Case Study IV-2 FastTrack IT Integration for the Sallie Mae Merger
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Teaching Note on Case Study IV-2
FastTrack IT Integration for the Sallie Mae Merger*
Objectives
The primary objective of this teaching case is to provide an example of a successful post-merger
IT integration project. The project includes the usage of a previously established project
management office and examples of tough tradeoff decisions that were made under the leadership
of a highly skilled IT team in the acquired organization.
Overview
Merger Facts and Goals
In July 2000, the two largest players in the U.S. educational loan finance industry joined forces to
create a new company that would span the entire loan financing transaction: Sallie Mae, a public
firm in Reston, Virginia, acquired USA Group, a not-for-profit organization in the Indianapolis
area. Prior to the merger, Sallie Mae had a $50 billion portfolio of student loans and was the
* This teaching note was prepared by Professor Carol V. Brown, Kelley School of Business, Indiana
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Two Critical IT Integration Decisions
The case focuses on two of the critical IT integration decisions that had major impacts on the IT
workforce: 1) the choice between Reston and Indianapolis for the new data center and 2) the
choice between the two home-grown loan servicing systems.
The data center (and IT headquarters) decision was primarily driven by operating costs.
Operating a consolidated data center out of Reston would be much more expensive than out of the
acquired Indianapolis area facility for the following reasons:
The decision to locate IT headquarters in Indianapolis (though USA Group was the acquired
company) was announced in October 2001.
The choice between two home-grown loan servicing systems was a much more difficult
technology decision. S -year-old application, written in
The FastTrack Data Center Relocation Project
The Data Center Relocation (DCR) project included the moving of equipment, the installation of
the selected software, with software modifications as needed, and data conversions. The
FastTrack plan also incorporated IT infrastructure improvements. The project timeline, DCR
team structure, equipment move strategies, and relevant knowledge retention concerns are
described in detail within the case text and the exhibits.
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Epilogue
to be too aggressive to
be successful. Yet the company placed its bets on its own internal IT team and were rewarded
with on-time achievement of cost savings and advanced application capabilities. An external
testament to the innovativeness of Sallie Mae
familiar with this integration initiative have begun to adapt these learnings to their own
methodologies.
Case Study IV-2 FastTrack IT Integration for the Sallie Mae Merger
Overview of IT Integration Project Success Factors
According to a recent report in the trade press, the track record for accelerating growth after an
acquisition or merger is not the norm among publicly listed U.S. companies,5 and the majority of
According to Linder,6 effective integ
credible leadership, common direction, and compelling deadlines. For mergers in which the
Linder also provides evidence that successful integration processes are planning-intensive and
collaborative. Many of the Indianapolis-based team members had a successful track record
working together on complex systems projects under a project office structure. This made it
5 According to The
Case Study IV-2 FastTrack IT Integration for the Sallie Mae Merger
A recent Watson Wyatt survey8 of top executives around the world who had been through merger
experiences found that the most critical activity to their integration plans was the retention of key
talent. According to a McKinsey report,9 key employees usually start receiving job inquiries
Lessons Learned by IT Leaders
IT Leadership
Announce the IT leadership team as soon as possible so that the difficult decisions needed to
drive the integration of business operations can move forward.
Focus senior IT managers on communicating the goals and making difficult integration
decisions quickly, but grant autonomy to seasoned people closer to the trenches and remove
their roadblocks so that they can get the work done.
lue of prior IT-
business relationships for moving a project
forward.
Integration Planning
Recognize the business mandates for choosing between customer–
facing application
office
pplications. But set compelling deadlines for both: Accepting change is usually easier when
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When a premium is placed on c
ompleting a project quickly, separate the essential tasks from
the nice-to-haves, and incorporate novel risk management strategies.
Managing the Human Element
Be open and honest with employees about the long-
term prospects, and be prepared to offer
retent
ion packages right away. Generous severance packages yield loyalty to the company,
Team Decision Making and Communications
Team members that know how to work with each other are secret weapons in a merger
they
already have personal working relationships, shared project management approaches, and
Use rich communications media that give you the ability to read emotions and recognize
Moving a Data Center
Look at move elements from a business application viewpoint first, then from an
ot only reduces the risk of
Questions for Discussion
1. What were some of the factors that contributed to the choice of the CIO and the
Indianapolis data center location?
The Sallie Mae IT organization had undergone a great deal of change in the years prior to the
merger. CIO turnover had been high, making it difficult for the company to maintain a coherent
The data center (and IT headquarters) decision was primarily driven by operating costs.
Operating a consolidated data center out of Reston would be much more expensive than out of the
acquired Indianapolis area facility:
people to
lifetime opportunity. If faced with external
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2. What were the reasons that the older loan servicing application (Class) was selected over
the Unity system? Do you think the executive team made the right decision, and why?
Because the loan servicing systems were customer-facing systems, implementation time became a
wanted the loan servicing system conversion to occur before the first summer servicing season of
3. Why were the decision criteria different for the loan servicing application choice and the
packaged financials application choice?
Speed of implementation for combining the loan records into a single loan servicing system
4. What were some of the mechanisms used by the IT organization to deal with the human
element of the merger?
The primary human resource concern for this merger was how to temporarily retain the IT experts
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5. What were the pros and cons of having the internal IT group manage the Data Center
Relocation, with minimal consultant support?
Pros:
Top management wanted the DCR project completed before the next peak processing season,
Cons:
The consulting firm had extensive experience with systems integration projects; the
6. What were some of the ways that the DCR team decreased the business and technology
integration risks during the Data Center Relocation?
Business Risks
Service level agreements were developed with each operating unit and were used as
performance metrics for the DCR project.
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Technology Integration Risks
Early on, from the director level down, the IT staffs at Reston and Indianapolis were paired
7. What were some of the ways that communications across team members were achieved?
DCR team members created written status reports and updated project plans on a weekly
basis.