Post-Merger Integration of Two ERP Systems
Your company, a $2B manufacturer, has acquired a competitor of similar size. Both run SAP ECC but with heavily customized instances: your system has 1,200 custom objects, the acquired company has 800. The merger synergy target is $50M annually, with $20M expected from IT integration. You have 18 months to merge the ERPs. The acquired company’s CIO insists on keeping their system as the master for manufacturing because of unique shop-floor integrations. Your CFO demands a single source of financial truth within 12 months. A greenfield S/4HANA implementation would cost $40M and take 30 months. A system-of-record consolidation (one instance, harmonized processes) would cost $15M and take 24 months. The board is risk-averse after a previous failed ERP project.
1. What integration architecture and migration strategy would you recommend, and why?
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Recommend a two-speed approach: (1) Financial consolidation first: Implement a centralized financial data hub (e.g., SAP Central Finance) to achieve a single source of financial truth within 12 months without disrupting operations. This satisfies the CFO and avoids a big-bang migration. (2) Manufacturing integration: Keep the acquired company’s manufacturing execution system (MES) but integrate it via standardized APIs to the chosen ERP core. This respects the acquired CIO’s concern while reducing duplication. (3) Long-term ERP strategy: Use the 18-month window to harmonize processes and prepare for a move to S/4HANA, but do not commit to a full greenfield now. A phased consolidation to a single ECC instance over 24 months is more feasible than greenfield given the board’s risk aversion. Cost: ~$15M for consolidation + $5M for integration layer = $20M, within the IT synergy target. This balances speed, risk, and cost.
2. How would you manage the political and organizational challenges between the two IT organizations?
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Establish a joint integration office with co-leads from both companies and clear decision rights. Create a ‘best of both’ process council where business owners, not IT, decide on harmonized processes. Address the acquired CIO’s concerns by giving them ownership of the manufacturing integration workstream and recognizing their expertise. Use objective criteria (e.g., process cost, cycle time) to select which system’s process becomes the standard. Communicate early and often about roles, retention bonuses for key talent, and a clear end-state architecture. Avoid ‘us vs. them’ by focusing on customer and shareholder value. Escalate unresolved issues to the steering committee with a defined RACI.