Mergers Drive Problems Before they Deliver Benefits

By Alan Wilson

During mergers, Service Providers are a frenzy of activity. All areas of the business are impacted, but operations are among the most affected. The operations organization is responsible for keeping the network up and running 24 hours a day, seven days a week while at the same time merging a new network into the existing one. Mergers occur for a variety of reasons, one of which is to increase market share and increase revenue. Companies also try to take advantage of economies of scale when they merge, spreading costs over a larger customer basis for a given service.

Mergers Result First in Increased Costs
While a company may increase its customer base and geographical reach as a result of a merger, it will also increase its costs. The intended economies of scale will only be realized with prudent cost reduction. A merger or acquisition also creates redundancies. Two human resource departments, two sales forces and of course duplicate IT operations.

Two fundamental questions must be asked in relation to duplicate operations. The first asks how to continue 7 x 24 operations without impacting customers or revenue generation while merging the two operations. The second concerns how to choose which software tools to keep and which to eliminate from the operations environment.

To avoid impacting the life-blood of the firm - the revenue-generating network – it's important to keep everything the same and keep that money machine cranking. But the status quo should only remain the state of the business for a short period of time. It is highly likely that costs will be climbing faster than revenues, thus pruning the business to eliminate costs will need to occur. A redundant service with redundant personnel is an expensive way to do business.

Impact on People
When mergers occur, people are always affected. “Salaries are your biggest expense in operations,” says John Lee, President of FieldDispatch.com, a company that provides field service solutions. How does a service provider make the difficult decisions regarding who stays and who goes? The final decision comes back to revenue, looking at which services customers will demand today and in the future. A service provider must look at the services that will provide the most revenue, continue activating new customers on those services, and continue to manage the network - often as a separate entity.

It may be more cost effective to maintain separate staff rather than trying to merge a new service into existing operations. This is especially true of service activation. Many of these systems are homegrown and would be very expensive to merge with other service activation systems. If the service is at the end of its life, it will be phased out and customers will be merged into new or existing services.

When services are phased out, so are the personnel associated with all aspects of their operations. This occurs for a couple of reasons. First, in many cases the operations of the merged companies are located in different cities. It would be quite expensive to re-locate dozens of people. This leads to second reason, which is that it makes no sense to relocate a staff that has a skill set that is no longer needed. Costs must be driven out, and losing people is an unfortunate fact of life.

Monitoring and field service is a different animal from service activation. Many service activation systems are homegrown and personnel need an intimate knowledge of the service in question and how to activate it. While there can be some unique twists in fault management, monitoring a network often has a similar look and feel regardless of whether it's an IP network or a circuit network. A fault is a fault is a fault when it comes to monitoring hardware problems. But even with similarities among monitoring systems it is likely that these systems need to be merged in order to have an efficient operation. There is still a multitude of issues to tackle when merging multiple trouble ticketing and monitoring systems. How does a company decide what to keep and what to eliminate?

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