Top 7 checks – IT and Software Due Diligence in Mergers and Acquisitions
Over £1.7 billion is wasted every year in the UK on unused software and associated services. This is primarily due to organisations paying for licenses they are not using. If you are involved in a merger or acquisition, how do you conduct your IT due diligence to ensure you are not committing yourself to wasted expenditure or exposure to IT commitments that you will regret?
Here are 7 key checks that you can make to ensure that you are not leaving yourself exposed:
1. How much licensed software is actually used?
You need to compare the amount of software licensed with what is actually used. Most organisations just check what they deploy against what they license to ensure that they are compliant with licensing rules, but they are often purchasing and deploying more licenses than is actually needed.
2. Does what you are paying match what you were contracted for?
You should compare the amounts being invoiced with what was in the contracts as there can sometimes be discrepancies. It is possible to claim credits for overpayments if the vendor is found to be at fault.
3. Are there excess assets that are worth money?
Mergers often result in duplicate resources such as software licenses which can be worth money. If you can identify the software and other resources that are no longer used, you could sell these via brokers and recover money for these spare assets.
4. Are legacy systems necessary?
Organisations often hold onto legacy systems even though they are expensive to run and maintain. If you can identify who actually uses the legacy software you can find out if there are ways to remove these systems.
5. Do you know if new systems are being used?
A merger may mean that new software and services are being deployed so you should know how much of the intended audience is actually using them. The effectiveness of the merger will be jeopardised if new services are implemented but not used.
6. Do you have control over virtualised software and SaaS?
Virtualised and SaaS services are often easier to set up than “fat client” software products so the subscriber numbers can grow quickly, but you should ensure that all of the instances are being used and you have a process for closing down unused software subscriptions. There can be high levels of non-usage in these environments.
7. Are contracts and supplier terms comparable?
You may find that the same supplier has different contracts and terms in place with the two organisations that are merging. You will need to compare the contracts and ensure that you continue with the best terms, and ensure that future contracts are based on what is actually used rather than the previous quantities.
Putting two organisations together to create a new one will create new IT requirements and reveal duplicate technologies. Monitor the usage of software and services to identify wasted resources and eradicate these as soon as possible to deliver efficiencies. Support this with contracts that reflect your new usage needs rather than what was contracted when the two organisations were independent, otherwise you will not deliver the full efficiency opportunities from the merger.