Spring 2014
MBA 501 - Managing Networked Enterprise
Section N70
Assignment II
URL: http://studentblogs.viu.ca/mba501s70team
Group Name
ONYEKA CHIFE – 575279716
MANAL ALREBDI – 574976759
PATRICIA NDUBUISI – 575181896
PHUONG THI MAI NGUYEN – 575074562
Submitted to: Professor Lili Saghafi
Date: July 23, 2014
Group Email: meodenkesoc@yahoo.com.vn
EXECUTIVE SUMMARY
This paper is on FastTrack IT integration for the Sallie Mae Merger and Group USA, and
the decision of the impact of IT integration decisions their workforce. The decision is the
choice between Reston and Indianapolis for the new data center and the choice between
the two home-grown loan servicing systems (class system and unity system). The former
was primarily driven by cost, while the home-grown servicing systems was driven by
technology decision. The factors that contributed to choice of the CIO were identified, as
well as the location of the Indianapolis data center. The paper also identified the reasons
of choosing the class system over the unity system, and the difference in the decision
criteria for the loan service application choice and the packaged financials application
choice. The paper further identified the mechanisms used by the IT organization to deal
with the human resource management, the pros and cons of having the internal IT group
manage the relocation of the data center and some of the ways in which the DCR team
decreased the business and technology integration risk during the data center relocation.
Finally, the paper discussed the communication strategies employed to communicate
across team members and a Cost-Benefit analysis to determine the efficiency of the
project. The second part of the paper illustrates the Context level and Zero level DFD
Diagrams for their existing IT system.
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Table of Contents
EXECUTIVE SUMMARY ......................................................................................................................... 2
Part 1............................................................................................................................................................ 4
Question 1 ............................................................................................................................................. 4
Question 2 ............................................................................................................................................. 4
Question 3 ............................................................................................................................................. 5
Question 4 ............................................................................................................................................. 6
Question 5 ............................................................................................................................................. 7
Question 6 ............................................................................................................................................. 8
Question 7 ............................................................................................................................................. 8
The Cost-Benefit Analysis .................................................................................................................... 9
Part 2: DFD ............................................................................................................................................. 10
Zero Level ........................................................................................................................................... 10
Context ................................................................................................................................................ 12
Reference: ............................................................................................................................................... 13
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Part 1
Question 1
What were some of the factors that contributed to the choice of the CIO and the
Indianapolis data center location?
According to the case, there were some factors that contributed to the choice of the CIO
and the Indianapolis data center location ((Brown et al., 2011). Firstly, after conducting
the cost benefit analysis for both locations in Reston and Indianapolis in order to come up
with the decision on the best location for the IT headquarters, it was clearly observed that
operating the data center in Indianapolis is much cheaper than in Reston area. Secondly,
the IT personnel costs in Indianapolis are about 30% less than the Reston area. Also, due
to significantly lower occupancy costs, choosing Indianapolis as a data center will bring
the benefit of saving $2 million or more annually for the company. Lastly, as the Sallie
Mae data center facility in Reston could be leased out at an attractive price (Brown et al.,
2011), it supports the decision to locate IT headquarters in Indianapolis strongly and
firmly. Furthermore, based on the current situation of many companies when it comes to
the failure of merger and acquisition; more fail than succeed. Therefore, the company has
to deal with a lot of changes in the years prior to the merger regarding to the choice of the
CIO because the CIO turnover had been high, making it difficult for the company to
maintain a coherent IT architecture (Brown et al., 2011).
Question 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?
Even though the Unity system was better and more advanced than Sallie Mae’s Class
system, the executive team made the decision to retain Sallie Mae’s Class system in order
to keep risks at an acceptable level. Sallie Mae had triple the size of the student loan
records of USA Group, selecting the Class system would make it easier to convert the
loan records into a single system.
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Another reason is that the class system would make a low impact on call volumes at
servicing centers, as a result of the decreased number of customers that would experience
the change in the system.
The executive team made the right decision by choosing the Unity system based on the
situation at hand, though the system used an older technology.
Question 3
Why were the decision criteria different for the loan servicing application choice
and the packaged financial application choice?
The decision criteria was different because the loan servicing application choice and the
packaged financial application choice requires relocating the data center which involves
the movement of equipment, installation of selected software and data conversions
(Brown et al., 2011). The internal IT leadership designed the integration schedule to fasttrack the IT integration plan which helped the organization achieve its merger goals of
completing the data project relocation on time, without exceeding its budget and with
minimal disruption to its operations and customers.
The IT integration plan also considered the improvement of the IT infrastructure which
was timely concluded with all students records combined on a mainframe. The IT leaders
also anticipated the IT integration challenges by implementing PeopleSoft program
(ERP- Enterprise Resource Planning application), e-mail and Internet consolidation, and
full implementation of an advanced call center routing capability (Brown et al., 2011).
The plan further included migrating to selected back-office application systems within a
stipulated timeline and developing new functionality for call routing systems.
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Question 4
What were some of the mechanisms used by the IT organization to deal with the
human element of the merger?
a) IT Leadership Team: The management had confidence on its experienced IT
leaders by forming a team from the acquired firm, which was the first key
approach towards executing an IT integration project. This strategy was
adopted in order to reduce the integration risks.
b) Continuation of existing project office structure: The existing office
structure made it easier to create teams of people who are already used to
the same culture, same working experience, shared project management
approaches, communication channels and reporting mechanism. This was
based on the successful track record of team members working together on
complex systems projects under the same office structure.
c) Avoiding the “holy war” syndrome: The “holy war” syndrome is where
teams from the two merged companies are put up against each other to
determine strengths and weaknesses of their own systems. However, Sallie
Mae’s IT leaders avoided this syndrome and established the expectations of
acceptance of the final decisions (Brown et al., 2011).
d) Retention of key talents: In order to keep Reston-based staff as long as
needed to acquire knowledge transfer, the company adopted the strategy to
be open and honest about an individual’s long-term prospects. The company
also offered a generous severance package, which renewed the loyalty of the
employees and signaled that they were highly valued, even though some of
them might be laid-off.
e) Bonus Plan: Sallie Mae also implemented a bonus plan, which was tied to
performance in evaluating both accomplishment and attitude. This enabled
the company to retain the talents needed without disrupting business
operations.
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Question 5
What were the pros and cons of having the internal IT group manage the Data
Center Relocation, with minimal consultant support?
The pros and cons of having IT group manage the Data Center Relocation with minimal
consultant support are as follows:
Pros:

As per the consultant’s report, the best-in-class IVR systems handled 18% of call
but the internal IT group handled more than double the percentage of all calls.

Evidences support the fact that for successful integration processes, intensive
planning and collaboration of the team members is very important. The merger
adopted Indianapolis-based team members who had a successful team and
collaborative work record on complex projects. This gave way for easy creation
of teams with good personal working relationships, project management
approaches, pre-existing communication channels and reporting systems.

The Internal group avoided the use of holy war by making best use of resources
acquired from the merger and by establishing an expectation of graciously
accepting the final decision, which enabled them to progress during the IT
integration planning stage.

Sallie Mae’s approach on openness and honesty, the offer of severance package
and bonuses helped retain the key talents required for business operations.
Cons:

Effective integrated projects need to be anchored in rationality by credible
leadership, common direction and obliging deadlines. For this, placing the IT
leadership team properly is essential but at Sallie Mae the IT leadership was
announced soon after the merger was confirmed which operated on a fast track
approach. They did not consider the risks that could be associated with the merger.

According to the paper, it was noted that the critical activity to integration is
retention of key talents. But at Sallie Mae the CIO selection created lot of
imbalance on the Reston side. The key challenge in this was to retain the Restonbased staff as long as required for physical moves and data transfer.
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Question 6
What were some of the ways that the DCR team decreased the business and
technology integration risks during the Data Center Relocation?
Some of the ways that DCR team has used to decrease the business and technology
integration risks during the Data Center Relocation can be considered an effective
method. One major risk is the need for extensive manual review during the conversion
process and the fact that the current system is servicing a population with little financial
management experience (Brown et al., 2011), DCR suggested to add new Web
functionality and to complete the implementation of an advanced call-center capability
for the Class system in the second year of the new merged company.
Also, adopting the PeopleSoft modules, which is an Enterprise Resource Planning
application for finance and human resources is another way. Besides, in order to retain IT
staffs after the company announced that they would move to Indianapolis, generous
severance packages and retention bonuses were offered to in order to retain talents until
the merger is complete (Brown et al., 2011). In addition, three different strategies (Asset
Swap, Push/Pull strategy and Swing method) were used to install computer equipment.
This was in order to decrease integration risks by minimizing the hardware assets that
would be physically moved from Reston to Indianapolis. Finally, the DASD storage
which is a new vendor to reduce redundancies, is built to handle the company storage
needs more effectively and reduce the maintenance risk as well as minimize the business
impact (Brown et al., 2011).
Question 7
What were some of the ways that communications across team members were
achieved?
The company maintained the project office structure by allowing team members work
together on complex systems project as team members are already used to the same
structure. Team members worked successful by helping each other on difficult projects as
they shared the same management methods (Brown et al., 2011).
The company also had an open and honest approach regarding the employees’ long-term
prospects with the company.
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IT leadership team was swiftly incorporated in order to drive the integration of business
operations. This enabled the team leaders to communicate the company’s goal to their
team members. Furthermore, the company made communication easier for the
experienced people to communicate with the management by removing bureaucratic
channels.
The Cost-Benefit Analysis
Adding up the expenses and profits, and also valuing the intangible costs and benefits
was used to calculate the Return On Investment (ROI) analysis for the project. The ROI
formula:
Necessary assumptions made in order to estimate a good judgment.
Benefits: The occupancy cost saving of $2 million was assumed to be a feasible benefit
available and was taken to be the initial cost if increased by 40%. The consultant role
saving of $3.5 million was added as a benefit to analysis, since the company as saved the
amount. The report mentioned that the Reston Sallie Mae data center could be leased at
an attractive price, which will add to the revenue of the company. It was estimated to
leased at $1 million. This sums up all the benefits to a total of $6.3 million.
Costs: The target was to reduce cost by 40%, this increases the occupancy cost saving by
40% which gives a total cost of $2.8 million as the initial cost for the merge. The target
reduction of headcounts by 25% means that some employees will be will be sacked and
have to be paid off too. An assumption was made that it will cost 25% of the initial cost
of $2.8 million to pay off the workers, which is $0.7 million (25% of 2.8). Since the
company is experiencing change in management, operations, and strategic areas, it is
estimated that the company might lose about $1 million (contingency cost) in revenue for
the first phase of the management changes.
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ROI =
$6.3 mil−$4.5mil
$4.5 mil
= 0.4 or 40%
From the assumptions, the ROI was estimated at 40%, which implies that the investment
or the merger agreement will yield a return of 40%.
Part 2: DFD
Zero Level
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Context
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Reference:
Brown, C., DeHayes, D., Hoffer, J., Martin, E. and Perkins, W. (2011). Managing
Information Technology. 7th ed. Prentice Hall, pp.628-633.
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