Microsoft-Yahoo: Gauging the IT integration risks

Microsoft-Yahoo: Gauging the IT integration risks

Summary: Once you strip away the financial, strategy and ad prospects for Microsoft's 10-year search partnership with Yahoo you're left with a lot of information technology integration heavy lifting.Make no mistake about it: The Microsoft-Yahoo search pact will flop if it doesn't have some good old fashioned IT project management.

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Once you strip away the financial, strategy and ad prospects for Microsoft's 10-year search partnership with Yahoo you're left with a lot of information technology integration heavy lifting.

Make no mistake about it: The Microsoft-Yahoo search pact will flop if it doesn't have some good old fashioned IT project management. Sure, the first day headlines are about chasing Google and regulatory approval (Techmeme), but in the end we're talking technology management. Yahoo CEO Carol Bartz can talk about a more focused content company. Microsoft CEO Steve Ballmer can yap about search scale. In the end, the real work will be the 24 month technology integration once the deal closes in early 2010.

Also see: It's official: Microsoft-Yahoo ink 10-year search pact; Regulator scrum begins

With Microsoft search deal, Yahoo risks becoming AOL

The fortunate thing on the IT integration front is that Bartz is a real tech pro. On a conference call, she talked about data flow between the two companies and how the negotiations between Microsoft and Yahoo were very systematic. You wouldn't get that IT detail from Jerry Yang.
"It's not like we come in here with a two page term sheet," said Ballmer. Indeed, it's more like 100 pages of operating principles, according to Bartz. The message: The operating agreement between Microsoft and Yahoo is well thought out. However, there's a lot left to be figured out. There are multiple moving fronts in this closely-watched technology integration.

First the timeline:

  • Regulators approve Microsoft-Yahoo pact in early 2010 (best case).
  • Yahoo migrates major market to Bing search three to six months after deal closes.
  • Migration from Yahoo's Panama ad system to Microsoft's AdCenter completed 12 months after deal closes.
  • Total integration in 24 months.

In between that rough timeline there will be data sharing processes, APIs to be determined, privacy rules to adhere to and engineers moving from Yahoo to Microsoft. Meanwhile, the Microsoft-Yahoo search pact doesn't cover everything. Search in Mail and instant messaging will stay with Yahoo.

Here are some of the potential landmines that the Microsoft-Yahoo deal will face on the integration front:

People: Project management always comes down to people. Ballmer said that "some Yahoo engineers may move to Microsoft" as the search giant ramps up its technology and integration with Yahoo. The big question will revolve around culture and whether Yahoo will suffer a flight of engineers to other companies rather than jumping to Microsoft. Two years is a long time for a project and brain drain will be a risk.

Data sharing processes: The team of Microsoft-Yahoo will be at a key disadvantage against Google. Google doesn't have to share customer data with others. Microsoft and Yahoo have to share data in a way that's seamless, respects privacy and is efficient enough to match Google's relevance.

Ballmer noted:

The way this deal is constructed we can have the same ability to innovate  around search as the other company can and we can treat our respective  users properly with the privacy they expect. You have to say what data gets shared and how it gets shared.

Also see: Gallery: Ballmer-Bartz ink Microhoo deal

Big projects are difficult: There's a reason that big multi-year projects are out of favor---they eat up capital and don't work. Microsoft and Yahoo will have to break this integration up into digestible chunks.

Systems integration: The biggest migration on the collective plate will be the migration from Yahoo's Panama ad system to Microsoft's AdCenter platform. The risk here is obvious as there could be advertiser disruptions. Bartz, however, noted that Yahoo has already migrated systems before when it moved from Overture to Panama.

Culture: To their credit, Microsoft and Yahoo appear to have focused a good bit on potential operations hitches. Nevertheless, the companies have different cultures that could clash. Bridging project management styles will be key. In fact, Ballmer and Bartz will have little impact on whether the integration fails or succeeds. The managers sitting around a conference table will decide the fate of Microhoo.

Simply put, this project will be among the more interesting ones to monitor over the next two years.

Topics: Microsoft, CXO, Social Enterprise

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3 comments
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  • Communication & Vision

    I appreciate the complexity of the task at hand for these two large organizations. But just as important as pointing out potential sticking points...is to have a vision for what success looks like in 24 months. And by success, I don't mean one that is evaluated simplistically..by marketshare. It would be largely be gauged by on-time deliverables and consistently great communication with advertisers, publishers and where visible..with consumers.
    USArcher
  • RE: Microsoft-Yahoo: Gauging the IT integration risks

    Wow! Finally Microsoft has reached a deal Yahoo for an
    internet search partnership. Will the newly announced
    deal between giants Microsoft and Yahoo be a good
    thing? Got to wait and see. But atleast Microsoft and
    Yahoo deal is straightforward and not complex at all
    and ofcourse, the negotiation talks have been going
    for long. I was just curious to know all the past
    negotiations between Microsoft and Yahoo so collected
    all the articles and links (more than 200) related to
    the current merger and the previous events or
    negotiations between Microsoft and Yahoo. If you are
    interested check the link below.
    http://markthispage.blogspot.com/2009/07/saga-of-
    microsoft-and-yahoo-from-2007.html
    kotla_sr@...
  • RE: Microsoft-Yahoo: Gauging the IT integration risks

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