Managing HP-Compaq Merger

When HP decided to merge with Compaq, I was among those skeptical of the prospects of the merged entity. The history of big mergers in the computer industry had not been encouraging. So, it was with interest that I read this story in the WSJ which said that “elaborate planning is keeping the union on target”:

With an elaborate playbook of action plans and time tables, H-P Chief Executive Carly Fiorina has managed to succeed at the first chapter of the biggest high-tech merger ever: putting the pieces together. A chorus of critics predicted the deal would become stalled, like so many tech mergers before it, in a mess of technical and personal tangles.

Instead, using a methodical approach put into action months before the deal closed, Ms. Fiorina formed an elite team that studied past tech mergers, mapped out the merger’s most important tasks and then checked regularly whether key projects were on schedule.

H-P’s integration crew learned, for example, that during Compaq’s merger with Digital, some server computers slated for elimination were never killed off. In contrast, H-P executives quickly decided what to ditch and every week pored over progress charts with red, green and yellow markers to review how each product exit was proceeding. Red and yellow markers indicated a task was troubled; green signaled a task going well.

Now, just a year after the merger closed, H-P has shed numerous duplicate product lines and shuttered dozens of facilities. By last October, it had cut well over 12,000 staff — more than the 10,000 targeted for that date — from its combined 150,000 employees.

And by early this year, after just nine months as a combined company, H-P was approaching $3 billion in savings from layoffs, office closures and consolidating its supply chain. Its original target was $2.4 billion in savings in the first year and a half after the deal.

The punchline: “Fiorina says Tom Ridge has lunched with her several times in recent months, seeking ideas on how to merge the far-flung units of his Homeland Security Department.”

Delta Airlines and IT

Baseline Magazine writes about how Delta intends to tackle the low-priced competition that it faces, with technology being a cornerstone of its strategy.

Over the past five years, Delta spent $1.5 billion on a computer and communications infrastructure, called the Delta Nervous System, that cuts inefficiencies out of virtually every area of its operation – an investment that Delta chief information officer Curtis Robb notes Delta could not afford to make today. A study by Baseline finds Delta is realizing about $700 million this year in savings and is generating $150 million in new revenue from such things as maintenance, which previously hadn’t been a profit center.

The Delta Nervous System linked some 30 to 40 customer and flight databases that track everything from reservations and ticketing, to check-in and baggage handling, to flight and crew operations. Delta in February flew 2,100 flights, carried almost 300,000 passengers, used 7.3 million gallons of fuel, served 87,000 cans of soda, and, to keep that soda cold, boarded 219,000 pounds of ice. Every day.

The Nervous System works like a radio network. Individual stations broadcast changes – a new ticket reservation, a flight delay, a gate change – as they occur. Messaging software supplied by Tibco Software picks up the broadcast and carries it to any station (a local computing system) that is programmed to receive it.

A ticket reservation, for instance, will be broadcast and recorded in Delta’s financial systems, its frequent-flier database, and its boarding and flight records, among other places. This way, gate agents, food suppliers, even Delta’s chief financial officer know immediately what’s going on with any particular Delta flight.

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