AOL-Time Warner Deal: It's About the Scope

Astronomical deal poses IT challenge of cosmic scaleWHILE THE IMPACT of America Online's mammoth acquisition of Time Warner is reverberating far and wide, some of the biggest shock waves are likely to be felt within the two organizations as they undertake the Herculean task of merging.

Beyond the clear contrasts in business models, industry focus, and corporate culture, the two giants face an outsized version of the thankless but critical merger-induced chore of rationalizing IT systems.

Time Warner is itself a number of merged companies, said one analyst, who noted that the company has a lot of experience in putting together systems.

"And they also know when not to merge entities. If you are going to war and have two huge battleships, does it make sense to bolt them together or should you let them be free when you go into battle?" said Sean Kaldor, an analyst at International Data Corp. (IDC), in Mountain View, Calif.

However, AOL-Time Warner does expect to save $1 billion in operational efficiencies largely from removing duplication in back-office staff and infrastructure, Kaldor said .

"You don't need two CIOs or two CFOs [chief financial officers]," Kaldor said.

The dimensions of the merger are immense. The $350 billion stock deal, subject to approval, will lead to the creation of AOL-Time Warner Inc., which would have a combined revenue on the order of more than $30 billion.

Because the merged company will seek to speed the development of the Internet and its related businesses, as the principals said last week, the need for AOL-Time Warner to effectively integrate and streamline its existing systems is paramount.

In many ways, the deal and its mechanics represent a template for emerging business models.

With the AOL-Time Warner merger, the artificial dividing line between traditional and "new economy" business models will disappear, according to analysts.

Additional reporting by IDG News Service, an InfoWorld affiliate.

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