Fast Track IT Integration for the

Sallie Mae Merger

Case Study
Idot Supriadi
Fernando Salomo
Dhoni Rahadi
Sylvia Kartika
MM UGM Executive B 28 C
Presentation Document
July 2015

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Recommendation

Case Summary

Founded in 1972 in Reston,VA

For profit, government sponsored,
Focused on secondary market
$50 billion portfolio in 2000

Founded in 1960 in
Indianapolis
Non profit company
$16 billion portfolio in 2000

Case Summary
Different Works Environment

High CIO turnover

Outsourced Strategic
Applications
Shrinking IT workforce

20 years tenure of CIO

Greg Clancy
Successful internal
systems with low
operating costs
Growing IT workforce

Case Summary
Goals and Strategy acquisition USA group by Sallie Mae

Goals :

Sustainable double digit growth

Expand role in industry (direct lending)

Leverage USA Groups information, technology and

market power less

Strategy
-

Cut cost by 40%

Reduce headcount by 1700

Consolidating Data Center and Customer Services

- Rationalizing, transitioning, or retiring IT systems (500

different technologies between 2 companies

Contents

Case Summary
Main Issue
Problem Statement
Analysis of solution alternatives
Recommendation

The consequences of Sallie Mae Merger Project

1.

MAIN ISSUE

IT Organization, Services (external used) applications, and Internal used applications

should be defined soon to meet cost reduction target and double digit growth; single
team leader, single services application, single internal used application should be
chosen

2.

Single Data Center location should be define and DCR management should take
place;

3.

People issue; when single applications applied, transfer knowledge should take place
while they know their job will no longer available after the process is done.

The consequences of Sallie Mae Merger Project

MAIN ISSUE

IT System:

The loan processing system and back office system should be united and integrated to
meet the peak loan processing season target, on June 1 st of each year .

There should be a team leader for IT integration project

Data Center location should be define and DCR management should take place;

The decision on every activities should be made with low cost operating, on time and inbudget, well received by stockholders

SOURCE:

The consequences of Sallie Mae Merger Project

MAIN ISSUE

Business Perspective:

Sallie Mae acquired its major

competitor, USA Group on July 31,
2000 for USD 770 million

Company sought to attain double-digit

growth in its business as a result of the
merger.
People issue:
when single applications applied,
transfer knowledge should take place
while they know their job will no
longer available after the process is
done.

SOURCE:

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Recommendation

New Sallie Mae IT Application Should be Ready in Fast Track

Single application in single data center with minimum risk
1.

PROBLEM STATEMENT

How to attain double-digit growth in its business as a result of the merger; make the
service application ready for use in user friendly (non experienced people) manner but
has the full functionality before June 2001 to convert $50 billion target loans into
reality. IT Organization; should maintain USA Groups team or Sallie Maes Team?

2.

Single Data Center location should be in Reston (Sallie Maes) or in Indianapolis (USA
Groups)

3.

People issue; how to adjust from not-for-profit culture (USA Groups) to a result-driven,
for-profit culture, how to encourage some key person of IT team to stay until the
merger was complete

SOURCE:

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Different Background should
be United
The Best IT System &
Organization should be Chosen
Choosing Data Center Location
People Management

Executive Summary

Different Background Companies are Merged

Redundancies should be reduced, new target should be applied

ANALYSIS

$14 billion public firm based in Reston,

Virginia

Largest guarantor of student loans

based in Indianapolis

$50 billion student loan portfolio

$16 billion student loan portfolio

Public firm with employee stock option

program

Not-for-profit with growing fee-based

businesses

New Sallie Mae

SOURCE:

Different Background Companies are Merged

Redundancies should be reduced, new target should be applied

1. Consolidated 9 customer services into 1

2. 4 data centers consolidated into 1
3. Reduce headcount by 1700 (25%)
4. 500 technologies being rationalized

SOURCE:

ANALYSIS

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Different Background should
be United
The Best IT System &
Organization should be Chosen
Choosing Data Center Location

People Management
Executive Summary

Choosing the best IT systems

ANALYSIS

There are 2 types different IT systems (internal) :

Walker Interactive Vs People soft
Company
Sallie Mae

Internal
Walker Interactive

External
Class

USA

People soft

Unity

Cost savings vs. functionality

Decision
Short term savings vs. long term strategy
factor
No time constraint (not customer-facing)

Decision factors :
- Cost savings vs. functionality
- Short term savings vs. long term strategy
- No time constraint (not customer-facing)

SOURCE:

Time

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Different Background should
be United
The Best IT System &
Organization should be Chosen
Choosing Data Center Location

People Management

Executive Summary

Data Center Location

Merged company need only single location data center

ANALYSIS

Decision Factor : Cost!

Indianapolis Vs Reston
1. IT personnel cost in Indianapolis was expected to reduce 30
percent less than in Reston region.
2. The New Sallie Mae can save more than 2 million dollars per year
for occupancy cost if the new firm could operate data center out of
an expended Indianapolis facility.
3. The new Sallie Mae data-center facility in Reston could be leased
out an attractive price

Decision : Indianapolis was clear cost saver

SOURCE:

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Different Background should
be United
The Best IT System &
Organization should be Chosen
Choosing Data Center Location
Choosing Services Application
Choosing Financial Application
People Management

Executive Summary

19

People Management

ANALYSIS

Smooth transition
Early decisions and fair treatment allowed a smooth HR transition
Seamless communication environment
Simple and clear chain of command
Telephone & videoconferencing
Documents and plans by email

SOURCE:

Contents

Case summary
Main issue
Problem Statement
Analysis of solution alternatives
Executive Summary

21

Successful Integration of New Sallie Mae

Lesson Learnt

SUMMARY

1.

Sallie Mae has done a great job for IT integration. To be successful, the effective
integration projects must have a common direction, full of leadership and constraint
deadlines. Another factor that contributed to the success of the merger was the
rapidness of how the company integrated the project and how they moved in the same
direction since the merger started. Furthermore, the case provides evidence that for a
project of integration in order to be successful, it should combine a very intensive
planning and also have a collaborative approach. Moreover, it was crucial the fact of
combining teams of experts from the two merged companies. Also Sallie Mae was
capable to retain the expertise they needed to integrate the company in an effective way
and very quickly.

2.

There were four lessons learned in the Sallie Mae case. The first one is the quick
announcement of the IT Leadership and how this action helped them to solve difficult
decisions that were required for continuing with business operations. And also not to
underrate the importance of previous IT business relationships. The second lesson is
the Integration Planning. It is important to increase the level of risk to help the company
reach the integration goals. Thirdly, to manage the human element effectively. In other
words, to be open and honest with the employees of the company and create an
atmosphere of challenge among people and the desire of success. Finally, the critical
point is to get the team members to know what to do, make decisions very fast and use
appropriate communications media in order to recognize success at every chance.

SOURCE:

THANK YOU