Why IT Due Diligence?
If you consider acquiring another company, you must seriously think to let conduct an IT due diligence for the following reasons:
- Know what you buy or pay too much for it
- Prevent “surprises”
- Have your integration plan ready
- The right estimate of risks and project costs for improvements and possible integration
Another possibility is having a check-up of your own current organization. Sometimes it is necessary to get a better picture of the opportunities, costs and risks involved with the own IT function. This makes planning for the future easier or even possible.
In either case, there are benefits to have a specialized and independent third party perform the assessment.
Why IT Due Diligence by an independent party?
- In the case of acquisitions or mergers, investors often treat IT due diligence as part of the general activities performed by a team with generalist knowledge. Although the due diligence team is independent, they rarely are IT specialists, doing it well requires hands-on IT knowledge and in-depth experience.
- In the case of an internal assessment, the business owners may assign the job to the own IT organization. Although this involves IT specialists, they are not independent and have an interest in the outcome.
Because of this, the responsibility for IT Due Diligence is best assigned to an independent IT consulting firm that has the knowledge and in-depth experience for doing the job right.
Our IT due diligence consulting services evaluate the the current state of the organization’s IT from the angle of people, process and technology. It identifies opportunities for cost savings, assesses risks, and outlines a future roadmap. This is done in the following way:
1. Assessment of Current Situation
- Organizational Assessment What is the size and skill level of the existing IT staff? How does IT headcount and staff mix compare to others in this industry?
- Process Assessment How is the fit between the IT and Business Processes? To what extent are the main business processes automated? How well is IT itself automated? What management processes are in place for IT itself? See also our page on ERP Master Plan.
- Technology Assessment. What application systems are installed, and what shape are they in? Are they suitable for a company of this size, in this industry? If they are packaged systems, how well are they supported by existing staff or vendors? Are users satisfied?
- IT Infrastructure Assessment. What IT hardware or lease obligations are on the books? What network infrastructure is in place? Who are the service providers? What problems or issues are there? Are there any issues with software license transfer when corporate ownership changes? What is the market or liquidation value of certain equipment?
2. Scalability & Fit
Based on the assessment of the current situation, we can assess whether the current IT landscape is scalable to support its anticipated growth and how it would fit the company which takes over. Based on this we make a roadmap with different future scenarios.
3. Risk Assessment
During a merger or acquisition, an effective IT due diligence process can minimize risk, improve the odds of success and increase the value of the deal. The same considerations also apply when we perform an IT assessment for internal purposes. Like the assessment of the current situation, we take into account people process and technology risks. Examples are:
- Disaster recovery and business continuity. Are IT systems adequately secured against intrusion or known vulnerabilities? Is there a disaster recovery plan? Are backup/recovery procedures implemented and tested? In regulated industries (e.g. life sciences), are there risks of non-compliance?
- New initiatives. What system development projects are underway? What is the status? Should they continue? What should be done to ensure successful implementation?
- Key personnel. Who are the key resources, who need to be retained? What actions should be taken to mitigate the risk of loss of these key personnel? Work on plan B for personnel in order to ensure that the desired value creation of the merger and/or acquisition can be realized.
4. Budget Analysis / Benchmark
Often organizations have an IT cost structure that is higher than necessary. In other cases, the organization may be underspending in certain areas relative to its industry peers. The typical IT cost questions are the following:
- IT spending and staffing benchmark. How do overall IT spending and staffing levels compare with others in this industry? Should this company be spending more, or less on IT or should it change the portfolio of the spending?
- Opportunities for cost savings. Are there opportunities for consolidation, standardisation or simplification? What contracts are in place? Are the rates competitive? Can certain IT capabilities be more cost-effectively performed by outsourcing? If outsourcing is currently in place, can certain functions be more cost-effectively delivered internally?
5. End Report and Management Presentation
Finally the results of the previous steps are put in an end report which is presented to management if that is desired. Our due diligence is delivered in three different flavors:
|Quick Scan||3 business days||€ 2.900 fixed price||High level scan, limited benchmarking & end report|
|Business edition||1 week||€ 9.900 fixed price||Detailed scan, business process scan, benchmarking & end report|
|Premium edition||2 weeks||Price to be offered||As business edition plus full IT contract scan|
How do we deliver the service? Depending on needs and possibilities, we can deliver the services as follows:
- Or a combination of both
Why Q7 Consulting?
- We deliver first time right quality, against a standard tariff with a guaranteed throughput time. We sell experience and cover in our end-report all the items mentioned above in section 1.
- We have a unique way of focusing on People, Process, and Technology during a Due Diligence. We do not simply focus on the problem, but on your entire organization.