Posts Tagged ‘mathhew carmen’

Integration Projects

When a company goes through a merger, acquisition, purchase of a business unit, a strategic partnership, etc, there are activities that need to take place to make multiple entities into one cohesive unit.  These activities include: reaching the stated financial goals of the combined new business through operational and departmental combination, the selection of ongoing IT systems, and cost cutting initiatives.  All of these tasks, that create the new company, are integration projects within the larger program.

According to research done by the consulting company NGTO, over 50% of mergers are considered failures and 60-70% of these failures are due to significant misses regarding financial goals tied to the merger.  For public companies – and these are the mergers that people hear and read about – the financial goals are the key.  The true goal of a company is to grow shareholder value, be those shareholders stockholders in a public company or partners in a private entity.  If shareholder value is not improved by acquisition or merger, then what truly was the point?

Further research done by my own firm Datacenter Trust shows that when failure occurs, it is most often due to the stoppage of the integration process after reaching a portion of the total goal; say the merger of business units or reaching the financial goal set by the companies upon announcement of a deal.  By stopping the integration process, the new entity never reaches the strategic state that it set out to accomplish through merger.  Without reaching this state, optimal shareholder value is either not attained (as happens in most cases) or takes much longer and is more costly than was originally estimated.

Mitigating Integration Failure

As a financial professional with nearly two decades of integration experience, I would love to tell you that all the keys to success are based on dollars saved vs. dollars spent, but this sadly would be a lie. If I said all integration projects are successful, this too would be untrue. What I can tell you is that communication is the largest factor in a successful integration project.  Communication is followed closely by understanding – meaning that the people who will be doing the work must understand what the future state of the new organization is meant to look like.  Finally, there is program management – empowering the community that will perform the integration projects while having clear leadership and participation from the executive suite to ensure the program is aligned with the overall strategic vision. Now, lets look at these 3 a bit more closely:

Communication

I cannot stress enough that communication is the largest factor in the mitigation of integration failure.  The executive leadership of the company must ensure that the execution team understands the goal and the look and feel of the future state organization.  Leadership also must make it clear that they are willing and active participants in the program being developed.  Leadership must serve as the sounding board and approvers of each project so as to ensure the entire integration program stays aligned with the evolving strategic vision.  Without communication, there is zero chance of successfully integrating the new organization as advertised to stockholders, employees and the public at large.

Understanding

Understanding is an offshoot of communication.  I would argue that if the execution team as a whole does not completely understand the job at hand, then the notion of communication was unsuccessful.  Also, there cannot be any weak links in the execution team; everyone from the project managers to the network and database administrators must fully understand how their role will ultimately lead to success.  Without understanding, members of the execution team will invoke their own decision rules (e.g. loudest demands, squeakiest wheel, bosses whim, least risk to job, easiest activity, etc.)  Allowing this type of behavior is asking for trouble.  Integration initiatives have a finite amount of time to be completed and must be with the utmost skill and timeliness.

Program Management

Finally we come to program management; the company needs to get the best program and project managers available for integration.  This might even mean going outside the company to contract with consultants specializing in these types of integration projects.  As stated above, the project needs to be completed on time, on budget, and most importantly it must succeed in meeting the goals.  Setting up a ‘program office’ to manage integration properly is an imperative.  The program office manages expectations both up the corporate ladder to the executive suite and down to all areas of the execution team.  Management of the individual project managers is an important area of the program office as well.  With a limited amount of resources, each member of the execution team needs to manage his/her time down to the minute (remember, these team members have regular jobs as well) as the ongoing operations of the company need to take place on a continuing basis.

Countless other activities will help an integration initiative to succeed, but those I’ve covered here are the main three.  In the end, there are many intangibles that come up on a minute-by-minute basis during the project engagement.  The real key is to keep in mind that great people always lead to better results:  Empower the execution team while managing the alignment of integration and the new corporate strategy, ask for external help if needed, ensure leadership is fully engaged, and you’ll be on the path to success.

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Tagged as: active garage, business, data center trust, failure, Integration Projects, mathhew carmen, Mitigating Failure, program management, Project Management, Strategy, success, Technologies

I’ve spent many years as a consultant helping companies analyze their business to improve performance and reduce costs, Clients large and small often ask questions regarding outsourcing/managed-sourcing. They’ve often read case study after case study showing how companies of their size/in their industry have shown real cost savings from their IT outsourcing programs, but their own initiative seems to be lacking in some fashion, often experiencing cost overruns and sub-par service levels.

I always come back with the same answer – A question:  Did you have the right information to make this business changing decision, and did you enter into your agreement from a position of strength?  The prospective client’s answer is usually slightly defensive, wondering why I’m questioning that company’s decision-making ability.  Which essentially I am – clearly something is amiss. At this point, the wheels are in motion and a serious conversation about how the agreement was entered into can take place.  This conversation is meant to figure out what has gone wrong and how it can be fixed.

Here are the main points where an outsourcing agreement can go wrong:

1. Is the true cost of IT known and understood?
2. Was proper due diligence performed and a business case developed?
3. Did you open negotiations to multiple companies so as to get the best deal for your enterprise?
4. Are you enforcing the contract?
5. Has your company had any changes that would affect your agreement.

If these five questions can be answered, your company will be well ahead of the game and can facilitate changes that will help resolve the issues you may be experiencing. Lets look at these a bit more:

Understanding the true cost of IT

Many companies think they understand the true cost of IT, but most don’t.  It’s not just what is in the budget, it’s what isn’t as well.  Since every employee is part of the larger family, things are often done in a way that wouldn’t necessarily be the case with an outsource company.  For example, IT support staff would likely service a broken computer while they happen to be in that particular location to fix something else; an outsource company won’t (and unless on-site, can’t) do that.  There are hundreds of other “off book” examples (an ad-hoc server repair in the datacenter without a ticket being called into the help desk, perhaps) that, once outsourced, will no longer occur.  These are true costs of doing business that are challenging to foresee and don’t always get accounted for internally, however with an outsourced vendor these types of activities become chargeable events. In a large organization, this can lead to millions of dollars in additional outsourcing costs.

Performing Due Diligence to get the best deal possible

Knowing the true cost is the first step in the due diligence process.  Other things need to occur, including:

• Prioritizing which functions should be run internally and which should be run by experts that can drive costs out of the equation
• An understanding of which parts of the labor force will be affected either by being re-tasked to the outsourced vendor running the operations or being relieved of their positions entirely
• Service levels need to be agreed to internally; and
• Building a business case that supports the initiative, this includes noting all assumptions so as to be able to go back and audit.  By doing this, the company knows what is expected and then study the agreement forensically to uncover why the initiative is not proceeding as planned.

Handling Negotiations to Secure the “best” deal possible

Each company has their own process by which they procure goods and services.  The key questions to ask here are:

• Were your company’s policies and procedures followed?
• Were RFI’s and RFP’s constructed properly and submitted to all viable vendors?
• Did your company negotiate purely on price, and were factors such as the Service Levels (mentioned above) taken into consideration?
• Did you do research on the providers, talk to their current clients, etc to make sure they were the right fit for your needs?

All of these questions need to be given consideration up front, or you’ll risk the likelihood of compromised service down the road.

Enforcing the agreement with the selected vendor

This is key. Your company, when entering an outsource agreement, must establish a structure to allow for monitoring of the agreement and related SLAs. Is the vendor living up to their end of the agreement? If no, are steps being taken to alleviate the issues?  If you are not monitoring your agreement, you are as much at fault as the vendor for any perceived failures.  The agreement and the activity associated with it need to be continually monitored, and analyzed.

Knowing the changes in business conditions that might affect your outsourcing agreement

These business conditions can take many forms, and some affect all business – the current downturn in the economy, for example.  Perhaps your company may not have grown at the rate assumed in your business case and therefore in your negotiations with your chosen outsource vendor.  Other condition changes to consider include mergers and acquisitions, perhaps you are using more computing power then you estimated and did not take into consideration when purchasing another company.  Have you come out with an incredible new product that has driven growth within your organization? This is a good affect, but one that may not have been included in the portion of the new products business case that deals with internal costs such as IT, manufacturing and supply chain management.  All of these reasons and many others can affect the actual agreement, therefore it’s a must that your agreement be continually monitored as I noted earlier.

Conclusion

Several reasons can result in your company essentially leaving dollars and services on the table with respect to outsourcing.  There’s no such thing as too much thought when evaluating an outsourcing initiative.  If you need help, there are many experts available to you who can provide guidance and help develop a sound strategy tailored to your organization. Whatever your size or complexity of project, we’re here to help.

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Tagged as: active garage, business, clients, companies, cost savings, data center trust, IT costs, IT Finance, IT Outsourcing, mathhew carmen, vendors

Most companies have a mission.  This mission, many times, is some morally high statement that the company will, say, help all the people of the world live in harmony.  While this is a noble gesture, is it realistic?  Unless you’re the Bill & Melinda Gates foundation, probably not.  What a company really needs is an actionable strategy that leads it to meeting and/or exceeding business goals: those of higher revenues, margins and market shares, amongst many others.  A company can still be benevolent, like Ben and Jerry’s Ice Cream for example, who give a portion of their profits to charity.  This is a fantastic thing they do, but their shareholders want value for their investment as well.

What is more important is the corporate strategy that allows a going concern to reach its goals.  The main problem with any strategy is that the people who make it happen very rarely know what it is.  The “workers”, which make up probably 80 percent of employees only know that the company making money is good, and that losing money is bad (and this is probably all they really care about too).  These “workers” however, are the operational portion of the company.  Since the operational portion of the company has little or no knowledge of the company’s strategy, and probably cares about it just as much, how does a company’s leadership align its operations so as to reach its corporate goals?  Many tools are needed, including leadership, management of human and financial capital, logistics, etc.  All of these tools are fed by information and the better the information, the more intelligent the tool’s results. Business Intelligence (BI) is key to successfully aligning corporate operations with its strategy in order to achieve its goals and mission.

What exactly is BI?

Ask 5 people, you will probably get 6 answers.  Wikipedia defines BI as: “computer-based techniques used in spotting, digging-out, and analyzing business data, such as sales revenue by products and/or departments, or by associated costs and incomes.”  I guess this is one way to explain it.  My view:  BI is the use of technology to intelligently analyze raw data which is collected from each operational group.  This analysis is performed in many ways;  reporting, online analytical processing, analytics, data mining, business performance management, benchmarking, text mining, and predictive analytics are just some of the many techniques used.  Once all of the raw data is mined, processed, and analyzed, it becomes usable information that can be reported on, ‘dashboarded’ and presented.

This information often reflects a company’s competitive intelligence or advantage in the marketplace, and one way in which a company can differentiate itself from is competitors.  For example, Netflix and Harrah’s Entertainment are two companies that have benefit from BI initiatives.  These two companies collected raw data and utilized BI tools to analyze that data, ultimately resulting in advantage gains against their competitors – they were able to lead their industries in profit margin, sales and customer service, according to the book, Competing on Analytics by Davenport and Harris.  By efficiently analyzing sales data through the use of BI, a company can make sure that stores in different geographical areas keep the right products on the shelves.  One example of this is Kroger:  they were able to keep the right varieties and quantities of soup in colder weather stores.  Some of BI is basic common sense that is taken to the next level, this is the starting point.  Experts in BI need to take a company to the next level and beyond.

The keys to a successful BI implementation include:

1. Realizing that your company does not use the data it has to make decisions and wanting to change the dynamic.
2. Bring in experts where helpful (for example, Stixis and their BI Center of Excellence) to ask the right questions and properly architect and launch BI initiative.
3. Make sure employees and management participate in the development of Key Performance Indicators (KPI’s), designing dashboards, and providing input to the system designers.
4. A company must decide on BI deployment, maintenance, and continuous improvement.  By doing these things, a company will be able to gain a competitive advantage over competitors and lead its industry.

The key to successful implementation and usage of a company’s new or expanded BI environment is complete buy-in from all employees and communicating corporate mission, strategy and operational need.  Through this effective communication with the workforce, employees will become contributors of the new corporate culture and help move the company forward.

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Tagged as: active garage, analytics, benchmarking, Business Inetelligence, competing on analytics, corporate goals, corporate success, data center trust, data mining, mathhew carmen, predictive analysis, sales revenue, text mining