Seizing the value of the surge: How to use M&A to reshape your IT organization

M&A is an opportunity to align technology functions to strategic focus areas by pushing internal resources and top talent toward business-facing, differentiated activities while aligning commodity activities toward key strategic partners.

Authors: Seth Van Winkle, McCree Lake, Daniel McCarthy

In an earlier post, we explored the four dimensions of the IT workforce to assess to optimize merger and acquisition (M&A) success. As we further evaluate the IT workforce implications of M&A activity, it is notable that there is a tremendous (often underutilized) opportunity to leverage the sharp increase of work from M&A deals to redefine the IT workforce and organization. Leaders can better align technology functions to strategic focus areas by pushing internal resources and top talent toward business-facing, differentiated activities while aligning commodity activities toward key strategic partners that can manage those services even after the M&A activity has ended. Certainly, a like-for-like transformation makes sense in some cases, but there are four key areas to target to seize the value of the surge of demand that comes along with M&A integration or divestitures:

  1. Optimize location and sourcing strategy: M&A and divestiture transactions bring tremendous complexity and demand to IT organizations and, often, these organizations are not optimized from a labor supply and location perspective to be able to ramp up and down specific services based on the business needs throughout the life cycle of integration or divestiture. M&A is an opportunity for IT leaders to create a mandate around strategic consolidation of providers and moving resources to the right locations based on economics, skills and other organizational factors. The use of M&A as a lever creates the momentum to shift delivery methods and capabilities through strategic supplier selection. For example, organizations can set the stage to move from traditional waterfall approaches into agile and DevOps. It might not happen immediately, but major transformations such as an integration can pave the way. For IT leaders seeking a push toward new platforms or the cloud, selecting and utilizing providers with these types of emerging capabilities is the right move. Additionally, leaders can seize on high-priority initiatives across the IT organization that will maximize capital efficiency and minimize run/support activities in the long term by taking advantage of optimized sourcing approaches.
  2. Leverage opportunities for robotics and artificial intelligence: M&A is always a time to welcome new colleagues to the workforce — this time, they are going to include bots and machine learning algorithms. IT organizations should already be evaluating the use of robotic process automation (RPA) software and other technologies from a sourcing perspective, but this is also a chance to put these new automation and augmentation capabilities to the test within the organization. A powerful example from an information technology perspective would be a data or server factory. Moving IT services, migrating data or consolidating records can be extraordinarily laborious and complicated. Leveraging A.I. and RPA tools can significantly reduce workload, errors and time while empowering humans to do more meaningful, judgment-based work and handle the exceptions produced by A.I. tools.
  3. Shift the IT organization left: The concept of shifting testing left has long been standard practice in improving application development by engaging quality controls earlier in the process — moving those activities closer to the business. In the same way, M&A activity should push IT closer to the organization. Shifting IT’s operating model to more effectively capture and deliver on business demand is a common theme — but M&A both requires and provides a significant opportunity for truer IT-business integration. There is a chance to redefine traditional IT roles in ways that better align to and serve lines of business to drive revenue or improve bottom-line results. Additionally, M&A provides the opportunity to reorganize IT so that it is not focused only on traditional maintenance activities or taking orders, but instead on innovating and generating value. As M&A activities ramp up, think carefully about the optimal way to integrate internal people and skills into the business based on IT demand. This both supports the M&A activities and serves to position IT and its workforce for new opportunities in the longer term.
  4. Manage the talent life cycle and traditional competency models: A fundamental error that leaders sometimes make during M&A, particularly in IT, is focusing so much on the technological complexity of change that some core human capital elements are forgotten. In the short term, IT leaders need to address issues like attrition of key talent. By partnering with HR and business leaders to fund retention incentive packages or bring talented people into the enterprise from shared services centers (e.g. captives) or other labor sources, executives will make sure that there are clear lines of control to manage some of the volatility associated with M&A. In the longer term, there are two key actions that IT leaders should consider as an outcome of M&A integrations and divestitures. First, rethink the talent pipeline to rebrand the organization and attract new talent aligned to the goals of the new organization as well as exercise managed attrition activities to ensure the IT workforce is fit for purpose going forward. Second, refresh traditional competency models around IT strategy and service delivery to focus on digital transformation, cloud opportunities, innovation and robotics as well as aggressively reskill the workforce with investments in training and certification in new technologies and platforms.

Everyone knows that M&A is challenging, intricate work — no more so than in the IT organization of companies going through these types of activities. However, leaders would be remiss in not thinking about how to reshape their IT organizations and operating models in conjunction with a merger or acquisition. In many ways, this opportunity is a box that’s only temporarily opened — once it closes, it can be difficult to go back and exact the type of transformation needs for IT to remain relevant in a world of rapidly advancing and highly distributed technology capabilities in the enterprise.

This article is the second in a series of four that will explore the IT workforce implications and opportunities of M&A activity. Stay tuned for the next post, "Building Digital DNA: Leveraging M&A to Reshape the IT Workforce."

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