billion company in just ten years. As Smucker continued to expand its portfolio of leading brands, the company needed to devise a standard infrastructure that could help them acquire companies quickly while managing costs and maintaining an efficient operation.
Smucker's technology portfolio has grown dramatically since their first Oracle purchase in 1997. IT leadership created an Enterprise Architecture team to help guide their decisions as this Oracle platform changed and evolved. Smucker's Enterprise Architecture (EA) discipline has helped the organization to avoid some of the most common and costly mistakes that often plague companies following a corporate merger or acquisition.
For example, not all companies carefully consider the operational ramifications when they acquire another firm. They may be attracted to a particular asset or simply want to gain access to a new customer base. Managers don't always consider how well that business will fit in with their current organization, leading to immediate business and technology issues bringing the two organizations together. The goal is two fold: to foster harmony among new and old employees and to synthesize information systems in an efficient, economical way.
These issues often come to a head in the IT department, where everybody thinks their systems and processes are superior. We have seen mergers where it took up to 24 months for two organizations to rationalize their systems because they spent so much time arguing about the merits of each one.
An effective Enterprise Architecture and governance strategy helps a business enforce core principles and standardize processes across all aspects of the company. This enables line of business managers to share a centralized vision for executing specific processes.
Flexibility Through the Tiers of an Organization
As Smucker has learned, EA brings flexibility and consistency to an M&A strategy at multiple tiers:
- At the business tier, the EA strategy helps align with the organization's operating model, strategy, and IT objectives, guiding IT transformations by providing a business-centric view of the enterprise from a functional perspective.
- At the information tier, the EA strategy defines information models that accommodate new and existing business processes. Everything interrelates to support the overall data processing needs of the enterprise via well-defined master data management (MDM) techniques.
- At the application tier, the EA strategy ensures a minimal amount of overlap among information systems, laying the groundwork for a comprehensive set of applications that work well together, are easily integrated and don't duplicate efforts.
An EA framework helps resolve inconsistencies between the newly merged corporate entities to determine how well they support one another across each one of those tiers. This proven framework helps organizations integrate multiple applications and integrate new businesses as they come in. Will the new entity be a subset or a superset of what you already have? How do you combine information systems, applications, business processes and other IT assets?
Smucker successfully answers these questions during each merger and acquisition by following a three-pronged integration strategy. First they convert HR, payroll and GL activity to their Oracle platform so they can handle essential accounting and employee transactions. Next they cut over to common customer facing processes for ordering, invoicing, fulfillment and other basic business functions. Finally they bring new plants online and cut them over to the Oracle platform.
"Smucker considers acquisition integration as a key component of our Ability To Implement core competency," says Jeff Eshelman, Director of Enterprise Architecture and Standards at Smucker. "From an EA perspective, we compare all of our different platforms. We look at applications, data, integration, infrastructure, technology services, security, change management - really take a holistic look across the board at all of our architecture activities. If we acquire a company with a capability that we don't have, we'll accelerate or modify our roadmap to bring that component in, at least for that business area, as a test case for rolling it out to the rest of the organization. Having a future-state architecture allows Smucker to be proactive in these situations."
Eshelman says EA is built into their project management framework, and each project must complete an impact analysis at the outset. "We ask a few key questions to determine the risk profile of a certain application or infrastructure element," he adds. "The virtual EA team meets every week to review these projects. We also do a third party technical risk assessment whenever our data is going to be co-located with an outside provider. These regular meetings, practices and activities allow Smucker to react quickly following a merger or acquisition, since many of the governance procedures are the same."
Learn more about Enterprise Architecture and Mergers and Acquisitions:
- White Paper: Application Portfolio Rationalization: How IT Standardization Fuels Growth
- White Paper: Maximizing SOA Returns with Enterprise Architecture
- White Paper: SOA Anti-Patterns: How Not to do SOA
Additional Enterprise Architecture resources:
- Visit the Oracle Technology Network Enterprise Architecture Center
- Visit the Oracle Enterprise Architecture Blog
- Read more articles and white papers
- Download reference architectures
- Learn about Oracle EA Services
- Attend an EA event
About the Authors
Prithpal Bhogill is an Enterprise Architect with Oracle | LinkedIn
Bob Covington is Director of Enterprise Architecture at Oracle | LinkedIn