Delete that “About Us” slide

Do consultants really add value to a business?

Lately, my limited television viewing has included the House of Lies series. Its interesting to watch real life  consulting situations melded with all the jokes and anecdotes about consultants that you have heard. And while this may be a comedy series, it does have a lot of factual details to can make consultants smile and wince in cognizance to the situations depicted.

Which brings me to the question – Do we add value to your business?

Executives I’ve spoken to are varied in their opinion, depending upon which side of the change they’re on. Some swear by the consultants they’ve hired and sing praises in every forum they find. The majority however have a not-so-favourable opinion of the value delivered.

In all honesty, we as consultants are also guilty of doing too little to change the perception that the world has of us. Its time we project and publicise the value we bring to customers, not just the size of the deals. Not just get the business, but create evangelists among clients.

 

So we can have our reputation for bringing value precede us. So we waste less time proving who we are and spend more time doing what we can do.

So we can get rid of that “About Us” slide in our presentation deck.

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Mergers & Acquisitions: Due Diligence – The IT view

Organic growth in organizations is slowly becoming a concept in the past. While many would argue that sustainable growth is only possible organically, the fast paced nature of business today forces organizations to add capabilities, preferably without the delay of  developmental learning. Albeit, there is an entire entrepreneurial business model of developing a niche organization and then selling it to a larger general conglomerate.

Due diligence during M&As are a core area of expertise that have been arguably the holy grail for a lot of Finance and Strategy consultants. Deep expertise in valuation and strategic synergy becomes the core area of focus in the M&A evaluation process. However, a third element, Technology Synergy has become a major supporting factor during the decision process. It is estimated, that up to 38% to 40% of synergy savings in a Merger or Acquisition are enabled by IT synergy.

Every organization today depends on IT systems as a prime enabler for its business efficiency. Therefore, ensuring the ability of the disparate IT systems of merging entities to yield themselves to relatively easy integration, becomes the prime consideration for IT due diligence and subsequently, corporate due diligence as well.

The real life

In reality however, IT would be one of the last things considered during a M&A. I dare say, that IT integration is often given the priority just above Administrative Logistics. After all, as one business leader once told me, “We’re just have to be moving the servers, right?? We can put them with the office furniture.” Not exactly the kind of regard that the CIO would have liked, but usually that’s what happens.

Who should be blamed for this apathy? I think both sides of the table, Business and IT are equally at fault. While business to a large extent, tends to keep IT away from the strategic decision making table, for its part, IT very rarely tries to position and justify itself as a core business driver.

Business IT non-alignmentThe main reason I believe this happens is that everyone is caught up with the operational aspects of the IT organization. Including IT itself!! The working of IT is a hygiene factor. If IT works, nobody really notices it. But if IT stops working, everything is blamed on it. The IT organization ends up becoming a high value back office operation, with no initiative to justify the business enabler value that it really has.

Moreover, too much focus has been placed by IT on its operational achievements. A new web portal in 24 hours, new ERP deployment in 12 months, 99.999% uptime, zero downtime, 75% optimum utilization; some of the things you’d hear at an IT review or in an IT departmental newsletter. But does business really care, other than a pat on the back?

This contradicting focus is what builds up distrust among the two towers inside an organization. CFOs and CEOs become increasingly assured of CIOs as money wasters and CIOs correspondingly think of CEOs and CFOs as ignorant, stingy and oppressive. The result, IT and business remain separate.

The solution is communication. Consistent, coherent communication between both parties. CIOs must strive to translate their achievements and needs, operational or otherwise, into business terms, profitability, revenue, and ROI. CEOs and CFOs must invite CIOs into the decision making circle and in many cases, coach them to project business value.

 

IT value in an M&A

A merger and acquisition exercise is an important area where the IT Organization can prove its worth as a true business enabler.  The important aspect for any Merger or Acquisition is synergy – business synergy, market synergy, financial synergy. The biggest aspect that IT can proactively address is Technology Synergy – the possibility of integrating diverse technology systems to work together.

While there is practically no framework to govern what constitutes good value in a Technology Synergy scenario, it is obvious that during a M&A, it is essential to go beyond the obvious. It is easy to look for infrastructure or software integration candidates, however it is essential to take a holistic view of the systems to encompass people, operational processes and data as well.

 

Some of the areas to watch out for while making a technology synergy audit are:

Presence of Legacy Systems

One of the biggest reasons a technology synergy can lose value is when any one of the entities still relies on legacy systems. While it can be argued that the industry did not warrant state-of-the-art technologies, in a merger or acquisition, legacy systems might prove costly to replace and difficult to maintain. In such a scenario, if the IT systems have to merge, the legacy systems have to be replaced by current technology. Usually it would be a question of which of the merging entities has more mature processes and technology. This would be the best candidate for becoming the standard.

 

Use of Open standards for Data Exchange

Every enterprise chooses technology based on a number of parameters, the most common being functionality, ease of use and cost [hopefully in that order]. One more parameter that CIOs and IT decision makers have to keep in mind is Data Exchange standards. Not necessarily in a merger or acquisition scenario, but increasingly enterprises need to integrate with technology landscapes of multiple entities – partners, customers, vendors and of course, the internet. Gone are the days when proprietary data exchange standards were used in the name of data security. Open data standards like XML and ASN.1, thanks to the all-pervasiveness of the internet, have emerged as the glue that integrates disparate technology systems.

 

Areas of consolidation

Most of the time, IT Infrastructure is taken as a given. It would seem as if all the enterprise applications run on their own. That said, the platform on which enterprise applications like Email, ERP, CRM, Web Portals run is as important and signifies a large investment if not planned properly. However, in an M&A scenario, this is arguably an area of relative happiness. When two infrastructure stacks are brought together, the result is more capacity. However the happiness is relative because the governing factor is the combined usability of this capacity. The two systems may not be compatible with each other or the relative capacities might be so far different that the combined capacity is hardly an improvement. CIOs and IT decision makers have to watch for consolidation possibilities, whereby systems can be merged efficiently with maximum reuse.

Cloud services, specifically Infrastructure as a Service offerings, aim to solve these issues. By providing vendor independent infrastructure platforms, IaaS deals solely in infrastructure capacity. As a result, two entities running on IaaS platforms yield themselves much easily to consolidation.

 

Process Reengineering

If technology is considered the heart of the IT organization, operational processes would be the nervous system. Efficient and mature processes, which get the job done, remove inefficiency and redundancy, enable IT to react faster to incidents, address business needs faster and ensure overall functioning of the IT system. The maturity of a process is governed by its ability to reduce redundancy and to adapt to business change. While making an evaluation of IT operational processes, it is worthwhile for the CIOs and IT stakeholders to evaluate processes on the basis of their maturity and depending on the business need, judge the magnitude of process reengineering that would be required on both sides.

 

Core personnel

Mergers or acquisitions are a worrying time for employees of both organizations, specifically due to the looming fear of redundancies and as a result, layoffs. Most of the time, the easiest way to show cost reduction during a merger or acquisition is to reduce personnel. While this may seem effective in the short term, it is evident that any merger or acquisition exercise is executed for growth. With growth, eventually there will be the need for additional manpower, more so in the IT organization. To avoid costly recruitment in the future, it is important for CIOs and IT stakeholders to evaluate their teams and decide on two specific groups of individuals. On the one hand, individuals who would automatically fit into roles in the resulting IT organization [including one of the CIOs] and on the other hand, individuals who need to be groomed to fit into existing or future roles. It is important to note, layoffs should be used only as a last measure and only in cases where a candidate is found irrecoverably incompetent. As far as personnel are concerned, reuse of personnel should be the qualifying factor for technology synergy.

 

Dilemma

If the acquiring entity, despite its size, has legacy systems, proprietary data exchange standards, low maturity processes and the acquired entity, relatively smaller, has more modern technology and best of class processes, which becomes the standard??

Management Consulting vs Business Consulting

One of my close friends asked me this question recently. I thought I’d share the same here.

Actually the difference is not very much. Its more like when you talk about presales in IT. Some people think of presales as supplementary salespeople who don’t do anything technical, while others consider them completely technical solution architects with no role in sales.

My take on the difference between Management and Business consulting is this:

Management Consulting is more in terms of the management of the organization, that is, the business processes and procedures, "how the business is run". So typically a management consultant will advise on the improvement of business processes, streamlining of procedures and removal of redundancies to make the business run more efficiently.

Business consulting, on the other hand, is more about the business itself, "what the business is doing". This is more strategic advisory services which deal with what businesses the organization is in, how it should carry out its business more effectively, what strategic changes does it need to make. Typical decisions on which business consulting happens would be – Should the company merge with another company?, Should a new product line be launched?, Should we have an IPO or take more loans?

Would love to hear comments about this.