Buying another company? Have you checked the data models? #datamodeling #ITintegration #M&A

There’s an apparently never-ending discussion of the role of data modelling. Is it an IT activity? Is it only about designing databases? My friend Chris Bradley has given numerous sessions on this (you can see one of them here), as have many others, so I don’t want to labour the point. I’d just like to focus on a possibly overlooked role for data models in mergers and acquisitions.

I heard a tale a few years back, of a foreign mortgage provider that bought a UK company that had a comprehensive enterprise data model. This was the first UK company that the foreign company had ever purchased, so I expect that they carried out a lot of research into the new market before deciding how much to pay for the acquisition, and how much effort would be involved in migrating the existing UK IT applications to their own platform. During that research, they ought to have taken a look at the enterprise data model and compared it with their own data models, assuming they had any, but did they?

Here’s where the tale gets interesting. The foreign company was used to a market with a simple view of mortgage accounts; each mortgage account only has a single product, making the interest and repayment calculation processes quite simple:

Mortgages - simple view

Unfortunately, a glance at the UK company’s enterprise data model would have revealed that their business processes and IT systems were much more complicated:

More complex mortgage

This is a simplified view of the data model, so it doesn’t look like there’s much difference at first. Look at the full data model and you’ll see that the UK mortgage account can include multiple products with different:

  • start date
  • maturity date
  • interest rate %
  • interest rate type (interest only or repayment)

The business processes for managing these accounts would be much more complex.

According to the tale, the foreign company had a modular component-based IT platform, and their projected cost savings were dependent on migrating the UK IT functionality to the existing components. Without the knowledge gained from looking at the data model, they may have seriously underestimated the amount of work needed to migrate mortgage accounts.

Within three months of the takeover, the new owners shut down the entire enterprise data modelling organisation – all the people, the data modelling tools, and the metadata repositories. I’ll leave you to draw your own conclusions.

 

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