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Reports Archives - CIOstraightalk
IT affect on Merger Transactions

IT affect on Merger Transactions

The Board’s desire to involve the IT role in ‘Acquire, or Not-to-Acquire’ decision-making

Preventing Merger Value Erosion

Over past M&A activity, a recent survey report I read stated that nearly 50% of senior executives said that more detailed IT due diligence could have prevented merger value erosion. Only one third of corporate transactions put an emphasis on IT but more worryingly nearly 20% of the survey recognised that dealing with IT had the most challenges post transaction.

The key red flag that came from this report was that during M&A transactions 80% of respondents largely engaged the Finance function followed by Legal then Operations but IT only came forth on the list at 50%.

The changing landscape of the IT Technology arena within corporate Merger or Carve-out

To acquire, or Not-to-acquire – The question most CEOs ask their CFO is:- Will the transaction drive financial rewards and what are the risks, but really the glaring missing player here is the CIO!

Ask yourself, How many CFOs have you come across that have a full and clear understanding of the value an ‘Open and connectable’ versus ‘out-dated and proprietary’ IT department can make in driving business revenue growth.

This means that Board Executives are negotiating in the dark and potentially loosing large percentages of ‘cost-of-acquisition’ value. There couldn’t be a better time for the CEO to bring the CIO to the table.

Businesses today are under more pressure than ever to deliver value to stakeholders, particularly when undertaking bold initiatives such as mergers, acquisitions or asset disposals. This is true not only for corporate acquirers but also for private equity (PE) or Venture Capital (VC) firms, whose strategy is leaning toward add on acquisitions as a means of growing their portfolio companies.

Under the current economic conditions and the rising cost of debt, corporate business management teams will require additional focus on effort in order to restructure or streamline operations, and specifically the IT departments of acquired businesses to deliver success in the absence of financial engineering. For a while now Information Technology (IT) is fast becoming a key lever which management can use to deliver operational benefits — whether in reducing operational costs, entering emerging markets or scaling their business across multiple geographic regions. With the advances in technology and its impact on today’s business models, companies are increasingly pushing the boundaries to remain competitive. IT is one key area to do this — Technology should be looked at as a business enabler and not look at as so many boards still do today, as a cost to do business.

“The sooner that executive boards put the CIO or the IT department on their monthly agenda as a regular discussion point the better,” says Craig Ashmole, Founding Partner of London based CCServe consulting. In my humble experience and far too often I see the CIO struggling to get the ear of the CEO or even agendas on the board table; businesses need to view IT as a business enabler rather than viewed purely as a cost centre.”

Part of the reason the CIO is not at the board table is that often they do not speak the language of the business board executive. Technology scares most senior board members and until the Generation Y and Generation X group get into those senior positions we will continue to see a disparity with Technology and Fiscal business matters.

The CIO challenge is to do his/her bit too, they really need to fully engage with the commercial business functions, and stop hiding behind technology to protect themselves. The ‘head-in-the-sand’ CIO will have a rapidly growing threat from the likes of the CMO or emerging CDO Digital Officer. Understanding the business functions that deliver revenue is a key focus going forward.

With the fluid market of M&A today there are two clear distinct areas a corporate or global business can go with this. One; is to look at how costly it will be to split companies up or carve out elements that are no longer key areas of business growth for that organisation and IT efficiency should be at the forefront, not just fiscal separation.

The other area on the acquiring side of an M&A transaction – Many CEO/CFOs look at the cost of acquisition proposed by the big 5 consultancy houses, often building in huge elements of ‘cost of sale’ to mitigate IT integration risk especially where transaction teams are uncertain.

“Making ones own IT and infrastructure easy to connect with while utilising open standards or cloud services could help the process of bringing together two disparate lines of business,” Craig Ashmole goes on to say, “More importantly M&A is about the shortest time to ‘joined-up’ business revenue growth which gets the attention of the CEO. Well prepared IT and infrastructure are key success elements to that joined-up process.”

There is a large growth of non-accounting technology focused personnel coming into the Big-5 transaction teams as more emphasis is given to IT & Technology within the merger/carve-out transaction process. This however should be balanced, in my opinion, with the use of the CIO office within the business. What an IT department or CIO office may lack however is in the broader wider exposure that seasoned interim independent consultants could bring to the negotiations. Independent interim IT consultants have often engaged in similar situations or have awareness skills from engaging in many other organisations as they move from assignment to assignment.

Whatever the CEO or board choose to do as they grow through acquisition, or transform through business carve-out, they should put the IT agenda firmly on the boardroom table and take advantage of the experience and quick turn-rounds that so many senior and interim consultants have to offer.

CIOs Fighting Cloud Gravity

CIOs Fighting Cloud Gravity

CIOs keep trying to defy cloud gravity

Fighting the Cloud Gravity

A new Brocade survey shows 83% of enterprises are shaking their fists at unauthorised cloud adoption (not consented by the CIO Office) within the business, the reality is, “Not using cloud is just like fighting gravity and bound to fail.” CIOs that are gate keepers will be the ones that fight ‘shadow IT’ the most.

“We are seeing departments within the business vote with their feet,” driven by the marketing leaders, and those feet are sprinting to the public cloud. Why? Well because “The business wants to play with technology that makes their life easier.” The CIO Office needs to stop being ‘the technology gatekeeper’ and become the digital enabler.

In other words, the public cloud dominates because it’s so much more convenient to get access to. Until CIOs can wrangle that same level of convenience into their own internal data centres (and private clouds), they’re going to be fighting gravity.

A new survey suggests CIOs still want to control the cloud, which is a bit like “fighting gravity,” according to AWS.

You’ve got to feel sorry for IT. Once the undisputed sovereign of the enterprise, lines of business often route around IT today to get stuff done. Their favourite accomplice? Cloud.

Indeed, while a new Brocade survey shows 83% of enterprises shaking their fists at unauthorised cloud adoption, the reality is, as Amazon Web Services (AWS) executive Glenn Core posts, “Not using cloud is just like fighting gravity.”    Doomed to fail.

Defying gravity

Redmonk analyst Stephen O’Grady once declared that “Convenience trumps just about everything” when it comes to cloud adoption. Small wonder, then, that developers tell Forrester they’re turning to cloud primarily because it’s “the fastest way for me to get things done.”

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If anything, the preference for speed has accelerated since this survey was conducted. However, not everyone is happy about such IT-evading adoption.

Yes, according to a new Brocade survey of 200 global CIOs, 90% of the enterprises surveyed have cloud of some kind in place, but 83% of them also acknowledge unauthorised cloud adoption. This is despite a third of these businesses not allowing cloud adoption without IT approval.     Oops.

Of course, that same survey indicates that CIOs were more concerned with security than big data, so it didn’t seem to be tapping into the avant-garde of innovation. Or maybe they’re just concerned about having to take the blame when something goes wrong.

As Yarob Sakhnini, regional director, MEMA at Brocade, notes, unauthorised cloud adopters “are happy to circumvent IT so long as everything works. But chances are as soon as the performance and availability of these shadow IT services don’t meet expectations, it will be the CIOs who will get asked the hard questions.”

It’s a fair point. But it may simply not matter.

The irresistible force

After all, 83% of those enterprises don’t seem to care what their CIOs think. They just want to get stuff done and clearly see IT as more of a roadblock than an enabler. This needn’t be the case.

While projects originating within the line of business are on the rise, it’s still the case that most enterprises are finding ways for IT to play a key role in technology adoption.

They’d better. Cloud–and particularly public cloud–isn’t something that is going to wait on IT.

As AWS head of infrastructure, APAC Gore proclaims:

“Cloud is becoming the new normal, and not using cloud is just like fighting gravity. It is inevitable…. If you are not using it or looking at where it fits on your own strategy, you run the risk of being overtaken by others using the platform to increase their agility and scale…. The cloud is becoming the default position of customers looking to build new applications and services.”

Gore’s contention is backed up by Gartner analyst Thomas Bittman’s research, who finds that public cloud VMs have exploded by 20X, while private cloud VMs have grown just 3X during the same period. As he concludes, “New stuff tends to go to the public cloud, while doing old stuff in new ways tends to go to private clouds. And new stuff is simply growing faster.”

IT would love for things to be different and to have more control of its infrastructure. Hence, the constant drumbeat for private clouds.

This is one reason there’s so much interest–if lagging deployments–for OpenStack. Indeed, in a conversation with Mirantis CMO Boris Renski, he believes that “OpenStack [is] a datacentre operating system, not a VM orchestration engine,” one that gives operators or enterprises control over their clouds.

Maybe. Maybe not.

Because as much as we may want to talk about OpenStack adoption, the reality is that “We are seeing people vote with their feet,” as Gore points out, and those feet are sprinting to the public cloud. Why? Because “They want to play with technology that makes their life easier.”

In other words, the public cloud dominates because it’s so much more convenient. Until CIOs can wrangle that same level of convenience into their data centres (and private clouds), they’re going to be fighting gravity.

Who’s Cloud are You On

Who’s Cloud are You On

Cloud providers offer six-figure discounts to eligible startups

The Top three Cloud Players

If you want to find out what each vendor offers, and how to qualify for this promotional pricing read the text to the left. There will be many more areas where smaller SME customers can benefit but this is from the big three Cloud players.

The big three public cloud vendors are offering substantial discounts and usage credits to startups

In an effort to convince startups to adopt the cloud — and by extension, eventually be profitable customers — the big three public cloud providers are offering six-figure discounts to startups working with approved startup accelerators and incubators. Smaller discounts are available to independent projects or developers learning to work with cloud platforms.

Microsoft Azure and BizSpark Plus

Microsoft’s BizSpark program (the counterpart to the DreamSpark program for university students) offers $10,000 per month of Azure cloud services to BizSpark Plus for one year — for a total of $120,000. Eligibility is dependent on collaboration with a startup accelerator, with Microsoft partnering with over 150 startup accelerators in 47 countries, according to the announcement on Microsoft Developer Platform VP Steve Guggenheimer’s blog.

For smaller startups not aligned with a startup accelerator, the standard-tier BizSpark is available to privately-held companies less than five years old that earn less than $1 million USD annually. The standard tier provides up to $750 per month ($150 per month for up to five developers) for three years for a total of $27,000. Both tiers are eligible for free access to other software and services from Microsoft, including licenses for Windows, Office, and Visual Studio.

In an interview with Fortune, Mark Russinovich, the CTO of Azure, noted that “one out of five virtual machines hosted on Azure runs Linux,” which is an important consideration as part of Microsoft’s recent embrace of open-source software under CEO Satya Nadella.

Amazon Web Services Self-Starter and Portfolio packages

Like Microsoft, Amazon has different free tiers for startups. The Portfolio Plus package provides up to $100,000 of promotional credit for AWS for one year. The Portfolio and Portfolio Plus packages also offer up to $15,000 of promotional credit for up to two years, though the exact amounts and times vary between different startup accelerators.

The promotional credit can be applied to most AWS services (except for the Mechanical Turk crowdsourcing platform), some types of support, services offered on the AWS Marketplace, or upfront payments for Reserved Instances.

The AWS Free Tier is available to anyone without restriction for the first 12 months. It features 750 hours per month of EC2 t.2 micro instances of Linux (including RHEL and SLES) or Windows, which can be run as one instance at a time or as multiple simultaneous instances. The free tier also includes 5 GB of standard storage in S3, with 20,000 GET and 2,000 PUT requests and 25 GB of storage in DynamoDB with 25 units of Write and Read capacity each, which Amazon estimates to be sufficient to handle 200 million requests per month. It also includes one million free requests in

Lambda, and 20,000 free requests in AWS Key Management, and free access grants in one dozen other AWS services.

Google Cloud Platform for startups

Google’s initiative for startup access grants potential users $100,000 in Cloud Platform credit, which can be used for up to a year, and applies to all of the products offered by Google Cloud Platform. Like Amazon and Microsoft, applicants must be working with an approved accelerator or incubator. Google’s requirements stipulate that applicants must have less than $500,000 in annual revenue, and less than $5 million in funding.

Unlike Microsoft and Amazon, Google doesn’t have a free tier for smaller projects not aligned with a startup accelerator or incubator.

“Well I hope that’s as clear as mud”, says Craig Ashmole, Founding Partner of London based IT Consulting CCServe. “Not sure I will be basing my corporate recommendations on a credit system anytime soon, but it will probably get traction over time or go away all together”.

IT-as-a-roadblock must come to an end

IT-as-a-roadblock must come to an end

The era of IT-as-a-roadblock must come to an end right now

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The CIO of Yester Year

As other business leaders are growing more aware of technology in the digital age of the 2020’s, it is my view that CIOs too need to invest time in being a business leader, by immersing in and speaking the language of marketing, operations and finance. Gone are the days of the IT Departmental ‘Ivory Tower’ being the technology gatekeeper. CIOs need to be business enablers using technology to grow business and drive revenue which in turn will prevent ‘Shadow IT’ proliferation.

IT must stop being a passive observer and actually deliver what the business needs

“Countless years exposure with the CIO layer has convinced me that many CIOs even now in the digital twenty twenties need broader business experience than has typically been required in the past – more commercial business acumen than the typical deep technical expertise of the past,” states Craig Ashmole, Founding Partner of London Based IT Consultancy, CCServe Limited.

A recent article I saw on TechRepublic asked the question “Does anyone still want to be CIO?” Among other things it highlighted the growing trend of tech savvy people (or at least people who believe they are tech savvy) occupying other C-level positions, and makes the argument that technically-oriented IT leadership is dead, which I partly agree with in the format often seen today.

However, this does not mean the CIO or for that matter IT leadership in general is destined for the same demise.

As other leaders are growing more aware of technology in the digital age, it is my belief that CIOs need to also invest, immerse in and speak the language of marketing, operations and finance. It is through this cross-pollination of competing skills and professions that an IT leader can have the most impact.

We talk business alignment and business driven priorities but in my experience IT leaders fail at truly understanding these needs and requirements. It is that old order taker-mentality: to some extent not only is there a failure to understand, it appears in many cases it is by design for fear of moving out of ones comfort zones.

A CIO success should be tied to delivering more value than a CMO or a COO by both intimately understanding the business ‘problem‘ and then traversing the technology required to deliver a solution to that problem. The ‘problem‘ focused at growth of business revenue or market share.

“We do not have enough good leaders, we do not have enough CIO trend setters that will take a chance for the sake of their business and the sake of themselves and it is ruining it for the rest of us, especially those who believe that the CIO should be a commercial business leader with a technology flair”, Craig Ashmole stated passionately.

If CIOs want to be passive observers of their organisational priorities and marginalise themselves then they have no right to complain about why they are not given their due share of respect at the executive table. This attitude both confounds me and infuriates me. Bad leaders shift accountability to others and in so doing also dilute their power base. Good leaders take charge and take on innovation and creativity as a badge to wear everywhere. The CIO role has to transform or be transformed into insignificance.

If you see a leader or are managed by one that tries to justify IT-as-a-Roadblock (IaaR) by way of process or methodology and whom promotes the “that isn’t our job mentality” then say something because it is these leaders that are from a bygone era and whom should not have a place in modern IT organisations.

“As technology leaders we need to think strategically, act tactically, drive methodically, while delivering technically“, Craig Ashmole recommends. “If we do this we will provide more value than any other C-level position because we would — understand what needs to be done, — can demonstrate the courage to do it, — and use our experience to do it technically right.”

IT is a driver for M&A success

IT is a driver for M&A success

There is a masive drive to hire in IT skills to the Advisory teams within the Big 4 Consultancy firms

Preventing Merger Value Erosion

Over past M&A activity, a recent survey report I read stated that nearly 50% of senior executives said that more detailed IT due diligence could have prevented merger value erosion. Only one third of corporate transactions put an emphasis on IT but more worryingly nearly 20% of the survey recognised that dealing with IT had the most challenges post transaction.
The key red flag that came from this report was that during M&A transactions 80% of respondents largely engaged the Finance function followed by Legal then Operations but IT only came forth on the list at 50%.

Many Corporate Boards are found short on technology know-how during the M&A process as Boards make strategic Acquisition decisions in the ‘dark’ !

Businesses today are under more pressure than ever to deliver value to stakeholders, particularly when undertaking bold initiatives such as mergers, acquisitions or asset disposals. This is true not only for corporate acquirers but also for private equity (PE) firms, whose strategy is leaning toward add‑on acquisitions as a means of growing their portfolio companies.

Under the current economic conditions and the rising cost of debt, management teams will require additional effort in restructuring or streamlining operations of acquired businesses to deliver success in the absence of financial engineering. Information Technology (IT) is fast becoming a key lever which management can use to deliver operational benefits — whether in reducing operational costs, entering emerging markets or scaling their business across multiple geographic regions. With advances in technology and its impact on today’s business models, companies are increasingly pushing the boundaries to remain competitive. IT is one key area to do this — businesses need to view IT as an enabler rather than a cost center.

About this report: All of the strategic initiatives behind a transaction rely on IT. Businesses can no longer ignore IT or view it as a back-office function if they want to achieve maximum value. Ernst & Young have surveyed 220 senior corporate and private equity executives across Europe about the role of IT in the transaction process. E&Y aim was to uncover the common factors that help to drive deal success.