- Inventory ownership and transfer: Unlike manufacturing industry, a typical refinery or terminal would have millions of dollars worth of tank inventory and almost an equal amount on high seas/in-transit. How to prepare SAP to allow transfer of this ownership on the cut over date needs to be pondered over.
- Excise and Input/Output tax calculation is a complex process in Oil & Gas. Generally for US Geo, I/O tax is handled in ex ternal systems like Ver tex/Taxware, which are integrated to SAP. Excise tax handling is done in SAP-IS OIL’s TDP module. Post M&A, the new entity might come under different excise status for which necessary changes have to be made in SAP application and tested.
There might be a need to modify certain configuration items like payment terms, discounts and pricing procedures due to change in the business model. Changes to logos/names on custom forms like PO printouts, customer invoices will be needed from the very first day the new entity comes into existence.
There are typically two options for SAP carve out. One is using SAP’s System Landscape Transformation tool. This is generally given on lease by SAP and the work is performed by SAP’s own consultants. The other option is, replicate the conf iguration in new system, import the custom code, migrate master data and open items. Generally, historical data is not included in this. But we need to ensure if this data is critical for any legal requirements, resolving billing disputes, trend analysis, demand forecasting, etc.
Formulation of Transition Ser vice Agreement (TSA) too needs attention. TSA is an interim arrangement between the two entities -- typically for a one-year period. During this time, the parent entity hosts and supports the newly formed entity’s IT systems and also some of it business functions. Post expiry of TSA, the new entity has to manage and sur vive on its own. Often TSA comes at a hefty price, so the new entity is on the lookout to set up its house quickly and opt for an early exit.
From an IT perspective, important points to ponder on while formulating the TSA are:
Will the parent or its AMS vendor manage the carved out ERP system for operational support as well as application support and maintenance (bug fixes)?
Will they also be responsible for carrying out business critical system/application changes/upgrades during the TSA period?
What is the exit clause and notice period?
Will it cover filing of regulatory reports typical to O&G industry like ZYTAX report, various EHS filing with EPA, etc. using current interfaces with state agencies?
Knowledge transfer is another impor tant area of any M&A activity. It needs to be seen if there are business process documents, configuration and development documentation, and if the parent entity would provide this documentation to the new AMS vendor. If not, then there would be a need to select the new vendor who has the capability to quickly understand the system and business processes through reverse engineering, and create the required documentation.
Infrastructure is an integral part of this IT management process during any M&A activity. It is necessary to see if the new system will be on premise or on cloud, if there is a business contingency plan in place and bandwidth/connectivity to support and user teams. One needs to check if the SI vendor and power users access the TSA system while it is under the parent entity’s control.
While the TSA is in operation, it is required to replicate the existing development and quality assessment systems for knowledge transfer to business and support teams so that they can test integration with legacy systems.
After an M&A there would be a need for new security roles, new release strategies in procurement and modif ied workf lows due to a change in business model and size. Thus, Change Management becomes an impor tant par t of the process. In a combined entity, the business users might not be actively engaged in SAP as this is generally per formed by the BPO teams. But after car ve out, it could be expected that business users of the new entity might have to per form these functions directly in SAP. This throws up new challenges due to usability and training. So businesses need to be trained not only on the new processes but also in basic SAP.
Even as the M&A process rolls out, the Day 1 readiness check list needs to be put in place. There are separate checklists to be prepared for post M&A and post TSA, including detailed cutover plan and ownership. Post M&A readiness check list should have all data objects (identif ied in data car ve out section above) to be changed to have the new entity functional during TSA. Post TSA check list would involve cutover and production system migration.
There is need for business contingency planning, factoring in some application and system downtime. The inter faces with legacy systems should be stopped. The contingency plan should have process to capture the data during the migration and then replicate it once the system comes up.
The migration could be using one of these methods: