Modern IT leaders are always looking out for what’s new, particularly when it can confer competitive advantage. They’re keenly aware technology supports innovation, and promotes improved customer service/experience and product delivery. But it’s equally important to recognize, as new systems and services get deployed – cloud-based apps, or our own SD-WAN, for example – old ones must often be decommissioned and taken out of play for true gains in efficiency and effectiveness. This applies to every aspect of tech, from software to hardware, to managed services and networks.
Lessons learned from M&A tell a critical IT leadership story
One of the most vexing sets of issues to resolve when organizations merge or acquire one another, and subsequently join up forces and assets, is deciding how to conduct business under the new regime. Let’s call the principals in a hypothetical merger Company A and Company B, by way of illustration (I’ll point out here these observations are drawn from my many years in the industry and not the merger our own company is now involved in).
So, each of these two outfits has its own set of systems, infrastructure and software for payroll, HR, inventory management, product tracking, and asset management, to call out just a few of the typical 1,000+ piece puzzle modern M&A poses. In some cases, there’s a tendency to leave things alone and let the former A and B components keep doing things the way they always have. But sooner or later, a reckoning must come, because part of the impetus for M&A is to realize efficiencies by eliminating duplication of effort, assets, and systems.
For IT, the real merger occurs when disparate systems become unified, and duplicated infrastructure eliminated, so information processing, workflow, and systems work as the much-hyped but always elusive seamless integration. All too often, organizations find themselves struggling to push out new products and services, while simultaneously figuring out how to account for inventory that goes out through the A and B channels, or track products through multiple systems, or account for assets managed across multiple locations, software packages, processes and procedures.
Think about typical, meat-and-potatoes elements of the IT stack and this lesson slams home. Accounts Receivable and Payable arguably provide the blood supply for the organization. CRM drives the sales engine and keeps tabs on who you do business with. Customer support, such as trouble ticketing, keeps the interface between you and your customers working as smoothly as possible.
Keep going down this path with all the other examples of key systems you can think of, and ponder this: What if instead of dealing with each of these vital tasks and activities once, you have to deal with them two, three or four times, or more? Then keep things synchronized, making sure status reports and data flow up the management chain to the executive suite, while strategy and operational decisions flow back down to sales, support, manufacturing or development.
It’s all a lot more complex than most people initially imagine. No wonder big organizations struggle and find their ability to pivot in a rapidly changing marketplace hampered or hamstrung.
Stick to the basics, and keep it simple
When multiple systems overlap, life gets more complex. And the relentless pressure to innovate and adopt new tools and technologies means systems tend to proliferate like mad. This poses difficult challenges for IT and executive management. That’s because they must always plan and execute within an environment where constraints limit how much money and technology, and how many people, can be brought to bear on solving the problems at hand. Thus, the need to simplify can easily fall out in deference to other, apparently more urgent or value-generating objectives.
To counter this tendency, consider the impact of multiple systems that serve the same functions:
- Impact on cost: It’s a truism to say, “more costs more,” but multiple overlapping systems always incur more cost for application support, development, maintenance, licensing, etc.
- Impact on flexibility: Keeping up more systems requires more resources, especially people. If they’re busy with support, development, and maintenance of old systems, they’re not innovating, adding value or helping bring in new business. An organization weighed down by inefficient IT infrastructure loses at least some of its ability to pivot, and to be agile in the face of new opportunities.
- Impact on cadence: Modern business, and the customers who drive it, expect new or enhanced offerings at an increasing pace. The inability to deliver quickly forces those customers to turn elsewhere for innovative products or services. This has the double-whammy effect of turning off new customers while also scaring off existing ones.
It’s not a pretty picture, nor is it easy to solve
IT execs need always to look inward to consider their current collection of systems and services, even as they stay attuned to what’s happening in the outside world, always on the hunt for opportunities to improve and excel. This means making hard, swift and expensive decisions to eliminate redundancy and costs and activities that go with it. There’s no value gained adopting innovative new systems when the basics aren’t handled properly. Employees, suppliers, and partners need to get paid on time, products and services need to get delivered, and the mechanics of business need to tick over as efficiently as possible.
That’s why, painful and costly as consolidation can be, the ultimate result is a better, leaner organization. When the number of avenues for customer interaction and communication goes down, it’s easier to service customers and respond to their concerns in a timely way. When manual hand-offs across multiple systems are eliminated, staff can spend more time-solving problems and less time moving them through the infrastructure. Over time, consolidation pays extra dividends, particularly for gathering BI/analytics, since fewer sources of data need to be merged and fewer reports generated so more time may be spent pondering data and resulting insights. Ultimately, this means a better big picture view of organizational health, with fewer sources of conflict, contradiction or error.
Out with the old makes way for the new
Because old technologies fade as new ones appear and more importantly, get adopted (as we are now seeing with SD-WAN, for example) it’s also important to recognize the process of simplification is never simply “one and done.” It’s an ongoing process, to which IT management must remain attuned and sensitive so the cadence stays close to market demand and what customers want. It may be possible, for example, with proper planning, to slim down from a dozen different billing or inventory systems, to two or three. Though it’s unlikely that number will ever get to only one – at least, not for very long, since the constant influx of new technology more or less guarantees there will be some overlap somewhere on an ongoing basis. The job is to contain it, manage it, and make the most out of what’s on hand.
That’s been my experience. Feel free to share yours if you have a chance.
– Jay Ferro
Avoid Deal Integration Downfall: 6 Failure Points in Acquisitions, Consolidations, and Restructures CxOs Need to Know and Avoid
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