Hidden Profits Blog

Finding the Gold in Your Business

Hidden Profits Author:

Lynda J. Roth

As the president and founding partner of Woodland Hills-based LJR Consulting Services, Lynda advises clients on ways to improve profitability and productivity through both technology and business processes. She also works with companies and private equity firms on the role of information technology in mergers and acquisitions.

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IT Strategy Embedded In Business Strategy

Google alerts are Great!  I found a great blog by Steven Romero at CA Technologies on the importance of IT Strategy. 

I have discussed IT strategy here based on the concept of aligning the IT Strategy with the Business Strategy.  Steve discusses embedding IT into the business strategy discussion.  This is a subtle yet a very important difference.  When an IT Strategy is merely aligned with the business strategy it implies that the IT Strategy comes after the business strategy as support.  While just creating an IT Strategy is a major step forward for your company, it is still only a partial solution.  By embedding IT Strategy and thus the CIO in the Business Strategy process, you now are in the position to take advantage of advances and trends in information technology to influence your Business Strategy. 

So how does that help you? 

Well let’s look at some companies that have used Information Technology to change their industries.

  • Amazon.com completely changed the book retail industry by making technology the business focus. 
  • Dell is another example of a company that embedded technology in their business strategy to completely change an industry. In fact it so changed the industry that many people don’t even realize how difficult it was to purchase computers before Dell.   They leapfrogged over some of the biggest competition in the world, IBM and HP. 
  • To a lesser extent, Vistaprint has changed the printing industry.  You no longer have to find a printer to create business cards and stationary.  You go online create your look and the products are printed and shipped directly for a fraction of the cost. 

All of these examples are focused on the internet but that is not the only way that technology can be a game changer. Other technology options might include:

  • Mobile devices for customer facing applications, executive dashboards, and source data entry
  • Document management to reduce paper and copies
  • Electronic workflow to replace manual routing of paper forms, such as PO, expense reports, capital authorizations etc., for approval
  • Electronic marketing

 By including the CIO in the business strategy process, you open your business to experiencing significant leaps in productivity, profitability and customer loyalty!  And just as importantly you reap tremendous value and success from your investment in Information Technology.

For more information on this topic read Steven Romero’s blog    Read Steve’s blog 

Prior posts on IT Strategy

How an IT Strategy helps control IT Spending  http://www.hiddenprofitsblog.com/how-to-manage-it-spending

What is IT Strategy  http://www.hiddenprofitsblog.com/what-is-an-it-an-it-strategy-or-it-roadmap-and-why-do-i-need-one

If you would like  help with your IT Strategy, contact me at 818-709-6583 or email info@ljrconsultingservices.com

Real Value of IT – The Role of Business Intelligence

Financial puzzle piece

Are you frustrated because you have to wait until after the financial month end close to obtain any information about your company or departments operating results?  This happens in too many companies today!  In my last post, The Real Value of Information Technology, I reviewed the 4 critical areas to create value in Information Technology.  The first was real time information for better decision making.  

Jack Welch retired Chairman of General Electric said   ‘An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.’ 

So how can you as an executives learn fast and translate that learning into action rapidly? 

First, you need to have critical information at your fingertips in real-time.  So what is critical information commonly known as KPI’s (Key Performance Indicators).  Every company is different, however, KPI’s are generally financial or statistical values or percentages/ratios that indicate to you when critical operations are moving in the right direction. You know what your KPI’s are and once those are defined then we can define what is required provide them instaneously.  

Information Technology is critical to obtaining KPI’s on a real time basis. 

1.  Use technology to load data at it’s origin.  This can include mobile devices and/or internet to process sales in the field, receive products and inventory, load information from vendors, transfer data from manufacturing equipment or monitoring equipment, load agriculture data, etc. It can also include direct file transfer from customers, vendors and partners. This data is generally then loaded into an ERP system and optionally into a Business Intelligence system. 

2. ERP systems today process data from sub-modules (sales, manufacturing, purchasing, AP etc.) directly into the general ledger and/or job cost system on a real time basis.  An ERP system is a key component to process data and prepare/present information instantly. Processing data instantly is one of the key reasons to upgrade an old ERP system to a new system.

 3. A final puzzle piece in the technical stream to provide instantaneous information is the Business Intelligence system.  These systems provide functionality to dynamically process data into information and present it in numerical, graphical or text format into MS Office products and/or feed directly to mobile devices or web-based applications.  Data can be displayed in numerical or graphical formats and you can drill to detail transactions. Business Intelligence systems and mobile devices are the key components in transforming data into information immediately that enables you to learn, make decisions and act rapidly to make corrections.  As Jack Welch indicated this provides a distinct competitive advantage and the value of the technology used is invaluable!

For more information on how to define KPI’s and implement a fully integrated Business Intelligence system contact LJR Consulting Services at 818-709-6583 or info@ljrconsultingservices.com.

The Real Value of Information Technology

Do you feel like the Information Technology (IT) bills never stop coming?  It seems like there are always upgrades, maintenance costs, new software that must be purchased.  The question becomes ‘What Value Do We Receive From That Investment?’ That is actually a very good question.  Most IT executives would answer that there is almost 100% uptime, business transactions are processed with stunning accuracy and speed, employees have access to recent releases of Office software to better do their jobs, everyone has email with near 100% uptime, response time is quick and everyone has smartphones with email.  All  that is true and important, I mean just think of how the average office worker would do their job without email, MS Office and the standard accounting system used  in business. 

Increase IT value and watch profit soar

However, the value of Information Technology (IT) should go much further than that, especially today.  We have instant connectivity to the internet almost anywhere and from devices that we hold in our hand.  We use those devices to access our personal information instantly while many busy executives still wait until the end of the month and later to access critical business information.  In our personal lives we interact with each other quickly and learn more about each other than ever before with social media. Yet companies still have limited interaction with suppliers and sometimes customers.  

 In order to move to the next level of IT value there are 4 key areas that should be addressed.

  1. Real time information for better informed decision making
  2. Information provided suppliers to improve supply chain and customers in the form of new or add-on products and services
  3. Optimized business operations and back-office from increased use of technology
  4. Innovative interaction and collaboration with suppliers, partners and customers 

In many cases companies already have the technology to add value in these four areas but there is a lack of communication between IT and business and often a lack of innovative thought on the part of both business and IT to address these opportunities.  The reality is businesses that add technology value in these four areas will be the businesses that stand out, attract customers, attract ‘A’ level talent and become more profitable.

I will address each of these value opportunities in subsequent posts.  If you would like an evaluation of how your company can increase value in these areas, call us at 818-709-6583  for a free 90 minute consultation. 

5 Ideas to Utilize Mobile Devices for Business Applications

Almost all corporations today provide mobile devices – smart phones, iPad, etc. to employees.  The question is ‘Are they used for more than just phones, email, Facebook and Twitter?’ There are many business applications for which these devices can be used that increase the value to the business and improve business efficiency and performance.

Here are some types of business applications that can add value to the operation.

1.  Key Performance Indicators (KPI), business alerts, and other business information displayed via mobile device.  This could be any piece of key information that is important to executive management in monitoring business activity.  Some examples are:

  • Daily sales
  • Cash balances
  • Key project alerts
  • Profitability by key customer
  • Manufacturing statistics
  • Crop ratings for agriculture

2.  Purchase order/requisition entry and approval. One of the key reasons that company’s have for not using electronic purchase orders is that it is inconvenient to be at a computer when making a purchase. For industries in which employee’s that need to make purchases and do not easily have access to a computer providing a mobile device application to create and approve purchase orders greatly enhances the efficiency of the company and the AP department.

3.  Purchase Order receipt – for companies such as construction or agriculture that receive product deliveries in locations without computer access, the ability to receive PO via mobile devices reduce manual data entry and provide more accurate inventory control. 

3.  Delivery orders and authorizations for product delivery companies.  Many companies that deliver product such as food, uniforms, beverages, etc.  or provide on-site service such as plumbers, HVAC repair, electronic repair, still print the delivery orders daily for drivers.  Once the product is delivered the customer signs the paper order and often companies then scan those documents into a system for access by customers.  By downloading the orders to mobile devices the addresses can be input to GPS automatically for directions, the actual cost of the delivery or service calculated on the mobile device, customer authorization recorded and the completed order uploaded to the corporate ERP system and made available to customer facing applications.  All this is done with no data entry which can significantly reduce time and cost.

 4.  Customer Orders.  Company’s with sales reps that take orders in the field the entry of the order and contract signing can be competed on the mobile device. 

5.  Customer facing applications – many companies have already added the applications that are already available on the web to mobile devices.

These are just a few ideas on how to use mobile devices to improve corporate efficiency.  If you would like your organization’s systems reviewed  and  opportunities for mobile device applications identified, contact me at 818-709-6583 or by email lynda.roth@ljrconsultingservices.com 


2 Recent Examples of Corporate CyberCrime

Filed under: Cyber Security,Information Technology,Information Technology Strategy — Lynda Roth at 3:14 pm on Monday, April 4, 2011

In my last blog post I discussed the importance of evaluating risk of cyber crime in business and 5 steps to protect your company.  Well in the news in the last couple of weeks are 2 high profile examples of cyber crime and the affects to the victim firms’ reputation and profitability. 

The first was last week when BP (British Petroleum) announced that an employee had lost a laptop that contained social security numbers for victims of the BP oil spill that had been reimbursed by the company.  This is an example of the first type of breach I discussed in my previous post.  The laptop contained data that had either been downloaded from corporate systems to the laptop or had simply been created on the laptop using desktop software.  This was completely avoidable and has cost BP not only financially but also another hit to their already shaky reputation.  Today files with critical information do not need to be stored on laptops or workstations for employees to have access to them.  In a major corporation like BP, these files should have been maintained on a corporate secure server.  Other options are to maintain the files on outsourced secure servers.

The second was this past weekend when the Epsilon data servers were hacked and client information from a host of major corporations was compromised.  The good news is that it appears that the only information that was exposed was client names and email addresses.  How this was done is not yet known, however, it is one of those situations that may not have been easily prevented.  One scenario is that the data files may not have been as secure as they could have been because the data was not considered critical.  The Epsilon client corporations that were affected took adequate precautions by only providing customer name and email information to Epsilon.  While that information can lead to more details about a customer it will require additional work to obtain that information.  The big risk in this scenario is that the end customers could begin to receive pshing emails in which the perpetrators are seeking the additional identity information required directly from the consumer. 

Even though limited personal information was obtained, this will still cost numerous corporations significantly.  First Epsilon’s reputation is severely impaired and the company may lose significant revenue from this incident not to mention the cost of notification.  The victim companies involved which include Citibank, Capital One, Walgreens, will probably spend millions in notification and corrective action to protect their customers.

Senior executives and board members, this is a critical issue.  Security should be re-evaluated in all companies.  If you would like to discuss your security in more detail please contact me at 818-709-683.  Here is the link to my previous post www.hiddenprofitsblog.com/5-steps-to-protect-your-company-from-cyber-crime

5 Steps to Protect Your Company from Cyber Crime

Filed under: Cyber Security,Information Technology,Uncategorized — Lynda Roth at 7:43 am on Thursday, March 24, 2011

My friend Alex Auerbach who owns the PR firm, Alexander Auerbach & Co Public Relations, and is a member of the board of directors of a public company forwarded an article to me from Boardmember.com about Cyber Risk. and why corporate board members should be concerned about it.  The article addresses a couple of types of cyber crime and the general lack of attention paid to cyber crime by corporate boards and executive management.

The article discusses the 2 main areas of cyber crime

  1. Theft of customer and employee information for the purpose of identity theft
  2. Cyber corporate espionage for the purpose of obtaining competitive information and harming the firm’s revenue, profit and reputation

Both of these crimes are the result of individuals outside the organization hacking into the company’s computer systems to obtain the desired information.  As mentioned in the article the first type of cyber crime, theft of customer information, is generally a one-time problem in which the company is hacked and the data stolen, however it can happen multiple times.  The second type tends to be more ongoing in nature.

In addition, companies also need to guard against theft of data by internal employees,  The internal employees do not necessarily need to be IT employees.  With today’s sophisticated communications, offsite workforce and IT savvy employees it is more important than ever that additional precautions are taken to protect corporate data.

As the article mentions, the majority of executives and board members do not give much thought to cyber crime, although that is slowly changing.  Some of the reasons it is not on the radar for executives are:

1.  They assume the IT department will take care of it.

      While it is true that all good IT managers today address the basics, frequently that is not adequate and there are holes in security that are not obvious.  While a majority of software systems will encrypt data generally recognized as critical such as customer credit card numbers and employee SSN,  there may be data in systems that are critical to your company that are not generally considered critical in nature.  Also many in-house developed applications are not designed to encrypt data on the data bases.  Finally, if data is extracted from systems and stored in an employee’s spreadsheet or Access file it will not be encrypted and usually not even password protected. 

2.  They feel there is not much risk because no one would be interested in their data.

Cyber criminals are getting more and more sophisticated and as larger companies secure their systems and data better, smaller mid-market companies become easier targets,  Also all companies have competitors and in today’s marketplace many are becoming more willing to pay for competitive intelligence.  This is the biggest risk from internal employees because they have a greater understanding of what data is important.

3.  They are unaware of the growing magnitude of the risk and potential cost of loss

Cyber criminals have become more sophisticated and the rewards have become greater thus increasing the likelihood that any  company can be a victim.  With new laws regarding notification of breaches in customer and employee data, the administrative costs of a cyber crime are high.  However, even at the high cost of reporting the potential for loss from corporate espionage is even greater.  What would the cost to your company be if key product secrets or strategies were made known to competitors or to the public? 

So as executives and board members begin to put cyber crime on their radar, what can be done about it?  Just like any other type of crime cyber crime cannot be completely prevented, however, there are several steps that can be taken to reduce your chances of being the victim of cyber crime and increase your cyber security. 

  1. Identify the most critical corporate data and focus on securing that data. For example whatever is unique about your business, provides a competitive advantage or represents a large R&D investment should be protected in systems. 
  2. Perform an independent security assessment annually to identify risk levels.  Many companies feel they are adequately protected yet have lapses in security.  An independent audit by a cyber security firm can identify those lapses.  Secure the breaches that represent the biggest potential threat.
  3. Purchase insurance to protect the company and limit liability for any breach.  Majority of insurance companies today provide policies to protect against cyber crime.  This is just as important today as standard property and casualty insurance. 
  4. Perform background searches on all employees with access to critical data. 
  5. Include IT executive representation on board of directors.  The inclusion of a CIO/CTO as either a member or advisor to the board will bring understanding of cyber security options to that body. 

Boardroom.com article ‘Is Your Company Prepared for Cyber Risk?’

Alexander Auerbach & Company

How To Manage IT Spending

Filed under: Information Technology,IT Spending,IT Strategy,Uncategorized — Lynda Roth at 6:24 pm on Sunday, February 13, 2011

Most CEO’s and CFO’s of companies of all sizes would say that IT expenses are too high and they are not convinced that they receive value for what they spend.  CIO’s today spend a significant amount of time focusing on reducing costs and explaining the value of IT projects to the business.  While it is always a good idea to find ways to get the same value at a reduced cost and IT has alot of room to reduce costs, just cost cutting is not the optimum way to support the business.  In fact frequently a focus strictly on cost cutting will result long term lost value of IT.

The reality is that new technologies and IT business solutions have come together in the last few years to really provide the long term promise of enabling IT to increase revenue, reduce costs and increase productivity in businesses.  This situation has resulted in the new focus of aligning IT with business goals.  In a recent blog post I discussed the reasons to create an IT Strategy and that is certainly the beginning of ensuring that IT is aligned with the business strategy.


The IT strategy is the first step. The next step after the IT Strategy is to define the projects, create budgets, obtain approvals and architect the solutions so all the pieces fit together to fulfill the strategy.  This is generally where the strategy and alignment falls apart.

So how to ensure the strategy and plan come to fruition and bring the expected value to the business?  First, I recommend the company  create a board of executive management that includes the CIO, to define project priorities and requirements for project business cases and review project progress. 

Second is to manage all of IT – ongoing maintenance, new projects and infrastructure as a unit so the executive board can see how all the projects fit together.  The IT department basically has 2 tracks – investment in new systems and functions and projects to sustain existing systems.  Create separate budgets for existing system maintenance and new investment.  Group the new projects into major programs that work together as a group. Then bring the two together to define the entire IT budget.  The consolidated portfolio should include an overall picture of how each project fits into the company strategy and what existing systems and costs will be phased out as each new project is brought online. 

This approach enables all of management to see the global picture of IT initiatives and expenditures and for CIOs to manage expectations.



M&A Understanding Strategic Value of IT Part 4

Filed under: Information Technology,Information Technology Strategy,IT in M&A Transaction,M&A transaction — Lynda Roth at 10:14 pm on Sunday, January 23, 2011

This is the fourth in the series on Understanding the Strategic Value of IT in M&A based on the McKinsey & Co article of the same name by Hugo Sarrazin and Andy West.

The topic for this post is ‘Creating the IT transition and merger plan’.

Most of the time in an M&A transaction the acquiring organization has made the purchase for specific reasons such as increasing market share, expansion into new geographic locations, adding products/services that compliment core products/services, consolidating functions to increase profitability in the combined organization.  In order to support their goals for the acquisition, they usually create plans to consolidate common functions within the merged organization such as sales, accounting, customer service, HR, potentially manufacturing, logistics, etc.  However, the consolidation of most of these functions require consolidation of IT systems and infrastructure.  As a result IT usually needs to be the first organization to the table.

If the acquiring company has followed the first 2 steps, IT will have already completed a due diligence on the acquisition’s systems, architecture and IT personnel.  This provides a natural platform to create a transition plan.  As the author’s noted in the article, building the transition plan in advance of the transaction completion, the IT team can move quickly to consolidate IT and enable a quicker consolidation of other functions and as a result quicker realization of ROI. 

The first component of the transition plan needs to be the personnel.  In the 1st phase, which was the analysis of the acquiring organization’s IT, a skills inventory should have been created.  So, the CIO will know the staff required to build the IT organization.  Also, as part of the due diligence the CIO will know the skills of the acquisition IT team and be able to make the decision quickly of the team members that are retained post merger.  In addition the CIO must identify the personnel in the acquisition that must be retained during the transition and create incentive plans for those team members. 

The second component of the transition plan is the network, hardware, mobile devices and communication infrastructure.  How will those be combined and what equipment, outsource arrangements and communication will be required.  This plan will include how to consolidate infrastructure prior to the consolidation of systems and processes.  I also include office productivity software such as email, spreadsheet, word processer software, etc..

The third component of the transition plan is the business systems and processes.  Decisions are required on which systems will be maintained, which will be eliminated and what new systems will be required.  This portion of the transition plan requires collaboration with business functions affected by the business systems being addressed.  Ideally the acquiring company will consider the age, functionality and support of the systems in their decision of which systems to eliminate.  Years ago I consulted with a bank to upgrade all of their legacy applications to new systems. The upgrade included not only their financial and back office applications but also their ATM, automated teller system and telephone systems.  The upgrade had been part of a strategy to re-insource their systems after an unsuccessful outsourcing arrangement.  Shortly after the upgrades had been completed the bank was merged with another bank that still had mainframe legacy applications.  Management decided to convert the acquired bank to the legacy applications.  Had the combined bank not been acquired again a couple of years later, it would have proved to be a very costly decision as ultimately all the legacy applications would have been replaced.  When the acquired company has newer and more effective systems it is in the combined company’s best interest to evaluate the systems to be maintained objectively. 

In addition to systems it is very important to evaluate business processes at this time.  Often in order to consolidate business functions, business processes need to be redesigned in order to enable the consolidation.  For example, I had a client that had grown by acquisition to greatly expanded geographical regions.  Because they had not modified their business processes and added additional technology such as document imaging, they were required to maintain back office functions in each of their geographic locations.  When we redesigned their processes and selected new systems they were able to consolidate to a single back office location and realize significant savings and productivity improvements.

It is the final phase of system consolidation that really enables the company to combine business functions and bring to fruition the goals of the merger.

M&A Understanding Strategic Value of IT Part 3

Filed under: IT in M&A Transaction,M&A transaction — Lynda Roth at 9:00 am on Wednesday, January 19, 2011

This is the third post in the series based on the McKinsey Quarterly article – ‘Understanding the Strategic Value of IT in M&A’  The authors list 3 IT components as critical in an M&A transaction.

  • Getting your own IT house in order
  • Performing IT Due Diligence on the aquisition target
  • Creating an IT transition and consolidation plan prior to completion of the transaction

In this post I will discuss IT Due Diligence in the review of the acquisition target.  Why is it important for you to evaluate the Information Techonology of the acquisition.  First, if you are a financial buyer it is critically important because you are going to rely on the IT infrastructure, systems and processes to support the planned growth of the company after your purchase. You need to know what investments are needed in IT and how quickly the investments need to be made.   If you are a strategic buyer you need to evaluate their infrastructure and applications to determine the accuracy of the data and the ability to merge the data in their systems into your systems.  The IT Due Diligence will provide the basis for your transition plan. 

So what should you include in IT Due Diligence process for an acquisition?  It is very much like the evaluation you made on your own IT on getting your house in order. 

First, you want to know details of the infrastructure.  What servers, mainframes, printers etc.  do they have, how old are they, how much life do they have and are they compatible with your environment and usable in your environment.  What PCs, laptops, mobile devices do they have and are they compatible with your environment, how old are they, how much life and when will they need to be replaced.  If you are a PC shop and the acquisition is primarily a MAC shop will you convert them to PC or integrate the environments. Are they hosting all or part of their infrastructure and if so what are the agreements in case of an acquisition. 

Next, you need to know what software and systems they are using.  First, are they using the same desktop software and versions.  For example, are both companies using MS Office and if so are they compatible versions or are you using different office applications software.  What investment will be required to make the environments compatible.  What ERP, CRM, reporting, operational systems are they using.  What are the liscensing agreements in case of an acquistion. Are key systems custom developed or highly customized products and if so who supports them.   What will be required to convert their systems to your systems. 

Third you need to evaluate who supports their IT infrastructure and software systems.  Do they have an in-house department that provides all the support, do they have outsource agreements and consultants that provide the primary support for systems.  What packages will you need to offer tp ensure that support is continued during the transition.  Who from their support team will you transfer to your team and who will not. 

Finally you need to review the hardware, software and support agreements and intellectual property issues.  Are the licenses for their software transferrable to you and is their a cost associated with that transfer. Do they have licenses for all their software.  Will you need to purchase additional licenses.  If they are using SaaS systems what is the agreement for continuing the service after an acquisition and what is required to convert the data to your system.  Often in a conversion, historical data is not converted, what are the requirements to maintain history on the systems they currently have.  Who owns the IP rights to the software they use especially if it has been custom developed. 

All of these areas can have a major impact on investment requirements in addition to purchase price not mention your ability to consolidate operational areas of the 2 companies and achieve expected savings and synergies from the merger.  While all of the components of IT are important to the success of an M&A transaction, I believe this is the single most important for 2 reasons.  First, if you are financial buyer the IT infrastructure, systems and personnel will need to support and grow your investment.  If this area is weak, which it is in many mid-market companies, you may have a potentially significant investment required in IT.  If you are strategic buyer, the current IT environment will greatly impact the cost, time and effort required to consolidate the companies.  Converting an acquisition to your systems and processes is often much easier said than done and without IT consolidation, consolidation of the rest of the company is much more difficult if not impossible.

M&A – Putting Your IT House in Order

Filed under: Information Technology Strategy,IT in M&A Transaction,IT Strategy,M&A transaction — Lynda Roth at 9:48 pm on Sunday, January 16, 2011

Growing your business by acquisition seems like a fabulous idea but it can be fraught with problems especially when Information Technology is ignored!

In my last post I discussed the article in the McKinsey Quarterly "Understanding the Strategic Value of IT in M&A’.  The article listed 3 key components of IT in an M&A transaction.  The first component is ‘Getting Your IT House in Order’ or as I call it Know Yourself First.  This applies primarily to the acquiring company but it also has application to the selling company.

What happens when executive management prepares a growth strategy based on acquisition, spends the time and resources to find businesses that fit in that strategy, and develop plans to merge the companies only to have those plans not meet expectations because the information technology structure is not sufficient to support the combined company.  I have seen this in far too many clients.  After years of attempting to consolidate, functioning on multiple technology platforms they have failed projects, wasted capital and lack of synergies of the combined companies. 

So what should be done to prevent this outcome and  ‘Get Your IT House in Order’?

The areas that should be evaluated and upgraded include  IT  infrastructure, business systems, business processes and IT personnel (within the company and outsourced).  


Many companies operate on hardware and communication infrastructure that does not have any room for expansion. Many companies, especially those in the mid-market, tend to not invest in IT infrastructure until it is falling apart.  So if the company is barely supporting it’s current systems on the infrastructure, how will it support the instant growth from an acquisition?  This affects simple functions such as email, website and server and network capacity  for additional personnel, in addition to major applications.   So first the infrastructure must be evaluated and upgraded as necessary to support the acquired company or companies.

Business Systems

In this area also, many companies frequently have core systems such as ERP, CRM, industry specific operational applications, that are unable to support additional users or companies.  The situation may be as serious as the core systems cannot support another company or the number of transactions from another company.  One of my clients had acquired several companies over a 5 year period and the ERP system they were using was no longer supported and had been so heavily customized that they could not put the acquired companies on it.  As a result they were using multiple ERP systems and one of their acquisitions was using Excel spreadsheets for manufacturing and inventory control because it had been a corporate spinoff and did not have an ERP system.  In another client who had acquired 4 companies over a 2 year period, now had 5 ERP systems and could not get any consolidated reporting because the ERP systems were different and all operating on their own servers.  This is probably the biggest problem that companies experience after making one or more acquisitions.  By evaluating the capacity for their existing systems and upgrading or selecting and implementing new systems prior to acquisitions, the company will be prepared to add the new acquisition(s).

Business Processes

Inefficient business processes in conjunction with limited use of technology hamper the growth of many mid-market companies.  In many mergers the additional workload from the acquired business can have a significant impact on the performance of employees.  This has an impact on customers and vendors and frequently sales.  As part of the review of core systems, core business processes should also be evaluated.  The goal is to be able to absorb the acquisition with limited if any growth in personnel while maintaining customer service.  As part of the business process review and redesign, implementation of additional technology such as document management systems, bank and vendor integration applications, customer self-service applications, mobile applications can significantly improve productivity.

IT Personnel

This is the final area of evaluation in which the company needs to identify the IT team that will be required to support the combined companies.  Often the consolidated organization and the technology needed to support it, requires different skill sets in IT personnel. 

In summary, when a company decides to grow by acquisition, it is critically important to ensure they have systems and processes to support the new company and ensure the success of the merger.  This is true for strategic acquirers and for financial buyers that are planning an industry roll-up.

In addition to the acquiring organization ensuring their ability to support the new company, executives that are planning to sell their company, especially to a financial buyer, need to get their IT house in order also.  Having antiquated IT infrastructure and systems can greatly impact corporate value and suitors. I have had clients that are unable to complete a sale because their systems are weak and ineffective.  We strongly recommend an IT and business assessment for any company planning either a purchase or sale.

Link to the McKinsey article   https://www.mckinseyquarterly.com/Corporate_Finance/M_A/Understanding_the_strategic_value_of_IT_in_MA_2709

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