After the Merger/Acquisition...What Do We Do With All Those GISs?

After the Merger/Acquisition...What Do We Do With All Those GISs?

Joseph L. Hobbs
Vice President Strategic Consulting Services
Geographic Information Technology, Inc.
101 Inverness Drive East, Suite 130
Englewood, Colorado 80112

Abstract

Merger and acquisition (M&A) activity in the utility market space is creating new challenges for geo-spatial systems managers and their new combined organizations. Making adjustments to meet these challenges threatens the status quo, and often evokes an emotional response and stiff resistance. So much so, that a rational approach is needed to sort out the challenges of having multiple, often conflicting geo-spatial technologies in the new organization. We will outline a tested methodology used to identify viable go-forward alternatives, gather key decision support information, and develop a business case structure to objectively select the best enterprise geospatial alternative. This approach takes most of the emotion out of the decision process and builds wide support in the enterprise for the selected alternative.

Introduction

When in the muddle of multiple systems, how does the new enterprise achieve the effectiveness and efficiency promised in the heat of the merger? Too often, it appears, operations management systems such as Geographic Information (GIS), Outage Management (OMS), Work Management (WMS), and Mobile Data/Field Force Management (MD/FFM) are overlooked in merger planning. These systems are often viewed as department level, limited scope systems, that perform specific operational support activities used by a relatively few employees.

In fact these systems, when deployed appropriately, have the potential to significantly impact the effective operation of the merged utilities across the entire enterprise. Now, the challenge is to identify what combination of existing or available systems will provide the best return to the merged enterprise.

In this paper we are going to concentrate on GIS solutions. This approach however, will work equally well when analyzing any of the operations management systems present within the merged utility.

The Problem

As a result of a merger or acquisition, two or more geo-spatial systems are deployed across segments of the new enterprise. Each system has a set of advocates familiar with its functions and with biases toward extending its implementation into the new larger enterprise. Additionally, the systems may be in dissimilar stages of implementation, providing differing functionality.

Further, the level of integration between one geo-spatial system and its related enterprise systems may be greater than that of the other(s). Significant capital investments have been made in each system, and one or more of the systems may have significant depreciation write-down remaining. Finally, significant investments have been made in employee training and interface development to link the geo-spatial system to other operational and corporate systems.

Simply stated, the problem encompasses complex and costly components, personal preferences and embedded processes, significant enterprise financial and tax consequences, and major change management or operational readiness issues.

The Solution

Selecting the optimum solution is not a simple process. However by turning to a fundamental Information Technology evaluation process, and beginning with the end in mind, the merged enterprise can determine the most advantageous solution. The recommended steps to identify viable alternatives, gather key decision support information, and develop a business case for the identified best alternative are summarized below.

Identify Goals & Objectives
It is imperative that the mission and goals of the merged enterprise (and their impact on the geospatial systems) be clearly identified. Mission statements and corporate goals frame the highestlevel requirements and define the boundaries for a business case regarding the continued use, extension, or replacement of each geo-spatial system. Mission statements and goals must be validated and interpreted at the geo-spatial and operations systems level to assure relevance and compatibility with enterprise vision for a future operations environment.

Two actions are required to achieve this step

Review and update the business drivers.
Confirm the business mission and goals for each operational system.

Establishing or confirming business driven goals and objectives that support a clear mission statement becomes the starting point for an objective assessment of the geo-spatial and adjacent technologies. Technology must be aligned with the business for it to succeed in any environment.

For example a mission statement may say something like the following.

The enterprise will create a geo-spatial system to fully support the gathering and organizing facility data into usable information that meets or exceeds the company operations facility network knowledge needs.

Goals may include statements of what the end-state will accomplish. Examples:

Consolidate geo-spatial systems into a single robust architecture that will meet near-term and long-term needs.
create a flexible geo-spatial architecture to support future planned merger and acquisition activities.
Reduce the cost of delivering operations facility data, information, and analysis to executives, superintendents, operations managers, operations staff, and customer service representatives.

The mission statement, goals and objectives will be referred to often throughout the evaluation process to assure that the team remains focused on the business requirements of the geo-spatial solution.

Identify Constraints of the Evaluation

Technical and business constraints applicable to the future solution must be evaluated. Clear identification and documentation of these constraints will help frame the evaluation.

Examples of relevant constraints include the following:

The financial evaluation must utilize a 5-year horizon.
Any geo-spatial solution must be compatible with XXX Customer Information System.

Identify Viable Alternatives

The viable and practical alternatives for resolving the geo-spatial dilemma must be identified. There may be only three or four options available. For example, migrate to one or the other geospatial technology, continue with all existing geo-spatial technologies, or implement new technology. Limit the list of alternatives to those that are truly practical for the new enterprise. If the list is too long, the effort required to gather and analyze data related to each alternative will exceed its value to the evaluation process. Focus on those alternatives that will address the key geo-spatial systems problems facing the new organization.

Typical alternatives may include two or more of the following:

Maintain separate geo-spatial data and application in existing platforms “X” and “Y”
Migrate all geo-spatial data and applications to existing platform “X”
Migrate all geo-spatial data and applications to existing platform “Y”
Migrate all geo-spatial data and applications to new platform “Z”

Gather Decision Support Information
A common evaluation standard, such as functionality and performance requirements must be identified in order to assure “apples to apples” comparison. An example of a common evaluations standard is “each alternative solution must provide all of the functionality required across the entire new enterprise”. Other evaluation standards could be used, however it is important that the evaluation standard be directly related to addressing the geo-spatial systems problems in the enterprise. Geo-spatial system features, functionality, and performance requirements must be identified, reviewed, and validated. Base the requirements evaluation on the confirmed geo-spatial vision, mission, goals, objectives, an constraints.

Build the requirements list into an evaluation matrix to correlate requirements to the alternatives. Gather information by requirement/function and alternative. Pair and record the data in the appropriate matrix location. The matrix becomes a tool to gather, store, and evaluate key information in a compact and accessible format.

Engage staff most familiar with each alternative to find and contribute the needed information. You may have several teams working in parallel to complete this task, so coordination and consistency of the information is critical. Use a consultant to provide unbiased information and to validate the organization’s input. When all gathered information is loaded into the matrix, strengths and weaknesses present in each alternative will start becoming apparent. Identify the effort required to create “level” functionality and performance across the identified alternatives. For each required function in an alternative that is either missing or less robust than the most capable alternative, identify the effort required to provide an “equivalent” function or capability. Typical efforts may be to buy an additional software package, develop an interface, code a new function, modify a database, collect additional data, or write a new application. The cost of the effort must be quantifiable.

The following general actions are required to complete this step.

Confirm the business needs and requirements for each system.
Evaluate the capability of each system to meet the identified business needs and requirements.
Determine the gap between capability and needs/requirements.
Define the effort required to close this gap, and estimate the costs.
Identify and confirm the expected benefits to be gained from each operational system.
Estimate or confirm the costs.
Identify the viable alternatives (migrate to one or the other existing system, select another system, maintain the status quo)
Identify all activities and costs to bring each alternative to a common standard of functionality and performance

Build the Business Case Update the evaluation matrix with the costs associated with each “leveling” effort. Assign a zero cost to those requirements/functions that do not require any activity. Estimated costs can be developed for those requirements that require upgrading either through a rigorous systems analysis process, or by a consultant with geo-spatial systems development experience. Assign the full cost of the leveling effort, including product purchase, internal and external labor, testing, interfaces, and reoccurring maintenance fees, to each required function. Identify all financial costs associated with each alternative, including depreciation, taxes and related items. This process usually requires segmentation of costs into capital and O&M categories and estimating the timing of the expenditure. Corporate accounting will be able to provide the information and formats the company uses to present and use the information (generally in a cash-flow analysis).

When a cost/benefit analysis is required, tangible and intangible benefits must be identified by alternative for presentation. Like cost expenditures, the timing of benefit accrual must be estimated. Many of the identified benefits will apply equally to each of the alternatives and may have little or no impact on the overall analysis.

Sum all of the cost (and benefit) components in each alternative. On a cash-outlay basis, the alternative with the lowest total cost should be the winner! Keep in mind that costs for each alternative is based upon the effort required to make all of the alternatives functionally “equivalent.”

The following issues may require consideration in the development of the business case:

Enterprise issues:
Energy mix (all electric, all gas, electric and gas, others?)
Enterprise strategic and operational goals and objectives
Enterprise financial goals
Future acquisition/merger activity
Divestitures
Consolidation of operations
Reorganizations

Land base and geo-referencing issues:
Land base requirements (coverage extent, positional accuracy, feature content)
Service territories: coincident, contiguous, or widely separated?
Coordinate reference systems (geographic, state plane, UTM)
Reference features available or needed (street centerline, right of way, parcel lines,
address ranges, hydrography, etc.)

Systems status issues:
Relative maturity of each system (in service date, and number of actual users)
Level of support for business process (high, moderate, low)
Version upgrades required (e.g., ArcInfo 7.x to 8.1)?
Financial status (capitalized and fully or partially depreciated?)

Extended functionality (by system):
Number and type of functions added to the core geo-spatial platform
Amount and type of customization applied to each core geo-spatial platform
Graphic design tools (internally developed or a commercial off the shelf (COTS) product)
Work order creation (graphic and tabular)
Cost estimating functions
Work tracking and management

Data issues:
Data model reconciliation, updates, and validation
Data migration
Data conversion completion
Data maintenance processes and procedures
Compatible Units definitions
Data completeness

Interface and integration issues:
External systems interfaces (number and type)
Data required (current and future requirements, type and volume of changes)
Status and condition of external systems (service life remaining, functional suitability)
Systems integration strategy (plans, software, processes, schedule, integration bus technology)

Financial issues:
Capital costs
Depreciation costs
Debt service costs
Tax impact costs
Net Present Value evaluation

Systems service issues:
System support staffing
Data quality maintenance
Business process maintenance

Risk Assessment
The final step is in the evaluation process is to assess the risks present in achieving each of the alternatives. Potential risks may include impacts from slipping product delivery schedules, rising labor costs, limited budgets, inadequately staffed projects, or poor executive support. Each alternative must be evaluated against each of the identified risks based upon the impact of the risk and probability of occurrence. Those risks identified as having a high impact or high probability may require a mitigation plan.

Conclusion

Evaluating multiple geo-spatial systems in an enterprise as the result of a merger and acquisition is possible in an unbiased and objective manner if the process and methodology applied is focused on gathering reliable and verifiable facts. Key to determining “what we do with all those GIS” is measuring the cost-effectiveness of each alternative in achieving the goals and addressing the business-driven system requirements across the entire enterprise. When supported by a thorough analysis, the selected alternative will be a relatively uneventful “sell” to senior management.