The tale of two competing technology platforms inside an enterprise

The company (let’s call it A) was seeded in the era of client-server technologies and the inception of what became known as the standard for developing open systems. So naturally their technology foray included the technology stack that promised interoperability and ease of programming. Systems were developed in-house with a bunch of programmers working alongside the business, thus creating many fit for purpose solutions that helped scale up the business. Their growth story aided by their early focus on technology made them a player of reckoning.

One of their able competitors (why not B) started off with a few years decided to watch the results of A’s foray before taking a decision to invest. Years passed by and the turn of the millennium saw anxiety filled movement for compliance and then a drop in business triggered by dot-bust coupled with further slowdown due to terrorist activity. By the time B did get started taking nascent steps into the world of technology, a newer framework was gaining popularity as an alternative making a compelling case for adoption.

By now A was already reaping the benefits of an early start giving them resilience and efficiency that a good technology solution can provide. They broke into the top 10 by the time B was just about stabilizing technology solutions to move to fast track growth path. Both grew at a fast clip from there on though the gap kept growing with A enjoying the benefit of base effect. Each had created specific market differentiators as they competed head on and survived the arrival and exit of some major global competitors.

A decade later the market had changed; heavy investments in technology by some big companies and newer technology enabled startups and disruptors started eating away market share from both. While they continued to stay profitable they were relegated to a marginal player status. Call it providence or just competitive landscape, A & B were finding it difficult to change, straightjacketed by their people and process. Technology alone was unable to pull them out of the quagmire they found themselves in.

Market forces led to consolidation of the industry and the founders of A & B who were healthy competitors decided to merge their business operations to create larger play. Due diligence and valuations aside, both believed that their technologies provided them the platform on which they had competed and created a name for themselves. In a merger of equals who decides on the prevalence of process and technology while the people were relatively easy to put into different buckets to rationalize.

Thus began the discussion and debate between the survival of technology landscape, the business applications, and the IT infrastructure, none willing to give a quarter. Both IT teams presented the merits of their choices to the combined management who defended their IT architectures and wanted their solutions to become the solution of choice. Both portrayed passionate attachment to their investments to the extent that rational thought was kept aside; so they decided to call in a consultant for mediation.

The consultant, a veteran with experience of many mergers and acquisitions and more than a score years behind him agreed to assist in resolution of the seemingly childish conflict. He started by asking some tough questions on the intent and rationale behind the merger, the new GTM (Go-To-Market) positioning, the target customers, competitive landscape, and finally team competencies to support the chosen solution. He opined that these shall determine the victor and survivor between the battles of technology solutions.

They agreed to drop their earlier arguments and align with the direction set by the consultant as the way forward. After all there was no direct impact to their business or customers due to technology frameworks and to that extent they were chasing a red herring driven by ego, otherwise a non-issue. Saner minds now applied rigor to determine the best option including a hybrid approach if necessary to solving the problem of technology choice. The solution that emerged gave them the benefit they wanted from technology.

Which solution stack finally won ? Does it matter ? What matters is that the decision was taken the way it should have in the initial stages by evaluating business benefit and connect to customers; you cannot go wrong with such criteria as compared to evaluating merits of one technology stack versus another. Forget IT folks, today business leaders also get enamored by smooth talking technology sales people who create inane metrics for assessment and are able to influence the search engine enabled technology decision makers.

Your company has been acquired, what should you do !

If this is the first time you are involved in one, it is a feeling of FUD (Fear, Uncertainty, Doubt); what will happen next ? Will the acquirer dictate their will or take rational or unilateral decisions ? Culturally we are so different; how will we work together ? There are so many parallel roles between the two companies, what will happen to the combined team ? What will be the future of my team ? What will happen to me ? They talked about synergies ! If you have been in an acquisition before, you think you know what will happen.

If you are an acquiring company, the feeling is similar to having won a war even if you were not on the field playing an active role and came to know of the event from an internal announcement or the newspapers; by association you believe that you now have the ability to change the destiny of the acquired group. You have already started thinking about the extended team, the tasks that lie ahead in integrating their systems. As the dominant partner you want to get them to your level, irrespective of comparative benefits.

But there is a lot more at stake in the first case as it deals with FUD; for many it is like appearing for a new job interview, a job that you desperately want because it is yours to begin with. You also want to ensure that your team also gets their jobs and don’t become a casualty to synergies between the two enterprises where overlapping roles see one go; it’s rarely the person from the acquirer impacted. The uncertainty is directly proportional to your place in the hierarchy; higher you are, it’s more likely that you will be collateral damage. Consider:

A.     The CIO was a leader in his own right having grown through the ranks over the years; his projects were well regarded and awarded by the industry, one becoming a case study in a premier B-school. He met the CEO and CIO of the big brother, sharing information and providing a view of their journey and success, though on a smaller scale. His confidence and positive approach ensured that he had a role in the new entity even before the integration process actually began. He became a critical part of the integration team. His team was not that fortunate, most did not make the grade.

B.     In another case, from the outside the deal did not appear to make any sense; the companies were fierce competitors in a crowded but growing market. Barring a few differences and branding, they operated in exactly the same space; acquisition added to scale but did not complement each other. When the integration started, both teams knew that the commonness will be a bane for many; but then the technologies even though being the same delivered very different results to the respective companies. The debate continued almost forever and as a result many left for greener pastures.

C.     Just before the announcement became public, the CIO had quit leaving a leadership vacuum at the targeted company. The acquirer known for ruthlessness and sharp business acumen created – what else – FUD within the team. The deal ran into roadblocks dragging for a long time and market rumor continued to fuel doubts on future strategy. When it did get started, heads rolled quickly, especially cruel from the top downwards. Remnants of IT leadership was not seen competent enough to manage the combined entity; they hired from outside !

Is there a magic formula that can help you survive or become the leader for the combined entity ? Or should you start actively seeking opportunities outside immediately after the announcement ? In most cases the tilt of balance is based on criticality of the role in the merged organization; if your exit were to create significant business disruption, then you will be retained for sure. If you are a high professional and add value to the enterprise, stay if the terms are good for you; it would not be difficult for you to find alternatives.

In the rest of the cases and I am not counting the politically savvy who survive in all kinds of situations, put your best foot forward and be prepared for the worst. Have an open conversation with your new manager to understand the new role being offered; warning: it may not be as juicy as your earlier one. If you decide to part ways, whatever happens, don’t burn bridges; it will come back and bite you sooner or later. Help your team as a friend and coach, give them the advice and solace required in difficult times, keep them cohesive.

Finally if you are the decision maker, be candid and kind, it’s a small world after all. 

How not to do M&A Integration

Why does the team need to travel and spend money ? You know well enough that there is pressure on costs and it is imperative that everyone contribute and IT is no exception. I don’t want to hear excuses on why it will not work effectively. Get on to a video-conference to understand more about what they have and what they do. Use a bit of technology to get requirements from these markets; there has already been too much travel from other functions. I just came back from a review and we have busted the travel budget.

With this spiel to the CIO and the IT team, the CFO proceeded to travel to four countries to give the message on cutting cost to the country heads. It was not important that he always made up his trips last minute and traveled First Class. It was also not of relevance that just his personal travel budget was higher than the total IT budget for travel. It did not matter if sub-optimal solutions were being used by some of the acquired companies and the integration effort had faltered in the absence of travel authorizations to IT.

The company had leapfrogged into the big league with acquisitions in quick succession; after an era of organic growth, the change in pace was exciting. There was a palpable sense of aggression and pride that prevailed internally and also made news thrusting the company to the pages of business magazines and newspapers. At the same time there was a bit of uncertainty on how to work the mechanics of integrating multiple companies simultaneously. As normal, Consultants were hired and teams created to oversee the process.

Business teams created groups of domain experts who traveled to the acquired companies globally to meet their counterparts, understand culture, process and systems used. Teams were mapped and processes reviewed for compliance to standards and regulatory requirements. All this was fed into a structure which captured each and every component of the new company beyond the pre-acquisition due diligence. They followed the best practices laid down by the Big Consulting Company assisting in the integration.

Weeks became months and progress was good though with one glaring gap; IT was nowhere to be seen in the picture. The business teams reached out to the CIO seeking a timeline and calendar that IT would follow in the integration process. The CIO advised them of the incremental data required and promised to have his team reach out to the far side. Quickly it was evident that the gap cannot not be bridged with conference calls and email exchanges. Having executed a couple of integrations, the CIO realized that he was being setup for failure.

The CIO reached out to the business teams with his constrains and sought help which was promptly offered since everyone was now feeling the pinch of unintegrated email systems which bounced messages, lack of information flow and integration between various systems including financial reporting. Some of the functions whose success depended on harmonized IT were happy to sponsor. Despite the urgency, need and demand, ego prevailed and the CFO was unwilling to accede leaving everyone frustrated and wondering.

It was evident that the deadlock would be difficult to break; in the absence of an integrated approach taking off, business leaders attempted to use local solutions. They had to deliver results with synergies and process improvements, and their dependence on IT was critical. Using personal rapport with the CIO they validated some of the local solutions that could be deployed in the short term. Scrounging for budgets they attempted to get these off the ground; talent crunch and missing strong leadership failed to get them going.

Integration review meetings became a war of words with the CFO finding excuses and then blaming the CIO for not effectively managing the effort. Business knew the reality to be otherwise and had reached a situation that they had no recourse but to accept the fact that the new company will remain technology challenged for some time to come. The acquired company’s leadership team too accepted the power play and silently lived in their acceptable level of inefficiency hoping that someday in the future things would change.

What happened to the CIO and the IT Team ? Well in quick succession many of them found greener pastures leaving the CFO to find other scapegoats for his ego while business struggled to stay afloat.

Integrated Best of Breed

Big fish gobbling up the smaller ones has been a natural way of life. Recent times have seen many startup and small-medium technology companies being acquired by their larger brethren as the biggies try to fill voids in their enterprise solution offering or expand their footprint in corporate IT. Innovative ideas and niche solutions have found it easier to expand their market aligning with the big companies while in many cases it was also about survival or the investors cashing out too.

Meeting up with few large enterprise and conglomerate CIOs the discussion veered towards how they are staying ahead of the pressures to continuously adapt to changing paradigms and ensure that the IT architecture stays agile and in sync with business. Everyone had gone down the path of implementing the monolithic ERP, CRM, SCM, … solutions more than a decade back. With (in)organic and global growth the footprint continued to expand moving from single instance to multiple and then back to consolidated deployment.

Depending on the evolution of solutions and enterprise need many CIOs took a call to implement the complete suite of functionality from one vendor; then there were few who decided that they will not compromise on business requirements and find the best fit for what their business needs. Integration as required was addressed using Enterprise Application Integration (EAI) tools which had evolved to allow coexistence of legacy and new systems. The resultant technology diversity did pose challenges for IT which was deemed acceptable.

Staying with one solution provider did have advantages of better integration over the other though not by a huge margin as most large vendors had acquired other companies to fill in gaps in their offerings. Some of the best of breed now became offerings from the same large vendor with support prices almost always going north busting budgets and taking away fiscal benefit which the smaller vendors had offered. CIOs had little choice but to fight tooth and nail to get marginal benefit eventually accepting the new terms.

M&A in the IT solutions industry keeps changing the landscape. While the acquirer in most cases buys to add missing functionality or to get ahead of competitors, there have also been a few to kill a smaller or dominant player in a specific segment. There have been many such acquisitions over the last decade where the solution became irrelevant and by the time it revived itself, the market had changed. This is very evident in customer management and supply chain solutions in which earlier leaders failed to regain their market leading positions.

With new technology and disruptive paradigms driven by consumerization and services on demand being touted as nemesis of conventional IT organizations, solution providers are joining the bandwagon in an attempt to brick-wall their customers. We can offer you the option of cloud, stay with us; list prices are only for small customers, we will give you good ROI on either stack. CIO buying from startups soon discovers that the solution is now with a vendor who they may have rejected in their larger evaluation.

With integration becoming easier over the years across “commercial off the shelf” and cloud solutions, the new wave belongs to point solutions for specific tasks and functions. Almost all of them provide ready connectors to legacy ERP solutions thus eliminating the earlier pain of integration. Today CIOs can exercise a choice along with business to find the best fit for which there are alternatives as compared to the past. And the discussions between best of breed and integrated is no longer relevant.

Predictions about the demise of the larger solutions have been around for a while now; I do not believe that they are going away in a hurry, rather many have adapted to the new situation quite well. The momentum from new and micro solutions will keep everyone on their toes. Acquisitions will continue to change the landscape and the CIO will have to continuously adapt. Business will want agility and legacy will remain entrenched. The future will be uncertain, that is certain. All in a days’ job for the CIO !