The merger of MTR and Kowloon-Canton Railway (KCR) resulted in an IT integration effort that put MTR under severe time constraints to integrate the two merging companies' systems. This merger included the implementation and migration of ERP, HR and payroll, and enterprise asset management (EAM) systems, and it involved the consulting and implementation services from IBM Global Business Services (GBS) and Oracle.

• For a merger that has a high impact on the general public to be successful, a well-planned IT integration strategy is of vital importance to facilitate communication within the merging companies and continuation of undisrupted services and daily operations, as well as to project a positive message to the general public.
• Dual leadership between the merging companies is not an efficient way for collaboration but, rather, adds to unnecessary bureaucracy.

• A detailed governance structure must be in place to expedite the planning and implementation processes as well as communication among internal senior management, key users and service providers.
• To achieve the expected result, don't hesitate to work with the service providers to list as many details as possible in the contract. This list can eliminate misunderstandings and ensure full compliance from the providers.
• A common goal and corporate culture must be established as soon as possible in the newly merged company. Best practices and methodologies must be decided and adopted among the merging companies to speed up the integration process.
• The newly merged company must be under a single leadership to allow efficient decision making and to resolve issues.

The implementation of enterprise solutions in a newly merged company involves more than just the application and functionalities. Strong management, a sophisticated governance structure and advice from independent consulting firms are all important to set the direction for the overall IT integration strategy.

MTR was established in 1975 as the Mass Transit Railway to provide an urban metropolitan system in Hong Kong. The sole shareholder was the Hong Kong government. MTR was listed on the stock exchange of Hong Kong on 5 October 2000.

On 2 December 2007, the KCR, a Hong Kong government-owned rail operator, and MTR were officially merged as a result of an initiation by the government in February 2004. The merger of these two railway companies resulted in the creation of the largest public transport operator in Hong Kong, accounting for 40% of the local transport market share and affecting 3.4 million passengers daily.

The merged network is composed of nine railway lines, a Light Rail network, a fleet of buses to provide feeder services, and the Airport Express, which is a high-speed rail service that links the major stations in the city center to the Hong Kong International Airport and the city's largest exhibition and conference center, AsiaWorld-Expo. From Hong Kong, passengers can travel to the Guangdong Province, Beijing and Shanghai in China using the MTR's intercity railway services.

MTR is involved in a wide variety of business activities, including the development of residential and commercial projects, property leasing, and international consultancy services. MTR has expanded outside of Hong Kong, including the building of the Beijing Metro Line 4 and Shenzhen Metro Line 4 and the operation of the London Overground system. The scope of the consultancy business has widened to cover cities across Asia/Pacific, the Middle East and Europe.

As in all mergers, MTR faced numerous challenges, such as differences in business models, company structures and corporate cultures. For instance, MTR had been running as a publicly listed company and had developed a sophisticated corporate model of its own. On the other hand, KCR had a government-owned operation style since its founding in 1910.

In particular, the integration of the IT infrastructure and organizations across the two companies was one of the most-challenging and pressing tasks. This integration included aligning application portfolios and architectures, eliminating duplicate systems, standardizing and conversing business-critical enterprise data, and developing an overall implementation road map. More than 50 IS/IT systems needed to be integrated. And among them, the ERP system supporting financial and supply chain management was one of the most-critical systems that MTR had to have to launch the merged network by the Appointed Day (A-Day) on 2 December 2007, together with the other 18 IT systems that were scheduled to go live simultaneously. The HR and payroll system and the EAM system were to be in production in March and April 2008, respectively.

Figure 1 shows the timeline of the IT integration program of the MTR-KCR merger.

Although the overall project planning was started in May 2006, the final confirmation of the merger was only announced in October 2007, which left the implementation of the ERP system only five weeks to complete, with the financial, inventory and procurement components as the main modules. This implementation included the conversion of the SAP ERP system from KCR over to MTR's Oracle platform. MTR also was confronted with the difficulty in data mapping of the SAP system to the Oracle system, which were both configured differently and had been heavily customized over the years; along with this challenge and 230 users to coordinate, MTR was under severe time constraints.

At the same time, the planning and implementation of the HR and payroll system and EAM system had started. The HR and payroll system involved more than 13,000 users and interfaces and many other systems in the newly merged company. This implementation included the conversion of the SAP platform to the PeopleSoft application, and the new system had to be able to handle many rules and exceptions to keep some of the existing functions as well as operate new ones. These functions include employee self-service, a retirement scheme, a Mandatory Provident Fund (MPF) system, overtime provision, shift allowance, employment ordinance, changes in grading structure/position/titles, voluntary staff separation, and so on.

The SAP application for the EAM system would have to be converted to the Oracle platform. This involved more than 4,000 users and required the transfer of all KCR assets — from rails and tunnels to electronic parts and rolling stock — to MTR with a combined value of $12.8 billion (HK$100 billion).

Daniel Lai, head of IT at MTR, together with his counterpart from KCR, was in charge of this massive IT integration project. Lai and his team developed a corporate IT governance structure, and MTR has refined and used it for more than 10 years. For this project, all participating service providers had to follow MTR's project practice, including project management methodology, system development life cycle (SDLC) framework and reporting structure that complied with MTR's IT governance. A detailed functional specification, statement of works and specific milestones also were included in the contract. Within each project, a detailed project plan, quality plan, resource plan and test plan were produced.

Figure 2 shows the MTR IT integration project governance structure. Under this structure, an IT Integration Management Committee (ITIMC) was created to set the policy and direction as well as supervise the whole integration program. ITIMC was co-chaired by Lai and the head of IT of KCR.

Reporting to the ITIMC is the IT Project Management Office (ITPMO), which manages all the day-to-day operations of all integration programs, including the coordination, administration and support of all projects and resolution of issues. The ITPMO consists of two IT professionals from MTR and KCR and an independent project management office consultant from IBM GBS.

For every individual project, a Project Steering Committee (PSC) was set up under the ITIMC. PSC is a focused committee with a specific charter that consists of all stakeholders in that particular project, a senior IT manager, and a user executive who are responsible for defining the objective, scope, schedule and funding of the project.

Under each PSC is a Business System Management Group (BSMG) and Project Delivery Group (PDG). BSMG consists of IT and business users from both MTR and KCR. They help to further define the business processes, impact and system functions, and they are involved in change management, training and user acceptance tests. With everything clearly defined, PDG will then deliver the solution.

The IT Changeover Command Center (ITCCC) was also set up, with almost military precision and discipline, to monitor the progress and quality of all A-Day-related IT projects during the transition period. Any issues arising were expected to be flagged and resolved immediately. The ITCCC consists of Lai, representatives of all participating service providers and the relevant operation managers.

With this sophisticated governance structure, MTR had also sought the advice from an independent consulting firm. IBM GBS was chosen, through an open tender, to provide consulting services in four key areas: merger IT integration strategy, IT integration planning and enterprise architecture, program management office, and ERP implementation.

An "adopt and go" guiding methodology was exercised by both IBM GBS and MTR to help select the systems. Because of time and cost factors, either Oracle or SAP would be chosen from among the two merging companies. The "best practice" system would have the best fit with the merged organization structure: It would be operationally easier to implement and maintain, would involve less risk and effort, and would have a lower total cost of ownership. IBM GBS worked with MTR to draft the IT strategy, including integration planning and architecture — immediately from a post-merger — to provide vision for the next two to three years that would enable the merged company to flexibly use IT based on business decisions.

As a result, the Oracle platform was chosen for the core ERP and EAM systems, while the HR and payroll system would use Oracle's PeopleSoft application. IBM GBS, which consists mainly of local consultants, would implement the ERP and EAM systems, and Oracle Consulting would partner with a local service provider, Vanda Group, to implement the HR and payroll system.

Although the ITPMO was co-chaired by MTR and KCR at the committee level, MTR's project governance and methodology were followed at the execution level by allowing only a single project manager from MTR and KCR to interact with IBM GBS's project manager for each project.

Technical and functional IT teams from KCR (for SAP) and MTR (for Oracle) were working together with IBM GBS' SAP and Oracle consultants during the planning and implementation phases. Although the nature of the business of KCR and MTR was similar, the underlying systems and processes were different. Therefore, each business process and technical function was identified and realigned for data mapping and conversion. No industry or preconfigured templates were used because the adopt-and-go approach was to select one of the IT environments and adopt it entirely with minimal changes, and MTR's templates were followed.

The new ERP system, together with the other 18 IT systems, went live ahead of schedule, with a 100% success rate and without any system problems or failures reported during the 30-day period after A-Day. The HR and payroll system and the EAM system also were launched on time on 1 March 2008 and 7 April 2008, respectively. A single integrated corporatewide IT platform enabled MTR to successfully create a single brand image and to go through the merger transition with minimal service disruption.

The total cost of the IT merger was $27 million, of which $17 million was for IT services and staff costs and $10 million for hardware and services. Although the merger resulted in a 40% increase in the number of individuals using the IT systems, there was an overall cost reduction of 40% because of the smaller number of IT staff and the 30% reduction in software maintenance costs. Furthermore, there was a savings of $1 million per year in software licenses, as well as a fewer number of data centers, elimination of duplicated network lines and procurement through bulk purchases. Moreover, the alignment of the IT systems helped MTR to deliver between 5% and 35% fare savings to passengers.

MTR's meticulous governance structure, methodology and strong management team are the key to the project's success. Strict disciplines were exercised, and each step was carefully planned, coordinated, documented, tested and executed. Contingency plans were built in case there were unexpected circumstances. In each project, MTR has a risk and issues management framework to assess and/or avoid potential risks; and if there are issues, this framework will help to resolve them on time.

A clear mandate was recognized by all parties, with clear roles, responsibilities and objectives that drove them to work diligently toward achieving the common goal. People issues will always be a critical factor in a merger. Staff selection and separation must be dealt with in a sensitive but transparent way. Changes in roles, titles and rankings must be communicated effectively to eliminate any presumptions.

Looking back, MTR learned that to minimize confusion and bureaucracy in such a large-scale integration project, dual chairmanship and project leadership should be avoided. Although the original intent was to lower political sensitivity by fostering collaboration between the two merging companies, such action would lower the ownership responsibility and encourage indecision. A command-and-control approach would be more efficient and suitable than a trust-and-control approach in this context.