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Is your IT team ready for M&A, Demerger Business Events?

Author: Abhay Narayan Joshi, Senior Principal Technology Architect

Context:
In my observation, since last ~8+ years, the business environment changes such as M&A (Mergers and Acquisitions), Demerger and Partial sell-offs scenarios are happening at relatively higher frequency than ever before. It is happening in every industry verticals including, Banking, Financial Services, Insurance, Healthcare, Manufacturing, Retail, Telecom, Media, Energy & Oil etc.

Some independent studies and reports1 concur on prediction that, by year 2020 the frequency of such business events will increase. Therefore it is today's need of IT teams, to be ready and being agile for embracing such business events gracefully, where reducing risks and reducing the TCO is the key mantras. These events have impact on the IT environment of Applications, Infrastructure, and People, Business operations, regulatory needs and overall TCO in enterprise(s). The question is, "is IT team ready for this journey?"

Here is my attempt to share views on multi-dimensional challenges and aspects, to help checking IT team's readiness.

Multi-Dimensional Readiness Challenges
From my observations and experience, I think of following major categories of readiness challenges such as, Business, Operations & Processes, Technology, Cost Investment and People. Following questions and rationales will help CIO/ CTOs / IT heads to make judgments about readiness of the IT team.

Business

  • Are IT applications aligned towards target business priorities and business capabilities for the future enterprise?
    - An approach of mapping of future business capabilities to IT Apps and services helps strengthening collaboration between Business and IT. It is important to have IT team representation in business M&A program steering committee.

  • Do IT applications / services have right capabilities to support the consolidated business processes? 
    - It is prudent to identify non-core, underperforming, redundant business processes and start a journey of  business process optimization

  • Are business teams getting valuable and timely information from IT systems?
    - Keeping future ways of working in mind, it makes sense to revisit the KPIs & measurements and align Business and IT well.

  • What is business and IT strategy for embracing digital ways of working?
    - Understand next level details of key dimensions such as customer-centricity, process digitization, enabling collaboration among stakeholders and 2 speed IT working culture.

  • What will be the future business processes, Apps and infrastructure, responsible for compliance with regulatory requirements such as SOX, PCI DSS, EU's GDPR, FISMA, HIPAA? 
    - While doing such transition and transformation, need to understand new needs of regulatory compliance at country/ region level, internal or external audit needs and do impact analysis of the Apps and infrastructure deployment models, reporting to regulatory authorities etc.

Operations and Processes

  • Are the operational risks and mitigation strategies identified to "run the business", during a journey of aligning to business event (M&A, demerger etc.)?
    - IT team must prepare the primary and backup plans during change over period to avoid or minimize risks of disruption to "run the business" smoothly.

  • What is percentage of "Shadow IT" you have and you will have in future, over total IT assets owned by "IT department'?
    - This could be burden, liabilities and or can be good business solutions towards standardization and optimization.

  • What are opportunities to renegotiate contracts of same software vendors for same software product licenses and support (e.g. MS SharePoint, Documentum, SAP, Oracle) or similar capabilities products from competing vendors, due to M&A scenario?
    - In our experience, this is one of the toughest points for decision making if the application products are top vendors in their domain space and have equally strong market share. In our experience, these vendor applications can hardly be differentiated on their functional and technical capabilities. However in such cases, other factors play a bigger role in finalizing the products, such as their existing contracts, relationship with existing business entities, hunger to provide differentiated service to business entities, regional market share and support, pricing strategy, vendor's financial performance history and future product roadmap. In our experience, client should select a product vendor, which has a consistent financial performance history and a clear and matured future roadmap for longevity.

  • What are the apps, which are not under the control of "IT department" leading to increased probability of uncontrolled data flow and non-compliance with various regulatory requirements?
    - Such applications could be disrupting and risk to enterprises. Detailed analysis should be done on priority towards migration and decommissioning.

  • How do seamless integration capabilities of new portfolios enhance existing business capabilities?
    - Applications supporting open standards for integrations or aligned to standard industry models such as ACORD in Insurance, are easier and priority for smooth integration
    - Identify duplicate / overlapping functionality among applications and choose right application aligned best to business capabilities with modern technology as future App.

  • Do current set of applications meet future need of quality of services (QoS) aspects, such as, availability, maintainability, reliability and security?
    - Consider the new future total users loads, new countries, new time zones, multilingual capabilities, backup windows. Many times consolidation of current needs of 13x7 type application may become future 24x7 type application

  • How to improve operational efficiency and governance in the future combined IT portfolios? 
  • Are there well-articulated plans for providing uninterrupted IT services to current business services and aligning it in future business directions?
    - In our experience, to mitigate the challenges of managing different changes in IT applications, IT assets and minimizing any impact on the 'end customers', it requires a thorough change management execution plan and a PMO/ governance team. It helps to implement changes across various dimensions of the changed organization (people, process, technology and business) in a step by step manner.

  • Are there guidelines on how to adopt "2 speed ways of working"?
    - It is important to align on guidelines for 2 different modes of working; one is traditional way of IT for existing core areas and other is agile experimenting with rapid prototypes of new ideas.

  • What does communication plan cover on organization change management and new way of supporting RTB operations (Apps, Infra etc.), SLAs and OLAs?
    - Communication plan should cover "What, how, and who" of day-to-day support to run-the-business. It is suggested to revisit and change the SLAs and OLAs for such transformation phase

  • What are opportunities to renegotiate contracts with existing vendors, suppliers across merged entity or demerged entities?
    - It is good opportunity to rationalize all such vendor service providers to the preferred ones, after the end of their existing time-bound contract terms; to "get more from less" from vendors in competitive and commoditized service areas, to de-risk the high dependencies on a single vendor. Services include typically, Apps maintenance and development, product vendors, hardware infrastructure maintenance, communication, connectivity, mobile, wireless etc.
    - Our experience suggests to use this opportunity to redefine sourcing models for vendor service providers including pay-per-use model service providers to optimize overall IT portfolio TCO.  Some of the typical widely accepted sourcing models are - 'strategic sourcing', 'commodity sourcing', 'Fit for purpose sourcing'.

Technology

  • Do you know your IT assets ("KYITA" - Apps, Infrastructure, Services, Skills-set) of future enterprise?
    - This is one of the fundamental steps to know your IT assets well, which becomes a baseline reference to do IT portfolio analysis, to identify opportunities for optimization in applications, infrastructure, services and software products licensing, modernization, adopting new tech trends etc. Some of the key sources of information is CMDB tools such as ServiceNow, Remedy and EA tools such as Troux, Unicom System Architect etc. It is suggested to leverage existing or implement such tools for continuous maintenance of IT assets.

  • What are technology misalignments across current and future IT portfolios with respect to enterprise technology standards?
    - Technology misalignments are relatively costly from overall maintenance and hence IT portfolio analysis can help to identify such misalignments and to lay out a roadmap to reduce the gaps.

  • Are the interoperability and information exchange mechanism guidelines well defined for the future IT portfolio? 
  • Are there guidelines on different level of integrations across IT portfolios?
    - Such guidelines will help consistent execution of integration projects especially intermediate integration during transition and transformation and then in target integration.

  • What will be your unsupported and legacy technology contribution in future IT portfolio? Have you identified technology migrations needs?
    - Unsupported and legacy technology is enterprise's technology debt. Our experience suggests to identify migration path at enterprise level than at individual division or group level to get factory model efficiencies.

  •  Are IT strategy and Technology standards and roadmaps re-defined for the future enterprise?
    - Especially in M&A scenario, redefining a common future IT strategy and tech standards & guidelines for merged entities before starting actual transition & transformation, helps avoiding confusion on deciding tech stack and right fit IT solutions, during such merger transition & transformation journey.

  • Are the industry specific architecture trends considered when charting transformation roadmap of future enterprise?
    - For example, in Telecom industries M&A events, OSS Apps and BSS Apps landscape would require considering different architecture trends to decide future disposition of Apps & integration.

Cost Investment

  • How much business is ready to invest in short term, medium term and long term for such transformation at tactical and strategic level?
    - It will help to prioritize the opportunities and provide roadmap and in some cases challenge the investment needs also.
  • What are TCO reductions targets envisaged by business? What are different levers of TCO reduction?
  • What are opportunities to optimize costs across applications maintenance, automation, support staff, infrastructure in M&A scenarios?

People

  • Is organization change management office planned to be active from beginning?
    - Organization change management (OCM) office has important role to communicate importance of such events at different level of people in organization and answer people's questions. Especially in M&A scenario, OCM office can act as catalyst to get people collaboration across entities.
  • Is re-skilling and redesigning of job description for the existing people planned as a part of organization change management, in friendly collaborative environment?
    - Our experience suggests that do gap analysis between as-is roles and skills-set and future roles, supplementary roles, and skills-set and roles description. Organization change management office should plan carefully enablement and trainings for everyone.

Key Takeaway:
For achieving better readiness, IT Portfolio Management & Analysis is an inevitable process and key enabler for a successful event of M&A, Demergers. It is encouraged that IT Portfolio management & analysis should be part of enterprise's "continuous improvement" discipline. With the right framework, models, tools, processes and skills-set in place, it leads to numerous immense benefits towards making IT team agile and improved readiness for any such business events.

Notes & References:

1. http://www.reuters.com/finance/deals/mergers   
2. http://www.themiddlemarket.com/index.html, http://www.themiddlemarket.com/news/financial_services/financial-services-m-262249-1.html  

3.https://www.innosight.com/insight/making-ma-a-powerful-pillar-of-your-growth-strategy/ ; https://www.innosight.com/insight/corporate-longevity-turbulence-ahead-for-large-organizations/

Comments

Nicely put together all aspects of covering “knowing your IT Assets and capabilities“.

Very relevant and well articulated

well compiled IT role and preparation steps in M&A

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