20 Sep The secret sauce in merging tech stacks: plan for people & process before technology
Co-authored with Tamara Fahey, Principal Consultant at Eighty20 and Andrew Lawrence, Strategic Account Director at Eighty20
When two organisations become one, there’s a whole host of boundaries to negotiate. Tech stacks are just one of the assets that can be challenging to harmonise with minimal disruption to data, employees and operations as a whole. But as a resource that just keeps growing in both importance and cost to the modern organisation, it definitely pays to put more planning into getting technology right.
After the initial shockwave of COVID-19 which stopped the global economy in its tracks and sent equity markets into freefall, the pandemic has turned into boom time for mergers and acquisitions. In their latest report on global M&A activity, Bain & Company recorded a 30% lift in deals during the second half of 2020. 2021 has seen this rise continue, spurred on by businesses motivated to scale up and digitise to protect against the unexpected.
Access to capital that’s rarely been cheaper has been another factor fuelling this M&A spree. Here in Australia, the deal-making rebound is looking particularly strong, following a short drought in 2020 as everything ground to a halt for the first COVID wave. The Australian Financial Review calls these current conditions of affordable capital, and post-COVID strategy shifts, “a perfect storm for deal making” expected to lead to our biggest year for M&A since the post-GFC period.
Deal makers say the sheer level of activity still in the pipeline suggests the second half of the year will be even stronger, putting 2021 on track to set a historic high and eclipse the $US134 billion of deals announced in 2011.
Australian Financial Review, 8 June 2021
Start with people and culture
This degree of activity is all the more remarkable given the challenges of brokering multi-million or billion dollar transactions during the time of COVID. The Bain report also speaks to the challenges deal makers have encountered as they go about valuations and due diligence. As with the many other hurdles our new world order has delivered, technology presents an effective solution to much of the detail in the process.
Rapid digitalization has underpinned the M&A recovery by enabling M&A processes to be conducted virtually, even as the world was in lockdown. While digital collaboration tools and ways of working replaced many of the traditional methods, M&A practitioners also ran into the limitations of technology in the softer aspects of dealmaking, such as relationship building or assessing cultural fit.
Bain & Company, Global M&A Report 2021
However, parties on both sides have also found technology comes up short for critical parts of the M&A journey. Building bridges between what used to be separate entities takes a human element that has long been an issue when two companies join. And in our experience as consultants, it’s something that couldn’t be more important when exploring both the strategy and practicalities of consolidating tech stacks.
Increasingly, technology is one of the most critical drivers of competitive advantage, resilience and ultimately, profitability and success. But for the time being at least, technology doesn’t run organisations. People do. And this is why any strategy that seeks to get the best from technology must centre on the people and that complex collision of unwritten rules and assumptions that influence their behaviour. It’s called workplace culture and addressing a tech merger without proper consideration of both the roles people play and the culture they co-create is a recipe for disaster and an expensive one at that.
There’s a good reason why the role of enterprise architect now exists. It follows years of technology transformations being led by an IT agenda and largely ignoring the reality of how the broader organisation operates. Looking at the roles that people and culture play day-to-day must come first, no matter how challenging it might be to reconcile this with the functions we’d like to see technology performing in their hands.
A recipe for merger success
When companies consolidate their technology, whether one operates on G-Suite and the other on Microsoft is almost – but not quite – irrelevant. Of course it makes no sense from a cost or consistency perspective for two parts of a newly merged organisation to use different technologies and tools to perform their work. But choosing one type of infrastructure over another and then migrating data and identities is only a small part of the picture when it comes to getting everyone pulling together and realising value from a consolidated tech stack.
Even if two organisations were to use the same underlying IT infrastructure, you could still have a very different collection of use cases across these entities. Even between business units, we can often see huge differences in how employees use Teams, OneDrive and Sharepoint. And culture will have a lot to do with why these differences exist. If one company is more sales driven and the other prides itself on strengths in research and development, for example, it could well be a match made in heaven for combining complementary strengths to create a force to be reckoned with in their industry. But it does present a challenge as to how the new team and culture will move forward with their technology tools and practices. Culture dictates how they’re going to use their technology so there’s no point trying to solve for the technical complexity without first addressing a cultural showdown that’s looming and will likely stall or derail technology transformation efforts.
As with so many business challenges, the solution centers on people and strategy. This means that taking the next step might require you to lean on more than just the people who helped you get where you are — and to recognize that the systems strategy that worked in the old organization might not be a fit for the new one.
Forbes, How To Integrate Teams And Tech Stacks After Mergers And Acquisitions, 13 August 2019
Avoiding the hangover
As a consulting partner on projects like these, we’d be remiss in setting out to rationalise a tech stack without taking each company’s respective cultures and operating models into account. This might seem an obvious way to go about developing a technology strategy for a merger, but we’ve run out of fingers for the times we’ve come in to retrofit a solution after senior leadership have made decisions based on their tech stack alone.
We have a hunch that the speed with which mergers are now happening and the high expectations of investors looking for quick wins is going to lead to even more situations where tech rationalisation is fast-tracked without taking into account the many other hurdles along the journey to bringing two independent environments together. “We have seen the same patterns and outcomes around M&A across many industries, including public sector (Machinery of Government) as well as tertiary education,” says Andre Herbst, Account Director at Eighty20. “When speed and cost are driving this process forward for organisations like these that have been battling with budget cuts for years, something as fundamental as visibility of all products and services now offered by the new entity, for example, may not be available. This is just one of many inputs essential for informing technology choices and planning for the proper support needed for successful adoption across the board.”
77% of executives state that their technology architecture is becoming very critical or critical to the overall success of their organization.
Accenture, How CIOs can modernize tech stacks in divestitures, 14 July 2021
This narrative of failing to measure twice and cut once is something we’ve seen across all sectors as well as the fallout that results. When an ill-conceived merger program hits the wall long after a consulting partner has taken their fee and left the building, it’s the people in an organisation and IT leaders and teams who are left struggling to genuinely reconcile their differences and move forward.
In our approach at Eighty20, we act as an arbiter and the voice of experience for an organisation that’s highly occupied with change and feeling pressure to deliver. It’s our job to tackle their technology challenges as part of a broad and highly effective change program, informed by the findings of a fast and thorough discovery phase to build a strong rationale for execution. We also articulate this approach carefully in the form of a roadmap, giving senior leadership a view of how their program will deliver value and at what cost. This gives IT leaders some of the essentials they need for a successful transformation – executive sponsorship, breathing space and acknowledgement of complexity in this new cultural landscape they’re dealing with.