M&A challenging for IT managers

CIOs at financial institutions should be prepared for the stress mergers can bring to their operations, the head of IT at a leading regional bank has warned.

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By  Administrator Published  May 3, 2007

CIOs at financial institutions should be prepared for the stress mergers can bring to their operations, the head of IT at a leading regional bank has warned.

As the banking sector increasingly consolidates in the region, IT managers need to ready their departments for the consequences of either leading a takeover or being the subject of one, said Omar Agha, global head of information technology at Arab Bank.

"I expect to see quite a bit of mergers and acquisitions (M&A), more consolidation which will put a lot of pressure on IT, the nerve system if you will. Certainly it is a challenge that we have to be prepared for," Agha said last month during an interview with IT Weekly at a financial technology summit in Dubai.

IT managers also need to be prepared for entrance to new markets, Agha said. "Countries like Sudan, Syria and Libya are also opportunities for banks to get into, either organically or by mergers and acquisitions, so it places quite a bit of demand on IT to be ready to go to market in a short period of time," he warned.

In March two of the region's largest banks - Emirates Bank International and the National Bank of Dubai - announced plans to join forces in a US$45 billion merger. While details of the two banks' IT integration plans have not yet been revealed, the implications for IT departments of such mistakes can be immense.

For instance, in the proposed merger between Barclays Bank and ABN Amro the two banks said that around 29% of the total savings they expected to make would come from a reduction in IT and telecommunications hardware, software, and development spend.

Mergers can, however, be a chance for IT departments to improve their operations and should be viewed as an opportunity rather than a threat, according to research firm Gartner.

"Integrating the IT systems of two or more enterprises is a vast, complex and potentially costly process and it is a major challenge for the information systems organisation," Dave Aron, vice president and research director at Gartner Executive Programs, told IT Weekly. "However, if the process is handled in the right way, it can provide the opportunity to upgrade and update existing systems for overall business benefit."

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