|By Quinn Devery||
|October 10, 2012 04:42 PM EDT||
During a merger or acquisition, plans must be made for the consolidation of the respective IT resources. Early planning is critical to completing this phase without negatively impacting the company's operations. The goal is that the resulting model actually enhances the IT operations with positive changes.
The first step in the IT Due Diligence Process is to determine the IT model that meets the needs of the corporation. This could depend on the type of business action that takes place. A merger could dictate the incorporation of resources into the existing infrastructure. An acquisition may require the creation of a separate business entity to manage each IT operation independently.
Some factors that determine the end model include:
- How closely related are the two IT departments
- The hardware and software products being supported
- The level of integration of services throughout the organization
- The skill level of staff in each department
Analysis of the Current State
To get a true picture of the current operations within each IT department, one must look at the four key areas that comprise any IT operation.
- What is the current hardware and software that makes up the current IT operations? Networking? Security?
- How current are license fees? Warranties? Support contracts?
- What is the extent of any over or under capacity situation?
- How well are procedures documented? What makes up the daily operations tasks? What are the backup/recovery and disaster recovery strategies?
- Are all of the IT hardware and software resources managed by the department (centralized) or do individual departments control their own resources (decentralized)?
- What applications does the IT department support? What are the critical, everyday applications? What are the ad hoc applications?
- What applications are COTS (commercial off the shelf) versus in-house developed?
- What applications are client-server and which are cloud-based?
- Are all of the applications supported by IT or are there department managed applications?
- What is the level of integration between the various applications? What level of integration is there with vendor (outside) applications?
IT Service Delivery
- What services does the IT department perform? What support or help desk functions exist? What is the reliance on outside support?
- What level of planning and software development is the department responsible for? What is their backlog of development work?
- What is their role in implementation of new products and applications? Training and education of staff on new products?
- What service level agreements are in place? What support items are routed through IT versus managed within other departments?
- What does the organization chart look like for the IT department? How are the key roles represented by staff?
- Does each role have the appropriate skill set for that role? Where are the gaps?
- Does the management structure match the functions given to the department?
- How is attrition and advancement managed? How are open positions filled and from where?
- How effective is management in the department? How does it relate to the senior management of the company?
Current Versus Future States
There are various reasons that companies go through mergers and acquisitions. Where there are IT resources involved (hardware, software and human resources), a goal is to create an end model that is better for the company than the individual entities. Performing the above analysis on both entities creates a picture of the current state.
The next step in the IT Due Diligence Process is to define how the future state of the organization should look. What structure will result in better products and services for the company, or at least bring it up to best practices? The difference between the current and future states is the gap analysis from which one can determine the level of effort to get to the desired future state.
The cost models that come out of this activity may show that the ideal future state is cost prohibited. If that's the case, then a staged evolution of the two IT entities can be created. Perhaps the two function independently for a time while various operations are absorbed into a single department.
Prioritizing the future state requirements will help in creating an implementation plan. It will also help in understanding and controlling costs. Value-added activities can be completed up front while pure investment tasks are scheduled for later in the timeline.
Planning is Key
The process of IT Due Diligence for a merger or acquisition can become complicated quickly so it is important to engage a partner or consultant that has done IT Due Diligence on other M&A transactions. Making changes without impacting the company overall is the goal. Key to success is in the planning and the execution of small steps and having a clear vision of the desired end result.