The Role of IT in Supporting Mergers and AcquisitionsCognizant
Involving IT teams early and often during mergers and acquisitions can help enterprises realize more value from the operational and market synergies that bring businesses together.
Gartner analysts will further discuss how to prioritise IT initiatives, while balancing the use of resources at Gartner PPM & IT Governance Summit 2011, 14-15 June in London. For more information please visit europe.gartner.com/ppm
As High performing businesses need to respond quickly to market changes, improve operational efficiency and accelerate growth. know more about how netmagic’s IT infrastructure services can help.
5 Steps to Effectively Handle Digital Transformation and Business Disruption:...SVRTechnologies
Digital technology continues to change the business world dramatically. This article provides business and IT leaders’ helpful tools to drive and manage digital transformation effectively.
Building a more cohesive organisation using business architectureCraig Martin
In shifting the focus away from enterprise architecture being seen purely as an IT discipline, organizations are beginning to formalise the development of business architecture practices and business architecture outcomes.
The OpenGroup has made the differentiation between business, IT and enterprise architects through their various working groups and certification tracks.
However, industry at present is grappling to try and understand where the discipline of business architecture resides in the business and what value it can provide separate of the traditional project based business analysis focus.
This presentation will take the audience through an overview of some of the critical questions being asked by business and how these are addressed through the discipline of business architecture.
Using both method as well as case study examples, I will show the audience an approach to building more cohesion across the business landscape using business architecture techniques and artefacts.
The presentation will focus on using business motivation models, strategic scenario planning and capability based planning techniques to provide input into the strategic planning process.
It will also highlight some of the outputs through examples from engagements.
Industrial Restructuration Avoiding the M&A Nightmare.Datonix.it
Many sectors face overcapacity with shrinking markets and margins and hyper competition. This prompts cost cutting and a frenzy of mergers and acquisitions (M&A). Stakeholders seek to drive ROI and maximizing future financial shareholder valuations.
However, when looking underneath the M&A “engine hood”, most mergers fail to add value
The Role of IT in Supporting Mergers and AcquisitionsCognizant
Involving IT teams early and often during mergers and acquisitions can help enterprises realize more value from the operational and market synergies that bring businesses together.
Gartner analysts will further discuss how to prioritise IT initiatives, while balancing the use of resources at Gartner PPM & IT Governance Summit 2011, 14-15 June in London. For more information please visit europe.gartner.com/ppm
As High performing businesses need to respond quickly to market changes, improve operational efficiency and accelerate growth. know more about how netmagic’s IT infrastructure services can help.
5 Steps to Effectively Handle Digital Transformation and Business Disruption:...SVRTechnologies
Digital technology continues to change the business world dramatically. This article provides business and IT leaders’ helpful tools to drive and manage digital transformation effectively.
Building a more cohesive organisation using business architectureCraig Martin
In shifting the focus away from enterprise architecture being seen purely as an IT discipline, organizations are beginning to formalise the development of business architecture practices and business architecture outcomes.
The OpenGroup has made the differentiation between business, IT and enterprise architects through their various working groups and certification tracks.
However, industry at present is grappling to try and understand where the discipline of business architecture resides in the business and what value it can provide separate of the traditional project based business analysis focus.
This presentation will take the audience through an overview of some of the critical questions being asked by business and how these are addressed through the discipline of business architecture.
Using both method as well as case study examples, I will show the audience an approach to building more cohesion across the business landscape using business architecture techniques and artefacts.
The presentation will focus on using business motivation models, strategic scenario planning and capability based planning techniques to provide input into the strategic planning process.
It will also highlight some of the outputs through examples from engagements.
Industrial Restructuration Avoiding the M&A Nightmare.Datonix.it
Many sectors face overcapacity with shrinking markets and margins and hyper competition. This prompts cost cutting and a frenzy of mergers and acquisitions (M&A). Stakeholders seek to drive ROI and maximizing future financial shareholder valuations.
However, when looking underneath the M&A “engine hood”, most mergers fail to add value
Aligning business and tech thru capabilities - A capstera thought paperSatyaIluri
Enterprises the world over spend billions of dollars on technology enablement of business functions. A significant portion of those dollars end up creating suboptimal solutions. Most IT project problems are rooted in ambiguous business definition, churn in requirements gathering, scope creep beyond a minimum marketable feature set, wild cost guestimations, not planning for interdependencies, and a lack of strong governance.
This Capstera white paper seeks to address some of these problems and provide a framework to minimize the challenges.
The incorporation of innovation on organizations is simultaneously a necessity and a risk which requires substantial changed in today’s organizations in order for those to achieve success and which frequently means reinventing their business models, hence, embracing the inevitable change.
A recent survey and report by analyst firm ComTech Advisory suggests that a majority of users of ETRM/CTRM software might consider building custom software to meet their business requirements. In fact, around 70% of the survey’s respondents suggested they would consider such an option. As ComTech noted in the report, about 35% of the respondents were representatives of the top tier of the industry who have extremely complex, global, multi-commodity supply chain operations to manage. Nonetheless, given the maturing market for commercial E/CTRM solutions, the idea that anyone would chose to build a solution is perhaps surprising. ComTech concluded that especially in todays’ business environment of rising costs and diminished profits, a more appropriate solution might be to build around a commercially available solution.
Slides from a presentation given by Paul Turner to meetings of IIBA UK on 16 July and 12 August 2014.
Much has been written about technical and solution architectures, without due attention being given to how these work together with the Business Architecture.
It is easy to believe that those who are involved in business analysis, requirements definition and systems modelling do not need to consider the Business Architecture at all. This could not be further from the truth. This talk explains the rationale behind Business Architecture, what its main components are and why Business Analysts should ensure that they understand it and the influence it is likely to have on their work.
Your Challenge
BI stakeholders are dissatisfied regarding the overall performance of the BI operation.
The BI operation is unable to return requests to the business in a timely fashion.
The BI operation is unable to produce quality BI deliverables that meet business requirements.
The BI operation is experiencing rising operational costs.
Our Advice:
Critical Insight
Your organization doesn’t need to spend a lot of money or resources on BI. The BI operation should be right-sized to fit your organization’s needs. To optimize the BI operation, ensure you:
Determine an initial target state BI operating model.
Assess your current BI organization structure, processes, people, application functionality, and performance.
Refine the initial target state BI operating model.
Rank and select gaps to plan for improvement.
Develop an improvement plan, obtain official sign-off, and execute the optimization project.
Track improvements and measure BI performance and value.
Communicate and sell the benefits to stakeholders.
Impact and Result
Improve information delivery time by utilizing effective reporting structures and improving staff competency and capacity.
Improve the quality of information by ensuring ownership and accountability is given to BI management practices.
Improve maintenance and support costs by enabling the appropriate and necessary applications and functions.
RFG believes the overwhelming majority of corporate and governmental IT departments were not built to be agile, low-cost, low-risk operations and changing that culture will require CFOs and IT executives to work together to change financial strategies and the operational paradigm.
In a fast-paced economy, IT organizations must have the ability to continuously acquire and integrate new capabilities in order to support the business strategy, increase flexibility and improve efficiency. An organization, IT in particular, can no longer rely on internal capabilities to stay competitive; IT needs to become an agile service integrator that can manage and govern a portfolio of ever-changing and evolving internal and external capabilities.
In this whitepaper, 3gamma is exploring how IT can support cost reduction and innovation strategies through a business-oriented, agile approach to IT sourcing. The IT sourcing strategy needs to be viewed as an enabler of the overall corporate strategy. IT sourcing is not something that can be isolated to IT.
Artificial Intelligence in Financial Services: From Nice to Have to Must HaveCognizant
AI is moving beyond experimentation to become a competitive differentiator in financial services — delivering a hyper-personalized customer experience, improving decision-making and boosting operational efficiency, our recent primary research reveals. Yet, many financial services companies will need to accelerate their efforts to infuse AI across the value chain while preparing for the next generation of evolutionary neural network technologies to keep pace with more forward-thinking players.
In Automated Controls It’s No Longer the Traditional Build vs. BuyMelissa Luongo
Exploring an Alternative Perspective | An Infogix Position Paper by Lane Lambert and Chris Kosin
Decades of experience and research have shown that organizations maximize their return on investment (ROI) when they build or buy solutions that automate core processes. While making the build versus buy decision for automated or ancillary data integrity controls, an organization needs to determine if it is in the business of controls and how each option impacts Capital Expenditures (CAPEX) and Operational Expenditures (OPEX) budgets. “Buy to standardize, build to compete” has been an IT mantra for many years. Yet, executives responsible for developing an automated controls strategy continue to struggle with this question. The decision not only impacts the ability of an organization to meet its immediate controls needs but also has longstanding influence on the ability to maintain and sustain an internal control environment that is aligned with business needs. The rule of thumb has been: if the system is a requirement for business, “buy” is the answer; conversely if the system provides a competitive advantage, then the answer
is “build.”
In this paper, we propose an alternative way to look at Build vs. Buy by splitting “buy” into two options: – pre- packaged offering and configurable solution. The pre- packaged offering refers to an off-the-shelf product, while a highly configurable solution combines the virtues of a “build” solution with the flexibility and adaptability of a “buy” solution that is faster to deploy and removes the risk inherent in building internal controls. Regardless of the solution, the decision points remain the same: CAPEX vs. OPEX cost, time to deployment, internal politics, regulatory compliance mandates, architecture, IT staff competencies and strategic importance to the organization’s bottom line. However; as IT departments are increasingly stretched thin, in part due to increased data governance, audit, and overall challenges to close fragmented data integrity gaps, the case for a highly configurable data integrity controls solution becomes a compelling consideration to deliver a tailored system that capitalizes on the benefits of both building and buying. Leading organizations that use Infogix Controls have achieved significant cost savings (up to 80%) compared to internal development options. In addition, implementing Infogix Controls has enabled these organizations to rapidly deploy controls to efficiently meet changing business and audit needs. This position paper provides a framework to compare and contrast build versus buy by evaluating buy in two dimensions – pre-packaged vs. configurable – to delve into the financial and non-financial implications of these options.
Aligning business and tech thru capabilities - A capstera thought paperSatyaIluri
Enterprises the world over spend billions of dollars on technology enablement of business functions. A significant portion of those dollars end up creating suboptimal solutions. Most IT project problems are rooted in ambiguous business definition, churn in requirements gathering, scope creep beyond a minimum marketable feature set, wild cost guestimations, not planning for interdependencies, and a lack of strong governance.
This Capstera white paper seeks to address some of these problems and provide a framework to minimize the challenges.
The incorporation of innovation on organizations is simultaneously a necessity and a risk which requires substantial changed in today’s organizations in order for those to achieve success and which frequently means reinventing their business models, hence, embracing the inevitable change.
A recent survey and report by analyst firm ComTech Advisory suggests that a majority of users of ETRM/CTRM software might consider building custom software to meet their business requirements. In fact, around 70% of the survey’s respondents suggested they would consider such an option. As ComTech noted in the report, about 35% of the respondents were representatives of the top tier of the industry who have extremely complex, global, multi-commodity supply chain operations to manage. Nonetheless, given the maturing market for commercial E/CTRM solutions, the idea that anyone would chose to build a solution is perhaps surprising. ComTech concluded that especially in todays’ business environment of rising costs and diminished profits, a more appropriate solution might be to build around a commercially available solution.
Slides from a presentation given by Paul Turner to meetings of IIBA UK on 16 July and 12 August 2014.
Much has been written about technical and solution architectures, without due attention being given to how these work together with the Business Architecture.
It is easy to believe that those who are involved in business analysis, requirements definition and systems modelling do not need to consider the Business Architecture at all. This could not be further from the truth. This talk explains the rationale behind Business Architecture, what its main components are and why Business Analysts should ensure that they understand it and the influence it is likely to have on their work.
Your Challenge
BI stakeholders are dissatisfied regarding the overall performance of the BI operation.
The BI operation is unable to return requests to the business in a timely fashion.
The BI operation is unable to produce quality BI deliverables that meet business requirements.
The BI operation is experiencing rising operational costs.
Our Advice:
Critical Insight
Your organization doesn’t need to spend a lot of money or resources on BI. The BI operation should be right-sized to fit your organization’s needs. To optimize the BI operation, ensure you:
Determine an initial target state BI operating model.
Assess your current BI organization structure, processes, people, application functionality, and performance.
Refine the initial target state BI operating model.
Rank and select gaps to plan for improvement.
Develop an improvement plan, obtain official sign-off, and execute the optimization project.
Track improvements and measure BI performance and value.
Communicate and sell the benefits to stakeholders.
Impact and Result
Improve information delivery time by utilizing effective reporting structures and improving staff competency and capacity.
Improve the quality of information by ensuring ownership and accountability is given to BI management practices.
Improve maintenance and support costs by enabling the appropriate and necessary applications and functions.
RFG believes the overwhelming majority of corporate and governmental IT departments were not built to be agile, low-cost, low-risk operations and changing that culture will require CFOs and IT executives to work together to change financial strategies and the operational paradigm.
In a fast-paced economy, IT organizations must have the ability to continuously acquire and integrate new capabilities in order to support the business strategy, increase flexibility and improve efficiency. An organization, IT in particular, can no longer rely on internal capabilities to stay competitive; IT needs to become an agile service integrator that can manage and govern a portfolio of ever-changing and evolving internal and external capabilities.
In this whitepaper, 3gamma is exploring how IT can support cost reduction and innovation strategies through a business-oriented, agile approach to IT sourcing. The IT sourcing strategy needs to be viewed as an enabler of the overall corporate strategy. IT sourcing is not something that can be isolated to IT.
Artificial Intelligence in Financial Services: From Nice to Have to Must HaveCognizant
AI is moving beyond experimentation to become a competitive differentiator in financial services — delivering a hyper-personalized customer experience, improving decision-making and boosting operational efficiency, our recent primary research reveals. Yet, many financial services companies will need to accelerate their efforts to infuse AI across the value chain while preparing for the next generation of evolutionary neural network technologies to keep pace with more forward-thinking players.
In Automated Controls It’s No Longer the Traditional Build vs. BuyMelissa Luongo
Exploring an Alternative Perspective | An Infogix Position Paper by Lane Lambert and Chris Kosin
Decades of experience and research have shown that organizations maximize their return on investment (ROI) when they build or buy solutions that automate core processes. While making the build versus buy decision for automated or ancillary data integrity controls, an organization needs to determine if it is in the business of controls and how each option impacts Capital Expenditures (CAPEX) and Operational Expenditures (OPEX) budgets. “Buy to standardize, build to compete” has been an IT mantra for many years. Yet, executives responsible for developing an automated controls strategy continue to struggle with this question. The decision not only impacts the ability of an organization to meet its immediate controls needs but also has longstanding influence on the ability to maintain and sustain an internal control environment that is aligned with business needs. The rule of thumb has been: if the system is a requirement for business, “buy” is the answer; conversely if the system provides a competitive advantage, then the answer
is “build.”
In this paper, we propose an alternative way to look at Build vs. Buy by splitting “buy” into two options: – pre- packaged offering and configurable solution. The pre- packaged offering refers to an off-the-shelf product, while a highly configurable solution combines the virtues of a “build” solution with the flexibility and adaptability of a “buy” solution that is faster to deploy and removes the risk inherent in building internal controls. Regardless of the solution, the decision points remain the same: CAPEX vs. OPEX cost, time to deployment, internal politics, regulatory compliance mandates, architecture, IT staff competencies and strategic importance to the organization’s bottom line. However; as IT departments are increasingly stretched thin, in part due to increased data governance, audit, and overall challenges to close fragmented data integrity gaps, the case for a highly configurable data integrity controls solution becomes a compelling consideration to deliver a tailored system that capitalizes on the benefits of both building and buying. Leading organizations that use Infogix Controls have achieved significant cost savings (up to 80%) compared to internal development options. In addition, implementing Infogix Controls has enabled these organizations to rapidly deploy controls to efficiently meet changing business and audit needs. This position paper provides a framework to compare and contrast build versus buy by evaluating buy in two dimensions – pre-packaged vs. configurable – to delve into the financial and non-financial implications of these options.
Operating Model Design in a Digital WorldRobert Cade
Operating Models have defined the way that we work and operate for centuries. A good set of architectural blueprints are essential to successfully build a new office. The same is true if you want to build a successful business; you need a good set of blueprints on which to lay the foundations and undertake the detailed design and implementation. In other words you need an Operating Model.
Like modern office designs, businesses are responding to digital stimuli and the changing needs of their customers. Digital is taking the world by storm, transforming everything in its path. Those who transform reap the benefits; those that don’t get left behind. So, just as the blueprints for offices have changed in the digital age, the blueprints for businesses – their Operating Models – also need to evolve.
The new digital era and the promise of complete machine to machine transformation isn't a mystery, but does require mastery of some "easier said than done" IT CPMO practices. IT executives, consultants, and change agents will benefit from using these CPMO transformation strategies
We have developed a four-part framework to help companies determine organizational areas that could be best served by the cloud. By aligning technology with business strategy and understanding how the organization must adapt, companies can optimize the impact of their cloud investments.
IT Integration Done Right
It may or may not surprise you, but about 70% – 90% of M&As fail, for one reason or another. The integration of two companies into one functional unit inevitably involves great change. Culture, business strategies, and many other variables need to be adapted to fit new environments, people, and goals.
Are you prepared to take on the pressure and complexity of an IT M&A? Our new M&A Playbook for IT is your roadmap to navigating the biggest IT integration challenges and driving business goals.
In this strategy brief, find out:
-The three common M&A pitfalls that CIOs must avoid
-How to improve synergy, lower costs, and shorten time to market
-How to determine the right level of IT integration for your company
By aligning technology with business strategy and understanding how the organization must adapt, companies can optimize the impact of their cloud investments. Companies can use four criteria to determine where the cloud can deliver the most value.
Learn more from our Cloud resource center - http://gt-us.co/1BQYYqp
5 keys to digital transformation for small businessesSameerShaik43
Digital Transformation is crucial for all types & sizes of businesses across the globe. Only then can you overcome increasing competition. But with a limited budget in hand, this can be an intimidating task to undertake. But using the latest technologies can help your business to derive myriads of benefits.
The 5E Framework is a methodical approach to align business strategy and IT consolidation. With no reprieve from a budget deficits on the horizon and greater investment scrutiny, this framework – comprised of expenditure, effectiveness, efficiency, exposure and execution – allows CIOs to facilitate the due diligence discussion, prioritize projects and formulate a strong business case.
Digital Transformation as a Service!
EA-Driven Enterprise Digital Transformation with BLUEPRINT framework
This presentation introduces the BLUEPRINT Framework, a practical and pragmatic, proven and tested framework and methodology to plan, manage, and execute Digital Transformation at organnizations.
Techaisle SMB Cloud Computing Adoption Market Research Report DetailsTechaisle
Techaisle's SMB Cloud Computing Adoption survey in US and Germany provide a detailed outline of what is needed by SMBs as we move through a period of intense growth spurred by the combination of increasing cloud penetration and increasing cloud workload density. Techaisle provides readers with the fact-based insight needed to take share-building action on these issues in this 360° on Cloud in the SMB market report. Its seven major sections are aligned with our clients’ key information requirements:
• Why is cloud being used by U.S. SMBs?
• Who is driving cloud adoption?
• What is in use
• Where is cloud being deployed?
• When will cloud usage patterns change – and how?
• Managing cloud security: roles and responsibilities
• Assessing success: key cloud solution elements
Report is delivered in PowerPoint format. Clients may also have access to Techaisle analysts, who can provide additional context for these findings and their implications for your firm. To inquire further contact inquiry@techaisle.com or visit www.techaisle.com
Embrace Modular Technology and Agile Process to Deliver Business ImpactMark Hewitt
- Is your enterprise technology built in a modular way?
- Can you modify or replace a component without affecting other parts of the technology architecture?
- Is your technology platform built with plug and play elements to allow for rapid change and adaptation to business and customer forces?
- Do you employ Agile processes to make calculated changes incrementally?
Technology architecture and implementation governed by a coherent platform strategy that prioritizes flexibility and component and service independence will deliver business impact.
In this paper, we articulate technology platform and architecture requirements to support modern ways of delivering iterative value, increasing the velocity, productivity, and performance of the organization, and reducing product and service time to market.
Atelier SAP 2014 business transformation to the cloud
Maintain Strategic Flexibility
1. Top of mind
Keep your options open with loosely
coupled deal integration
It’s a chief development officer’s nightmare: complete a costly, complex, lengthy and emotionally challenging integration
of a major acquisition, only to have the board decide to sell (or shutter) the operation after a few months of further study.
Sadly, technology industry business strategy is evolving so fast nowadays that this nightmare scenario is increasingly likely.
12
In the current environment, company
building is no longer a straight-line pursuit.
Innovation based on the five megatrends
(mobile, social, cloud, big data analytics
and accelerated technology adaptation) is
causing corporate dealmaking to accelerate
dramatically (as the rest of this report
attests). But that same innovation virtually
guarantees that technology company business
strategy will continue to change. In the past
five years, one software company we know
acquired approximately 60 companies while
divesting a different set of 10 entities.
“Integration practices have to catch up with
the reality of an extremely fast-changing
technology landscape,” says Dean
McCauley, Principal, Transaction Advisory
Services at Ernst & Young LLP.
Traditional tight integration still
technology’s default
Many acquisitive technology companies
default to tight, permanent integration
even when the strategic rationale may
be temporary, such as closing a market
share gap or gaining access to content or
intellectual property (IP). Integration
activities still bias toward hard-wiring a
target’s organization and processes into
the parent in order to achieve key objectives
(cost reduction, standardization and shared
processes and systems).
Loosely coupled, modular integration
should be considered
Technology companies may increasingly
regret defaulting to tight integration as
strategic priorities continue to shift, leading
to divestiture of even recently acquired
assets. Companies require new integration
thinking that recognizes togetherness is not
forever; what is bought might eventually
be sold. In many technology deals, buyers
should consider whether tight bonding
Global technology M&A update: July–September 2014
to the parent or a looser approach is
preferable, on a function-by-function basis.
In this approach, corporate entities are
treated like Legos: modular and easy to
move in and out of the corporate structure
to meet changing strategic imperatives.
Of note, this modular, “portfolio” approach
is how PE firms always have treated their
investments. It’s due, in part, to their
“acquire, improve profitability, divest”
business model, as well as restrictions on
integrating companies within a PE firm. Of
course, exit is a given for PE investors. But
the loosely coupled integration approach
described in this article enables technology
companies, too, to maintain exit as an
option. With this integration approach,
companies can have the best of both
worlds: emulate and enjoy the benefits of
the “nothing is forever” PE mindset without
being constrained in synergy attainment
by PE strictures.
Alternative success metrics for loosely
coupled integration
“Modular integration enables technology
companies to keep their options
open — but success with the approach
demands rethinking integration success
metrics,” explains EY’s McCauley. By
themselves, traditional metrics such as
maximizing cost synergies or minimizing
the time to combining product road maps
and processes are not enough to drive
the modular approach. Equal importance
should be given to minimizing the time to
gaining strategic value, driving flexibility
in repurposing the asset and maximizing
the net value of a potential exit.
Dean A. McCauley
Principal
Transaction Advisory Services
Ernst & Young LLP
dean.mccauley@ey.com
Iddo Hadar
Technology Transaction
Integration Advisor
Transaction Advisory Services
Ernst & Young LLP
iddo.hadar@ey.com
2. Target’s
approach
accepted by
parent
Target’s
approach to
be replaced
(date TBD)
Target’s
approach to
be replaced
by day 100
Global technology M&A update: July–September 2014 13
Recommended practices for loosely
coupled integration, by function
Thinking through integration strategy
function-by-function should enhance
the flexibility of a business strategy. “But
most acquirers do deal-specific integration
thinking only for functions such as sales,
marketing and product development,
while relying on a standard playbook
for everything else,” says Iddo Hadar,
Technology Transaction Integration
Advisor, Transaction Advisory Services,
EY. The loosely coupled approach enables
companies to avoid irreversible (or costly-to-
reverse) integration steps — unless the
business strategy warrants them.
A sampling of our recommended integration
practices, by function, includes:
• Shared services: Set up shared services
operations as truly arm’s-length
relationships, with full commercial
conditions and contracts and a willingness
to service other companies. With this
approach, sale of a business entity does
not require fundamental change — merely
new contracts for the buyer. The new
owner would be able to rapidly gain the
strategic benefit of the asset without
wasting time on low-value, high-complexity
work such as order-to-cash
process migrations.
• Human resources: On the HR front,
a one-size-fits-all playbook is rarely
effective. In many transactions,
technology companies buy smaller, more
agile companies as platforms for future
growth. To enable such growth, HR
integration should be “light-touch” and
nuanced. This approach, for example,
would allow a unique start-up culture to
thrive, attracting new technical talent and
subsequent business deals. Figure 5
frames a simplified view of integration
architecture options that meet
operational needs without sacrificing
target business practices or symbolic
behavior (which often is important for
key talent retention).
• Information technology: In the IT
realm, an easy improvement over tight
integration is to keep servers separate for
each operating entity. At a modest cost in
storage efficiency, this can greatly ease
data migration issues when an entity is
sold. A bigger decision is whether to
integrate major back-office systems.
The saving potential can be great, but
so can the degree of lock-in. Often, cloud-based
solutions with proper interfaces
and compatibility maximize flexibility for
future business scenarios.
• Accounting: Charts of accounts and audit
approaches should be designed so that
business units that might someday
be sold have clearly delineated and
independently audited financials. This
increases the annual audit cost by a small
amount but has high value come sale
time. When auditors have to work
backwards to generate audited financial
statements for the sale of a business that
was not handled in this way, it can delay
the sale of the business by four to six
months and cost several million dollars.
• Allocations: In a related vein, be
thoughtful about allocation methodologies.
Approaches that are not aligned with the
characteristics of the industry within
which the new business operates would
initially create an inaccurate guide to
profitability for potential buyers of the
business, delaying close. Later in the
buying process, such misalignment may
complicate the creation of standalone
financial statements and transition
service agreement pricing.
Modular thinking can also improve
a target’s salability
On the flip side, companies looking to be
acquired should also think about flexibility.
We recommend: stay in shared office space
with short leases, outsource non-core
processes, develop robust and standard
contracts with vendors and customers,
maintain centralized control over contractors
and rent IT systems and capabilities by the
hour. Finally, eschew using open-source
computer code in your products (as
opposed to your IT infrastructure). While
a short-term time saver, open source
presents complications for large acquirers.
Experienced buyers will walk away from a
situation that promises integration risk,
even if the strategic value is apparent.
Concludes McCauley, “I believe this kind of
modular thinking, aiming to increase the
options open to technology dealmakers, will
be the key evolutionary change in corporate
development strategy over the next five
years. At companies where this is done well,
transactions will be executed with less
business disruption, faster value creation
and tens of millions of dollars less in one-time
costs. Yet management will retain
flexibility to rapidly execute new business
combinations, as required by the evolving
technology landscape.”
Figure 5: Integration architecture options
Target’s
approach
adopted by
parent
People and
organization
Systems
and tools
Policies and
procedures
Internal
image
External
image
Integration
change
priorities
Integration
perceptions
and symbolic
action
Illustrative integration architecture models
Light touch Medium touch Heavy touch
Target’s
approach to
be replaced
by day 1
This is a greatly simplified view of a range of integration architecture models that EY has developed for discussion
with clients, covering a broad range of different acquisition scenarios.
Source: EY analysis.