IT Silos and IT Layer Awareness

Your IT Due Diligence in a Nutshell 

Nut Shell

There are several popular strategies investment bankers use when buying businesses.
• First, buying a business can be a quicker way to expand their customer base.
• The second strategy is to buy the R&D and new products of the new company.
A new strategy for Investment bankers is buying new companies for their Digital IP. Here's why 50% of IT projects fail. Instead of building your own and taking that risk, buy a company that has already successfully built the technology.
I was meeting over coffee this month with my investor friend, and our conversation inspired this article. I was asked, "How do you evaluate technology?" Then I was asked, "Can we inexpensively fix that technology? Kind of like turning lemons into lemonade."

Technology Evolution

Even as a non-technical expert, you would be surprised at how much you've learned about technology in the last thirty years. Let's tap into your intuitive knowledge so that you can expand the scope of your Due Diligence to include technology. Here are two areas where you have some experience and could be your own IT Advisor: IT Communication and system stability.

Technical Communication

Technology is like an iceberg in that you only see a little bit poking above the waters. So, as laymen, we have naturally seen the evolution of communication technology. Here is a history of the progress of communication technologies.

  1. Mainframes – 1000's people using a monitor & keyboard to a single central data source
  2. Personal computers (PC) – Millions individually connected to a small data source
  3. Computer networks – Companywide connection of PC and Mainframe computers
  4. Internet – Billions connected without the distinction of hardware to a central data source
  5. Cloud – Vendors providing a standard Information platform inside private and public internet connections.

Communication Technology allows people and computers to communicate more effectively reduce the cost of sales. In addition, multiple communication technology silos mean an improvement in earnings.

Layers of Information Systems

Company information systems are built in layers. Each type of technology in this list represents a layer. By figuring out how many layers of technology the company has built, you can determine how well the company has invested in technology for the future. When doing your IT Due Diligence, look for company investment in these layers of technology:

  • Network Stability – Measured by 9's of availability. (i.e., 99% vs 99.9% two 9’s vs three 9’s)
  • Automation – Measures the integration of business processes into company technology
  • Information Analysis – Does the system track custom metrics associated with unique industry competitive advantages?
  • Artificial Intelligence (AI) – Is the company using machine learning to manage automation and information Analysis?

Unlike technology layers, communication technology strategies are individually siloed. These silos are not dependent on each other. For example, a company can run mainframes in parallel with personal computers. There is no disadvantage in running one or more communication silos. If anything, there may be a competitive advantage to multiple communication silos.

On the other hand, Information Systems are layered. Each layer is dependent on the layer below. For example, automation, Information analysis, and AI each require network stability. The more layers of technology, the more valuable the company because these layers are difficult to build. If the company has successfully built these layers early, they will also be far ahead of companies when the new layer is essential to the company's competitive advantage.

Even though you aren't a technical expert, looking for investment in these layers of technology allows you some preliminary insights. For example, communication silos indicate companies with a reduced earnings cost, while companies with deep layers of technology indicate long-term advantage.

I have had several conversations with local investors in the area. In this article, I've tried to answer the questions other investors are asking me as they are thinking about their IT Due Diligence. Even for technical experts, building these layers is difficult.

If you are not a technical expert or need some help with your IT Due Diligence, you may want to use two reports we have developed to help you.

  • The Accelerator Report ™
  • The Accelerator Report (Plus) ™

The Accelerator Report ™ (For Business Owners)

Unfortunately, technology deployments have a 50% failure rate. To reduce the risk, we created The Accelerator Report ™. We find that running the report can improve our client's technical deployments success rate by 90%.

The Accelerator Report (Plus) ™

Because technology has become mission-critical to the organization's success, investors have begun asking pre-sale questions about technology as well. That's why we created The Accelerator Report (Plus) ™. The report is designed specifically for the IT Due Diligence process. Helping investors identify communication silos, technology layers, and other opportunities in pre-sale situations.

If you have questions, feel free to contact us for a free, no-obligation consultation.

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