CIOs' Guide to Cope With the Acquisition of Their IT Vendors

By CIOReview | Wednesday, August 10, 2016
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Overview

The $67 bn Dell-EMC merger struck the IT world like a whirlwind. Commotions could be felt by everyone associated with these two conglomerates. As the dust settled out, the CIOs started to try wrapping their arms around the largest deal in IT history. They started re-considering their digital strategies, vendor relationships and the very future of IT.

Reaction came in from Andrew Horne, IT practice leader at consultancy CEB Inc. as he agreed that the need for CIOs to work with a diversified and expanding field of small and medium-sized IT vendors has been highlighted by this deal. Horne advised CIOs to be vigilant about developing their pipelines to innovative technology. "This can be done either by checking that their procurement and vendor management capabilities are suited to working with vendors of all sizes, and that there are no barriers to working with small, innovative providers; or they should keep a close eye on whichever of the large providers they work with most to ensure that the pipeline of acquisitions of smaller vendors hasn't slowed down,” added Horne.

Overall this merger had mixed reactions, with Ed Czerwin, a senior systems engineer at a large Switzerland-based medical technology company that is a customer of both vendors noting his concerns about the M&A process. “Chaos will be injected into the normal day-to-day support and sale of products from both sides, and it will either lower the quality of support provided or cause purchases to have long ship times, with more confusion, as new parties are getting involved and ramped up," commented Czerwin. There are concerns to be sure. Customers associated with these two technological giants are scratching their heads as they have no idea of how to slog through the complex legal approval process.

In light of the technologies, like virtualization, cloud and system automation, quickly advancing and sparking dramatic market transformations, established vendors are seeing their dominance erode, and are trying to acquire any fledgling newbies disrupting the market. This has made it imperative for a buyer organization to be ready for a vendor acquisition or failure.

While nothing strikes more fear in the heart of a team immersed in operations technology than the call or email announcing the acquisition of a core vendor, this is a time for you as a CIO to take control. This is a good time to run through a checklist of activities your team can walk through to stay informed and keep a line of communication open with your service provider.

Below outlined are some steps that can help you to cope with the acquisition of your IT Vendors.

IT Vendor Acquisition: A Blessing and Curse

Much uncertainty surrounds when an IT vendor of an organization is acquired by an established vendors. An organization’s process can turn slapdash, and it can take months if not years to accurately assess the fallout from an IT acquisition. But does an IT Vendor acquisition have a positive side as well?

“Things tend to run slower and less efficiently the larger an organization becomes. What we generally see when a company gets bought up is most innovation, in terms of risk-taking, dramatically slows,” comments CJ Metz, Virtualization and backup systems administrator, First American. Metz believes that competition and flexibility are keys in today's marketplace, and providing an environment that is conducive to that is paramount. While there are some viable reasons for companies to consolidate, it is my opinion that the tradeoffs are ultimately not good for the consumer in the long run.

While Metz doesn’t see any profits for the buyer organization, Robert McShinsky, Sr. System Engineer, Microsoft MVP feels that for organizations that prefer working with fewer vendors, acquisitions provide a more extensive product set. “To the customer, the addition of a product to an already familiar vendor portfolio can only speed acceptance and adoption, limiting risk,” adds McShinsky.

Meanwhile, due to the recent rapidity of IT vendor acquisition, Shannon Snowden, Senior Technical Architect, Zerto predicts a future IT world that would be ruled only by a couple of huge companies. But Snowden is confident that innovative companies are still alive and keep on thriving, no matter what! “From a customer's perspective, the more established products get more features, but if you don't need those features or are trying to solve a specific problem, the smaller companies are still there with great products,” adds Snowden.

Thus IT vendor acquisition can work as both a blessing and curse for the buyers. On one hand, it may offer reliability, better customer care services, and better technology; on the other hand, it can exterminate innovation and flexibility that a small IT Vendor may provide!

Steps to take if your IT Vendor is acquired or about to!

If one of your chief IT vendors has been acquired, turbulent times are ahead for your organization. There is a need to act for you as a CIO and lead your organization in this time of crisis. You have to consolidate processes and procedures which can help your organization in covering up this crisis.

Even if the acquisition has not worked out yet, you have to be careful for the worse to happen. A CIO must be pro-active as well such that when the M&A process takes place, the organization doesn’t face that bigger a crisis. Below enlisted are some steps that you might take before and after the M&A process.

Meet regularly with critical vendors

You must be up to date with vendor activities, plans and financial conditions. Product plans and directions must be clear in your head and a finger must be kept on the business pulse of suppliers. It may not be possible to anticipate a specific acquisition, but the possibility of doing so is increased with regular conversations.

Maintain relationships with multiple vendors

Backup plans are needed for any mission-critical deployment. Maintaining contact with one or two competitive suppliers is very important in order to fabricate a backup plan. Abandoning a particular supplier may become necessary at some stage for reasons well beyond the consequences of an acquisition. An existing back up plan can help you in both cases.

Meet the acquired provider

When you get to know that your IT vendor has been acquired you must hold a meeting with the entity. Your key areas to cover in this meeting will be for short term. Any vendor acquisition was preceded by a period of strategic review and planning. Your provider may tell you they do not have a strategy or new business model in place as of yet. Questions that can be asked are:

1. Service Levels - will the current service levels pledged to you through a subscription agreement or contract change in any way within the next 90 days?
2. 
Who are the key contacts for relationship management, customer service (including billing) and technical support?
3. 
Will the currently publicized roadmap for products and services be changed for the forthcoming two quarters?
4. 
Is there business model change planned within two quarters?
5. 
If your products and services integrate with other vendors - will that change within two quarters?
6. 
If you have current customizations in their development pipeline - confirm the timeline for the delivery of those.

These topics will enable you to quickly delve into key areas that can affect your operations.