Develop an Availability and Capacity Management Plan

Manage capacity to increase uptime and reduce costs.

ANALYST PERSPECTIVE

The cloud changes the capacity manager’s job, but it doesn’t eliminate it.

"Nobody doubts the cloud’s transformative power. But will its ascent render “capacity manager” an archaic term to be carved into the walls of datacenters everywhere for future archaeologists to puzzle over? No. While it is true that the cloud has fundamentally changed how capacity managers do their jobs , the process is more important than ever. Managing capacity – and, by extent, availability – means minimizing costs while maximizing uptime. The cloud era is the era of unlimited capacity – and of infinite potential costs. If you put the infinity symbol on a purchase order… well, it’s probably not a good idea. Manage demand. Manage your capacity. Manage your availability. And, most importantly, keep your stakeholders happy. You won’t regret it."

Jeremy Roberts,

Consulting Analyst, Infrastructure Practice

Info-Tech Research Group

Availability and capacity management transcend IT

This Research Is Designed For:

✓ CIOs who want to increase uptime and reduce costs

✓ Infrastructure managers who want to deliver increased value to the business

✓ Enterprise architects who want to ensure stability of core IT services

✓ Dedicated capacity managers

This Research Will Help You:

✓ Develop a list of core services

✓ Establish visibility into your system

✓ Solicit business needs

✓ Project future demand

✓ Set SLAs

✓ Increase uptime

✓ Optimize spend

This Research Will Also Assist:

✓ Project managers

✓ Service desk staff

This Research Will Help Them:

✓ Plan IT projects

✓ Better manage availability incidents caused by lack of capacity

Executive summary

Situation

• IT infrastructure leaders are responsible for ensuring that the business has access to the technology needed to keep the organization humming along. This requires managing capacity and availability.
• Dependencies go undocumented. Services are provided on an ad hoc basis, and capacity/availability are managed reactively.

Complication

• Organizations are overprovisioning an average of 59% for compute, and 48% for storage. This is expensive. With budget pressure mounting, the cost of this approach can’t be ignored.
• Lead time to respond to demand is long. Half of organizations have experienced capacity-related downtime, and almost 60% wait 3+ months for additional capacity. (451 Research, 3)

Resolution

• Conduct a business impact analysis to determine which of your services are most critical, and require active capacity management that will reap more in benefits than it produces in costs.
• Establish visibility into your system. You can’t track what you can’t see, and you can’t see when you don’t have proper monitoring tools in place.
• Develop an understanding of business needs. Use a combination of historical trend analyses and consultation with line of business and project managers to separate wants from needs. Overprovisioning used to be necessary, but is no longer required.
• Project future needs in line with your hardware lifecycle. Never suffer availability issues as a result of a lack of capacity again.

Info-Tech Insight

1. Components are critical. The business doesn’t care about components. You, however, are not so lucky…
2. Ask what the business is working on, not what they need. If you ask them what they need, they’ll tell you – and it won’t be cheap. Find out what they’re going to do, and use your expertise to service those needs.
3. Cloud shmoud. The role of the capacity manager is changing with the cloud, but capacity management is as important as ever.

Save money and drive efficiency with an effective availability and capacity management plan

Overprovisioning happens because of the old style of infrastructure provisioning (hardware refresh cycles) and because capacity managers don’t know how much they need (either as a result of inaccurate or nonexistent information).

According to 451 Research, 59% of enterprises have had to wait 3+ months for new capacity. It is little wonder, then, that so many opt to overprovision. Capacity management is about ensuring that IT services are available, and with lead times like that, overprovisioning can be more attractive than the alternative. Fortunately there is hope. An effective availability and capacity management plan can help you:

• Identify your gold systems
• Establish visibility into them
• Project your future capacity needs

Balancing overprovisioning and spending is the capacity manager’s struggle.

Availability and capacity management go together like boots and feet

Availability and capacity are not the same, but they are related and can be effectively managed together as part of a single process.

If an IT department is unable to meet demand due to insufficient capacity, users will experience downtime or a degradation in service. To be clear, capacity is not the only factor in availability – reliability, serviceability, etc. are significant as well. But no organization can effectively manage availability without paying sufficient attention to capacity.

"Availability Management is concerned with the design, implementation, measurement and management of IT services to ensure that the stated business requirements for availability are consistently met."

– OGC, Best Practice for Service Delivery, 12

"Capacity management aims to balance supply and demand [of IT storage and computing services] cost-effectively…"

– OGC, Business Perspective, 90

Integrate the three levels of capacity management

Successful capacity management involves a holistic approach that incorporates all three levels.

The C-suite cares about business capacity as part of the organization’s strategic planning. Service leads care about their assigned services. IT infrastructure is concerned with components, but not for their own sake. Components mean services that are ultimately designed to facilitate business.

A healthcare organization practiced poor capacity management and suffered availability issues as a result

CASE STUDY

Industry: Healthcare

Source: Interview

New functionalities require new infrastructure

There was a project to implement an elastic search feature. This had to correlate all the organization’s member data from an Oracle data source and their own data warehouse, and pool them all into an elastic search index so that it could be used by the provider portal search function. In estimating the amount of space needed, the infrastructure team assumed that all the data would be shared in a single place. They didn’t account for the architecture of elastic search in which indexes are shared across multiple nodes and shards are often split up separately.

Beware underestimating demand and hardware sourcing lead times

As a result, they vastly underestimated the amount of space that was needed and ended up short by a terabyte. The infrastructure team frantically sourced more hardware, but the rush hardware order arrived physically damaged and had to be returned to the vendor.

Sufficient budget won’t ensure success without capacity planning

The project’s budget had been more than sufficient to pay for the extra necessary capacity, but because a lack of understanding of the infrastructure impact resulted in improper forecasting, the project ended up stuck in a standstill.

Manage availability and keep your stakeholders happy

If you run out of capacity, you will inevitably encounter availability issues like downtime and performance degradation . End users do not like downtime, and neither do their managers.

There are three variables that are monitored, measured, and analyzed as part of availability management more generally (Valentic).

1. Uptime:

The availability of a system is the percentage of time the system is “up,” (and not degraded) which can be calculated using the following formula: uptime/(uptime + downtime) x 100%. The more components there are in a system, the lower the availability, as a rule.

1. Reliability:

The length of time a component/service can go before there is an outage that brings it down, typically measured in hours.

1. Maintainability:

The amount of time it takes for a component/service to be restored in the event of an outage, also typically measured in hours.

Enter the cloud: changes in the capacity manager role

There can be no doubt – the rise of the public cloud has fundamentally changed the nature of capacity management.

Vendors will sell you the cloud as a solution to your capacity/availability problems

Traditionally, increases in capacity have come in bursts as a reaction to availability issues. This model inevitably results in overprovisioning, driving up costs. Access to the cloud changes the equation. On-demand capacity means that, ideally, nobody should pay for unused capacity.

Reality check: even in the cloud era, capacity management is necessary

You will likely find vendors to nurture the growth of a gap between your expectations and reality. That can be damaging.

The cloud reality does not look like the cloud ideal. Even with the ostensibly elastic cloud, vendors like the consistency that longer-term contracts offer. Enter reserved instances: in exchange for lower hourly rates, vendors offer the option to pay a fee for a reserved instance. Usage beyond the reserved will be billed at a higher hourly rate. In order to determine where that line should be drawn, you should engage in detailed capacity planning. Unfortunately, even when done right, this process will result in some overprovisioning, though it does provide convenience from an accounting perspective. The key is to use spot instances where demand is exceptional and bounded. Example: A university registration server that experiences exceptional demand at the start of term but at no other time.

Use best practices to optimize your cloud resources

Even in the era of elasticity, capacity planning is crucial. Spot instances – the spikes in the graph above – are more expensive, but if your capacity needs vary substantially, reserving instances for all of the space you need can cost even more money. Efficiently planning capacity will help you draw this line.

Evaluate business impact; not all systems are created equal

Limited resources are a reality. Detailed visibility into every single system is often not feasible and could be too much information.

Simple and effective. Sometimes a simple display can convey all of the information necessary to manage critical systems. In cars it is important to know your speed, how much fuel is in the tank, and whether or not you need to change your oil/check your engine.

Where to begin?! Specialized information is sometimes necessary, but it can be difficult to navigate.

Take advantage of a business impact analysis to define and understand your critical services

Ideally, downtime would be minimal. In reality, though, downtime is a part of IT life. It is important to have realistic expectations about its nature and likelihood.

Info-Tech Insight

According to end users, every system is critical and downtime is intolerable. Of course, once they see how much totally eliminating downtime can cost, they might change their tune. It is important to have this discussion to separate the critical from the less critical – but still important – services.

Establish visibility into critical systems

You may have seen “If you can’t measure it, you can’t manage it” or a variation thereof floating around the internet. This adage is consumable and makes sense…doesn’t it?

"It is wrong to suppose that if you can’t measure it, you can’t manage it – a costly myth."

– W. Edwards Deming, statistician and management consultant, author of The New Economics

While it is true that total monitoring is not absolutely necessary for management, when it comes to availability and capacity – objectively quantifiable service characteristics – a monitoring strategy is unavoidable. Capturing fluctuations in demand, and adjusting for those fluctuations, is among the most important functions of a capacity manager, even if hovering over employees with a stopwatch is poor management.

Solicit needs from line of business managers

Unless you head the world’s most involved IT department (kudos if you do) you’re going to have to determine your needs from the business.

Demand: manage or be managed

You might think you can get away with uncritically accepting your users’ demands, but this is not best practice. If you provide it, they will use it.

The company meeting

“I don’t need this much RAM,” the application developer said, implausibly. Titters wafted above the assembled crowd as her IT colleagues muttered their surprise. Heads shook, eyes widened. In fact, as she sat pondering her utterance, the developer wasn’t so sure she believed it herself. Noticing her consternation, the infrastructure manager cut in and offered the RAM anyway, forestalling the inevitable crisis that occurs when seismic internal shifts rock fragile self-conceptions. Until next time, he thought.

"Work expands as to fill the resources available for its completion…"

– C. Northcote Parkinson, quoted in Klimek et al.

Combine historical data with the needs you’ve solicited to holistically project your future needs

Predicting the future is difficult, but when it comes to capacity management, foresight is necessary.

Critical inputs

In order to project your future needs, the following inputs are necessary.

1. Usage trends: While it is true that past performance is no indication of future demand, trends are still a good way to validate requests from the business.
2. Line of business requests: An understanding of the projects the business has in the pipes is important for projecting future demand.
3. Institutional knowledge: Read between the lines. As experts on information technology, the IT department is well-equipped to translate needs into requirements.

Follow best practice guidelines to maximize the efficiency of your availability and capacity management process

Understand how the key frameworks relate and interact

BA104: Manage availability and capacity

• Current state assessment
• Forecasting based on business requirements
• Risk assessment of planning and implementation of requirements

Availability management

• Determine business requirements
• Match requirements to capabilities
• Address any mismatch between requirements and capabilities in a cost-effective manner

Capacity management

• Monitoring services and components
• Tuning for efficiency
• Forecasting future requirements
• Influencing demand
• Producing a capacity plan

Availability and capacity management

• Conduct a business impact analysis
• Establish visibility into critical systems
• Solicit and incorporate business needs
• Identify and mitigate risks

Disaster recovery and business continuity planning are forms of availability management

The scope of this project is managing day-to-day availability, largely but not exclusively, in the context of capacity. For additional important information on availability, see the following Info-Tech projects.

• Develop a Business Continuity Plan

If your focus is on ensuring process continuity in the event of a disaster.

• Establish a Program to Enable Effective Performance Monitoring

If your focus is on flow mapping and transaction monitoring as part of a plan to engage APM vendors.

• Create a Right-Sized Disaster Recovery Plan

If your focus is on hardening your IT systems against major events.

Info-Tech’s approach to availability and capacity management is stakeholder-centered and cloud ready

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

“Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.”

Guided Implementation

“Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track.”

Workshop

“We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place.”

Consulting

“Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project.”

Diagnostics and consistent frameworks used throughout all four options

Availability & capacity management – project overview

Workshop overview

Contact your account representative or email Workshops@InfoTech.com for more information.

PHASE 1

Conduct a Business Impact Analysis

Step 1.1: Conduct a business impact analysis

This step will walk you through the following activities:

• Record applications and dependencies in the Business Impact Analysis Tool.
• Define a scale to estimate the impact of various applications’ downtime.
• Estimate the impact of applications’ downtime.

This involves the following participants:

• Capacity manager
• Infrastructure team

Outcomes of this step

• Estimated impact of downtime for various applications

Execute a business impact analysis (BIA) as part of a broader availability plan

1.1a Business Impact Analysis Tool

Business impact analyses are an invaluable part of a broader IT strategy. Conducting a BIA benefits a variety of processes, including disaster recovery, business continuity, and availability and capacity management

Info-Tech Insight

Engaging in detailed capacity planning for an insignificant service draws time and resources away from more critical capacity planning exercises. Time spent tracking and planning use of the ancient fax machine in the basement is time you’ll never get back.

Control the scope of your availability and capacity management planning project with a business impact analysis

Don’t avoid conducting a BIA because of a perception that it’s too onerous or not necessary. If properly managed, as described in this blueprint, the BIA does not need to be onerous and the benefits are tangible.

A BIA enables you to identify appropriate spend levels, continue to drive executive support, and prioritize disaster recovery planning for a more successful outcome. For example, an Info-Tech survey found that a BIA has a significant impact on setting appropriate recovery time objectives (RTOs) and appropriate spending.

Terms

No BIA: lack of a BIA, or a BIA bases solely on the perceived importance of IT services.

BIA: based on a detailed evaluation or estimated dollar impact of downtime.

Source: Info-Tech Research Group; N=70

Select the services you wish to evaluate with the Business Impact Analysis Tool

1.1b 1 hour

In large organizations especially, collating an exhaustive list of applications and services is going to be onerous. For the purposes of this project, a subset should suffice.

Instructions

1. Gather a diverse group of IT staff and end users in a room with a whiteboard.
2. Solicit feedback from the group. Questions to ask:

• What services do you regularly use? What do you see others using? (End users)
• Which service inspires the greatest number of service calls? (IT)
• What services are you most excited about? (Management)
• What services are the most critical for business operations? (Everybody)

Input

• Applications/services

Output

• Candidate applications for the business impact analysis

Materials

• Whiteboard
• Markers

Participants

• Infrastructure manager
• Enterprise architect
• Application owners
• End users

Info-Tech Insight

Include a variety of services in your analysis. While it might be tempting to jump ahead and preselect important applications, don’t. The process is inherently valuable, and besides, it might surprise you.

Record the applications and dependencies in the BIA tool

1.1c Use tab 1 of the Business Impact Analysis Tool

1. In the Application/System column, list the applications identified for this pilot as well as the Core Infrastructure category. Also indicate the Impact on the Business and Business Owner.
2. List the dependencies for each application in the appropriate columns:

• Hosted On-Premises (In-House) – If the physical equipment is in a facility you own, record it here, even if it is managed by a vendor.
• Hosted by a Co-Lo/MSP – List any dependencies hosted by a co-lo/MSP vendor.
• Cloud (includes "as a Service”) – List any dependencies hosted by a cloud vendor.

Note: If there are no dependencies for a particular category, leave it blank.

Example

ID is optional. It is a sequential number by default.

In-House, Co-Lo/MSP, and Cloud dependencies; leave blank if not applicable.

Add notes as applicable – e.g. critical support services.

Define a scoring scale to estimate different levels of impact

1.1d Use tab 2 of the Business Impact Analysis Tool

Modify the Business Impact Scales headings and Overall Criticality Rating terminology to suit your organization. For example, if you don’t have business partners, use that column to measure a different goodwill impact or just ignore that column in this tool (i.e. leave it blank). Estimate the different levels of potential impact (where four is the highest impact and zero is no impact) and record these in the Business Impact Scales columns.

Estimate the impact of downtime for each application

1.1e Use tab 3 of the Business Impact Analysis Tool

In the BIA tab columns for Direct Costs of Downtime, Impact on Goodwill, and Additional Criticality Factors, use the drop-down menu to assign a score of zero to four based on levels of impact defined in the Scoring Criteria tab. For example, if an organization’s ERP is down, and that affects call center sales operations (e.g. ability to access customer records and process orders), the impact might be as described below:

• Loss of Revenue might score a two or three depending on the proportion of overall sales lost due to the downtime.
• The Impact on Customers might be a one or two depending on the extent that existing customers might be using the call center to purchase new products or services, and are frustrated by the inability to process orders.
• The Legal/Regulatory Compliance and Health or Safety Risk might be a zero.

On the other hand, if payroll processing is down, this may not impact revenue, but it certainly impacts internal goodwill and productivity.

Rank service criticality: gold, silver, and bronze

Gold

Mission critical services. An outage is catastrophic in terms of cost or public image/goodwill. Example: trading software at a financial institution.

Silver

Important to daily operations, but not mission critical. Example: email services at any large organization.

Bronze

Loss of these services is an inconvenience more than anything, though they do serve a purpose and will be missed if they are never brought back online. Example: ancient fax machines.

Info-Tech Best Practice

Info-Tech recommends gold, silver, and bronze because of this typology’s near universal recognition. If you would prefer a particular designation (it might help with internal comprehension), don’t hesitate to use that one instead.

Use the results of the business impact analysis to sort systems based on their criticality

1.1f 1 hour

Every organization has its own rules about how to categorize service importance. For some (consumer-facing businesses, perhaps) reputational damage may trump immediate costs.

Instructions

1. Gather a group of key stakeholders and project the completed Business Impact Analysis Tool onto a screen for them.
2. Share the definitions of gold, silver, and bronze services with them (if they are not familiar), and begin sorting the services by category,

• How long would it take to notice if a particular service went out?
• How important are the non-quantifiable damages that could come with an outage?

Input

• Results of the business impact analysis exercise

Output

• List of gold, silver, and bronze systems

Materials

• Projector
• Business Impact Analysis Tool
• Capacity Plan Template

Participants

• Infrastructure manager
• Enterprise architect

Leverage the rest of the BIA tool as part of your disaster recovery planning

Disaster recovery planning is a critical activity, and while it is a sort of availability management, it is beyond this project’s scope. You can complete the business impact analysis (including RTOs and RPOs) for the complete disaster recovery package.

See Info-Tech’s Create a Right-Sized Disaster Recovery Plan blueprint for instructions on how to complete your business impact analysis.

Step 1.2: Assign criticality ratings to services

This step will walk you through the following activities:

• Create a list of dependencies for your most important applications.
• Identify important sub-components.
• Use best practices to develop and negotiate SLAs.

This involves the following participants:

• Capacity manager
• Infrastructure team

Outcomes of this step

• List of dependencies of most important applications
• List of important sub-components
• SLAs based on best practices

Determine the base unit of the capacity you’re looking to purchase

Not every IT organization should approach capacity the same way. Needs scale, and larger organizations will inevitably deal in larger quantities.

"Cloud capacity management is not exactly the same as the ITIL version because ITIL has a focus on the component level. I actually don’t do that, because if I did I’d go crazy. There’s too many components in a cloud environment."

– Richie Mendoza, IT Consultant, SMITS Inc.

Consider the relationship between component capacity and service capacity

End users’ thoughts about IT are based on what they see. They are, in other words, concerned with service availability: does the organization have the ability to provide access to needed services?

Service

• Email
• CRM
• ERP

Component

• Switch
• SMTP server
• Archive database
• Storage

"You don’t ask the CEO or the guy in charge ‘What kind of response time is your requirement?’ He doesn’t really care. He just wants to make sure that all his customers are happy."

– Todd Evans, Capacity and Performance Management SME, IBM.

One telco solved its availability issues by addressing component capacity issues

CASE STUDY

Industry: Telecommunications

Source: Interview

Coffee and Wi-Fi – a match made in heaven

In tens of thousands of coffee shops around the world, patrons make ample use of complimentary Wi-Fi. Wi-Fi is an important part of customers’ coffee shop experience, whether they’re online to check their email, do a YouTube, or update their Googles. So when one telco that provided Wi-Fi access for thousands of coffee shops started encountering availability issues, the situation was serious.

Wi-Fi, whack-a-mole, and web woes

The team responsible for resolving the issue took an ad hoc approach to resolving complaints, fixing issues as they came up instead of taking a systematic approach.

Resolution

Looking at the network as a whole, the capacity manager took a proactive approach by using data to identify and rank the worst service areas, and then directing the team responsible to fix those areas in order of the worst first, then the next worst, and so on. Soon the availability of Wi-Fi service was restored across the network.

Create a list of dependencies for your most important applications

1.2a 1.5 hours

Instructions

1. Work your way down the list of services outlined in step 1, starting with your gold systems. During the first iteration of this exercise select only 3-5 of your most important systems.
2. Write the name of each application on a sticky note or at the top of a whiteboard (leaving ample space below for dependency mapping).
3. In the first tier below the application, include the specific services that the general service provides.

• This will vary based on the service in question, but an example for email is sending, retrieving, retrieving online, etc.

Input

• List of important applications

Output

• List of critical dependencies

Materials

• Whiteboard
• Markers
• Sticky notes

Participants

• Infrastructure manager
• Enterprise architect

Info-Tech Insight

Dependency mapping can be difficult. Make sure you don’t waste effort creating detailed dependency maps for relatively unimportant services.

Dependency mapping can be difficult. Make sure you don’t waste effort creating detailed dependency maps for relatively unimportant services.

Ride sharing cannot work, at least not at maximum effectiveness, without these constituent components. When one or more of these components are absent or degraded, the service will become unavailable. This example illustrates some challenges of capacity management; some of these components are necessary, but beyond the ride-sharing company’s control.

Leverage a sample dependency tree for a common service

Info-Tech Best Practice

Email is an example here not because it is necessarily a “gold system,” but because it is common across industries. This is a useful exercise for any service, but it can be quite onerous, so it should be conducted on the most important systems first.

Separate the wheat from the chaff; identify important sub-components and separate them from unimportant ones

1.2b 1.5 hours

Use the bottom layer of the pyramid drawn in step 1.2a for a list of important sub-components.

Instructions

1. Record a list of the gold services identified in the previous activity. Leave space next to each service for sub-components.
2. Go through each relevant sub-component. Highlight those that are critical and could reasonably be expected to cause problems.

• Has this sub-component caused a problem in the past?
• Is this sub-component a bottleneck?
• What could cause this component to fail? Is it such an occurrence feasible?

Input

• List of important applications

Output

• List of critical dependencies

Materials

• Whiteboard
• Markers

Participants

• Infrastructure manager
• Enterprise architect

Understand availability commitments with SLAs

With the rise of SaaS, cloud computing, and managed services, critical services and their components are increasingly external to IT.

• IT’s lack of access to the internal working of services does not let them off the hook for performance issues (as much as that might be the dream).
• Vendor management is availability management. Use the dependency map drawn earlier in this phase to highlight the components of critical services that rely on capacity that cannot be managed internally.
• For each of these services ensure that an appropriate SLA is in place. When acquiring new services, ensure that the vendor SLA meets business requirements.

In terms of service provision, capacity management is a form of availability management. Not all availability issues are capacity issues, but the inverse is true.

Info-Tech Insight

Capacity issues will always cause availability issues, but availability issues are not inherently capacity issues. Availability problems can stem from outages unrelated to capacity (e.g. power or vendor outages).

Use best practices to develop and negotiate SLAs

1.2c 20 minutes per service

When signing contracts with vendors, you will be presented with an SLA. Ensure that it meets your requirements.

1. Use the business impact analysis conducted in this project’s first step to determine your requirements. How much downtime can you tolerate for your critical services?
2. Once you have been presented with an SLA, be sure to scour it for tricks. Remember, just because a vendor offers “five nines” of availability doesn’t mean that you’ll actually get that much uptime. It could be that the vendor is comfortable eating the cost of downtime or that the contract includes provisions for planned maintenance. Whether or not the vendor anticipated your outage does little to mitigate the damage an outage can cause to your business, so be careful of these provisions.
3. Ensure that the person ultimately responsible for the SLA (the approver) understands the limitations of the agreement and the implications for availability.

Input

• List of external component dependencies

Output

• SLA requirements

Materials

• Whiteboard
• Markers

Participants

• Infrastructure manager
• Enterprise architect

Info-Tech Insight

Vendors are sometimes willing to eat the cost of violating SLAs if they think it will get them a contract. Be careful with negotiation. Just because the vendor says they can do something doesn’t make it true.

Negotiate internal SLAs using Info-Tech’s rigorous process

Talking past each other can drive misalignment between IT and the business, inconveniencing all involved. Quantify your needs through an internal SLA as part of a comprehensive availability management plan.

See Info-Tech’s Improve IT-Business Alignment Through an Internal SLA blueprint for instructions on why you should develop internal SLAs and the potential benefits they bring.

If you want additional support, have our analysts guide you through this phase as part of an Info-Tech workshop.

Book a workshop with our Info-Tech analysts:

• To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-Tech analyst team.
• Info-Tech analysts will join you and your team onsite at your location or welcome you to Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.
• Contact your account manager (www.infotech.com/account), or email Workshops@InfoTech.com for more information.

The following are sample activities that will be conducted by Info-Tech analysts with your team:

1.2

Create a list of dependencies for your most important applications

Using the results of the business impact analysis, the analyst will guide workshop participants through a dependency mapping exercise that will eventually populate the Capacity Plan Template.

Phase 1 Guided Implementation

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of 2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

PHASE 2

Establish Visibility Into Core Systems

Step 2.1: Define your monitoring strategy

This step will walk you through the following activities:

• Determine the indicators you should be tracking for each sub-component.

This involves the following participants:

• Capacity manager
• Infrastructure team

Outcomes of this step

• List of indicators to track for each sub-component

Data has its significance—but also its limitations

The rise of big data can be a boon for capacity managers, but be warned: not all data is created equal. Bad data can lead to bad decisions – and unemployed capacity managers.

Your findings are only as good as your data. Remember: garbage in, garbage out. There are three characteristics of good data:*

1. Accuracy: is the data exact and correct? More detail and confidence is better.
2. Reliability: is the data consistent? In other words, if you run the same test twice will you get the same results?
3. Validity: is the information gleaned believable and relevant?

*National College of Teaching & Leadership, “Reliability and Validity”

"Data is king. Good data is absolutely essential to [the capacity manager] role."

– Adrian Blant, Independent Capacity Consultant, IT Capability Solutions

Info-Tech Best Practice

Every organization’s data needs are different; your data needs are going to be dictated by your services, delivery model, and business requirements. Make sure you don’t confuse volume with quality, even if others in your organization make that mistake.

Take advantage of technology to establish visibility into your systems

Managing your availability and capacity involves important decisions about what to monitor and how thresholds should be set.

• Use the list of critical applications developed through the business impact analysis and the list of components identified in the dependency mapping exercise to produce a plan for effectively monitoring component availability and capacity.
• The nature of IT service provision – the multitude of vendors providing hardware and services necessary for even simple IT services to work effectively – means that it is unlikely that capacity management will be visible through a single pane of glass. In other words, “email” and “CRM” don’t have a defined capacity. It always depends.
• Establishing visibility into systems involves identifying what needs to be tracked for each component.

Too much monitoring can be as bad as the inverse

In 2013, a security breach at US retailer Target compromised more than 70 million customers’ data. The company received an alert, but it was thought to be a false positive because the monitoring system produced so many false and redundant alerts. As a result of the daily deluge, staff did not respond to the breach in time.

Info-Tech Insight

Don’t confuse monitoring with management. While establishing visibility is a crucial step, it is only part of the battle. Move on to this project’s next phase to explore opportunities to improve your capacity/availability management process.

Determine the indicators you should be tracking for each sub-component

2.1a Tab 3 of the Capacity Snapshot Tool

It is nearly impossible to overstate the importance of data to the process of availability and capacity management. But the wrong data will do you no good.

Instructions

1. Open the Capacity Snapshot Tool to tab 2. The tool should have been populated in step 1.2 as part of the component mapping exercise.
2. For each service, determine which metric(s) would most accurately tell the component’s story. Consider the following questions when completing this activity (you may end up with more than one metric):

• How would the component’s capacity be measured (storage space, RAM, bandwidth, vCPUs)?
• Is the metric in question actionable?

Info-Tech Insight

Bottlenecks are bad. Use the Capacity Snapshot Tool (or another tool like it) to ensure that when the capacity manager leaves (on vacation, to another role, for good) the knowledge that they have accumulated does not leave as well.

Understand the limitations of this approach

Although we’ve striven to make it as easy as possible, this process will inevitably be cumbersome for organizations with a complicated set of software, hardware, and cloud services.

Tracking every single component in significant detail will produce a lot of noise for each bit of signal. The approach outlined here addresses that concern in two ways:

• A focus on gold services
• A focus on sub-components that have a reasonable likelihood of being problematic in the future.

Despite this effort, however, managing capacity at the component level is a daunting task. Ultimately, tools provided by vendors like SolarWinds and AppDynamics will fill in some of the gaps. Nevertheless, an understanding of the conceptual framework underlying availability and capacity management is valuable.

Step 2.2: Implement your monitoring tool/aggregator

This step will walk you through the following activities:

• Clarify visibility.
• Determine whether or not you have sufficiently granular visibility.
• Develop strategies to .any visibility issues.

This involves the following participants:

• Capacity manager
• Infrastructure team
• Applications personnel

Outcomes of this step

• Method for measuring and monitoring critical sub-components

Companies struggle with performance monitoring because 95% of IT shops don’t have full visibility into their environments

CASE STUDY

Industry: Financial Services

Source: AppDynamics

Challenge

• Users are quick to provide feedback when there is downtime or application performance degradation.
• The challenge for IT teams is that while they can feel the pain, they don’t have visibility into the production environment and thus cannot identify where the pain is coming from.
• The most common solution that organizations rely on is leveraging the log files for issue diagnosis. However, this method is slow and often unable to pinpoint the problem areas, leading to delays in problem resolution.

Solution

• Application and infrastructure teams need to work together to develop infrastructure flow maps and transaction profiles.
• These diagrams will highlight the path that each transaction travels across your infrastructure.
• Ideally at this point, teams will also capture latency breakdowns across every tier that the business transaction flows through.
  • This will ultimately kick start the baselining process.

Results

• Ninety-five percent of IT departments don’t have full visibility into their production environment. As a result, a slow business transaction will often require a war-room approach where SMEs from across the organization gather to troubleshoot.
• Having visibility into the production environment through infrastructure flow mapping and transaction profiling will help IT teams pinpoint problems.
  • At the very least, teams will be able to identify common problem areas and expedite the root-cause analysis process.

Source: “Just how complex can a Login Transaction be? Answer: Very!,” AppDynamics

Monitor your critical sub-components

Establishing a monitoring plan for your capacity involves answering two questions: can I see what I need to see, and can I see it with sufficient granularity?

• Having the right tool for the job is an important step towards effective capacity and availability management.
• Application performance management tools (APMs) are essential to the process, but they tend to be highly specific and vertically oriented, like using a microscope.
• Some product families can cover a wider range of capacity monitoring functions (SolarWinds, for example). It is still important, however, to codify your monitoring needs.

"You don’t use a microscope to monitor an entire ant farm, but you might use many microscopes to monitor specific ants."

– Fred Chagnon, Research Director, Infrastructure Practice, Info-Tech Research Group

Monitor your sub-components: clarify visibility

2.2a Tab 2 of the Capacity Snapshot Tool

The next step in capacity management is establishing whether or not visibility (in the broad sense) is available into critical sub-components.

Instructions

1. Open the Capacity Snapshot Tool and record the list of sub-components identified in the previous step.
2. For each sub-component answer the following question:

• Do I have easy access to the information I need to monitor to ensure this component remains available?

• What tool provides the information? Where can it be found?

Monitor your sub-components; determine whether or not you have sufficient granular visibility

2.2b Tab 2 of the Capacity Snapshot Tool

Like ideas and watches, not all types of visibility are created equal. Ensure that you have access to the right information to make capacity decisions.

Instructions

1. For each of the sub-components clarify the appropriate level of granularity for the visibility gained to be useful. In the case of storage, for example, is raw usage (in gigabytes) sufficient, or do you need a breakdown of what exactly is taking up the space? The network might be more complicated.
2. Record the details of this ideation in the adjacent column.
3. Select “Yes” or “No” from the drop-down menu to track the status of each sub-component.

For most mobile phone users, this breakdown is sufficient. For some, more granularity might be necessary.

Info-Tech Insight

Make note of monitoring tools and strategies. If anything changes, be sure to re-evaluate the visibility status. An outdated spreadsheet can lead to availability issues if management is unaware of looming problems.

Develop strategies to ameliorate any visibility issues

2.2c 1 hour

The Capacity Snapshot Tool color-codes your components by status. Green – visibility and granularity are both sufficient; yellow – visibility exists, though not at sufficient granularity; and red – visibility does not exist at all.

Instructions

1. Write each of the yellow and red sub-components on a whiteboard or piece of chart paper.
2. Brainstorm amelioration strategies for each of the problematic sub-components.

• Does the current monitoring tool have sufficient functionality?
• Does it need to be further configured/customized?
• Do we need a whole new tool?

Input

• Sub-components
• Capacity Snapshot Tool

Output

• Amelioration strategies

Materials

• Whiteboard
• Markers
• Capacity Snapshot Tool

Participants

• Infrastructure manager

Info-Tech Best Practice

It might be that there is no amelioration strategy. Make note of this difficulty and highlight it as part of the risk section of the Capacity Plan Template.

See Info-Tech’s projects on storage and network modernization for additional details

Leverage other products for additional details on how to modernize your network and storage services.

The process of modernizing the network is fraught with vestigial limitations. Develop a program to gather requirements and plan.

As part of the blueprint, Modernize Enterprise Storage, the Modernize Enterprise Storage Workbook includes a section on storage capacity planning.

If you want additional support, have our analysts guide you through this phase as part of an Info-Tech workshop.

Book a workshop with our Info-Tech analysts:

• To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-Tech analyst team.
• Info-Tech analysts will join you and your team onsite at your location or welcome you to Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.
• Contact your account manager (www.infotech.com/account), or email Workshops@InfoTech.com for more information.

The following are sample activities that will be conducted by Info-Tech analysts with your team:

2.2

Develop strategies to ameliorate visibility issues

The analyst will guide workshop participants in brainstorming potential solutions to visibility issues and record them in the Capacity Snapshot Tool.

Phase 2 Guided Implementation

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of 2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

PHASE 3

Solicit and Incorporate Business Needs

Step 3.1: Solicit business needs and gather data

This step will walk you through the following activities:

• Build relationships with business stakeholders.
• Analyze usage data and identify trends.
• Correlate usage trends with business needs.

This involves the following participants:

• Capacity manager
• Infrastructure team members
• Business stakeholders

Outcomes of this step

• System for involving business stakeholders in the capacity planning process
• Correlated data on business level, service level, and infrastructure level capacity usage

Summarize your capacity planning activities in the Capacity Plan Template

The availability and capacity management summary card pictured here is a handy way to capture the results of the activities undertaken in the following phases. Note its contents carefully, and be sure to record specific outputs where appropriate. One such card should be completed for each of the gold services identified in the project’s first phase. Make note of the results of the activities in the coming phase, and populate the Capacity Snapshot Tool. These will help you populate the tool.

Info-Tech Best Practice

The Capacity Plan Template is designed to be a part of a broader mapping strategy. It is not a replacement for a dedicated monitoring tool.

Analyze historical trends as a crucial source of data

The first place to look for information about your organization is not industry benchmarks or your gut (though those might both prove useful).

• Where better to look than internally? Use the data you’ve gathered from your APM tool or other sources to understand your historical capacity needs and to highlight any periods of unavailability.
• Consider monitoring the status of the capacity of each of your crucial components. The nature of this monitoring will vary based on the component in question. It can range from a rough Excel sheet all the way to a dedicated application performance monitoring tool.

"In all cases the very first thing to do is to look at trending…The old adage is ‘you don’t steer a boat by its wake,’ however it’s also true that if something is growing at, say, three percent a month and it has been growing at three percent a month for the last twelve months, there’s a fairly good possibility that it’s going to carry on going in that direction."

– Mike Lynch, Consultant, CapacityIQ

Gather relevant data at the business level

3.1a 2 hours per service

A holistic approach to capacity management involves peering beyond the beaded curtain partitioning IT from the rest of the organization and tracking business metrics.

Instructions

1. Your service/application owners know how changes in business activities impact their systems. Business level capacity management involves responding to those changes. Ask service/application owners what changes will impact their capacity. Examples include:

• Business volume (net new customers, number of transactions)
• Staff changes (new hires, exits, etc.)

Input

• Brainstorming
• List of gold services

Output

• Business level data

Materials

• In-house solution or commercial tool

Participants

• Capacity manager
• Application/service owners

Gather relevant data at the service level

3.1b 2 hours per service

One level of abstraction down is the service level. Service level capacity management, recall that service level capacity management is about ensuring that IT is meeting SLAs in its service provision.

Instructions

1. There should be internal SLAs for each service IT offers. (If not, that’s a good place to start. See Info-Tech’s research on the subject.) Prod each of your service owners for information on the metrics that are relevant for their SLAs. Consider the following:

• Peak hours, requests per second, etc.
• This will usually include some APM data.

Input

• Brainstorming
• List of gold services

Output

• Service level data

Materials

• In-house solution or commercial tool

Participants

• Capacity manager
• Application/service owners

Leverage the visibility into your infrastructure components and compare all of your data over time

You established visibility into your components in the second phase of this project. Use this data, and that gathered at the business and service levels, to begin analyzing your demand over time.

• Different organizations will approach this issue differently. Those with a complicated service catalog and a dedicated capacity manager might employ a tool like TeamQuest. If your operation is small, or you need to get your availability and capacity management activities underway as quickly as possible, you might consider using a simple spreadsheet software like Excel.
• If you choose the latter option, select a level of granularity (monthly, weekly, etc.) and produce a line graph in Excel.
• Example: Employee count (business metric)

Note: the strength of this approach is that it is easy to visualize. Use the same timescale to facilitate simple comparison.

Manage, don’t just monitor; mountains of data need to be turned into information

Information lets you make a decision. Understand the questions you don’t need to ask, and ask the right ones.

"Often what is really being offered by many analytics solutions is just more data or information – not insights."

– Brent Dykes, Director of Data Strategy, Domo

Info-Tech Best Practice

You can have all the data in the world and absolutely nothing valuable to add. Don’t fall for this trap. Use the activities in this phase to structure your data collection operation and ensure that your organization’s availability and capacity management plan is data driven.

Analyze historical trends and track your services’ status

3.1c Tab 3 of the Capacity Snapshot Tool

At-a-glance – it’s how most executives consume all but the most important information. Create a dashboard that tracks the status of your most important systems.

Instructions

1. Consult infrastructure leaders for information about lead times for new capacity for relevant sub-components and include that information in the tool.

• Look to historical lead times. (How long does it traditionally take to get more storage?)
• If you’re not sure, contact an in-house expert, or speak to your vendor

This tool collates and presents information gathered from other sources. It is not a substitute for a performance monitoring tool.

Build a list of key business stakeholders

3.1d 10 minutes

Stakeholder analysis is crucial. Lines of authority can be diffuse. Understand who needs to be involved in the capacity management process early on.

Instructions

1. With the infrastructure team, brainstorm a group of departments, roles, and people who may impact demand on capacity.
2. Go through the list with your team and identify stakeholders from two groups:

• Line of business: who in the business makes use of the service?
• Application owner: who in IT is responsible for ensuring the service is up?

Input

• Gold systems
• Personnel Information

Output

• List of key business stakeholders

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Best Practice

Consider which departments are most closely aligned with the business processes that fuel demand. Prioritize those that have the greatest impact. Consider the stakeholders who will make purchasing decisions for increasing infrastructure capacity.

Organize stakeholder meetings

3.1e 10 hours

Establishing a relationship with your stakeholders is a necessary step in managing your capacity and availability.

Instructions

1. Gather as many of the stakeholders identified in the previous activity as you can and present information on availability and capacity management

• If you can’t get everyone in the same room, a virtual meeting or even an email blast could get the job done.

• Consider highlighting the trade-offs between cost and availability.

Input

• List of business stakeholders
• Hard work

Output

• Working relationship, trust
• Regular meetings

Materials

• Work ethic
• Executive brief

Participants

• Capacity manager
• Business stakeholders

Info-Tech Insight

The best capacity managers develop new business processes that more closely align their role with business stakeholders. Building these relationships takes hard work, and you must first earn the trust of the business.

Bake stakeholders into the planning process

3.1f Ongoing

Convince, don’t coerce. Stakeholders want the same thing you do. Bake them into the planning process as a step towards this goal.

1. Develop a system to involve stakeholders regularly in the capacity planning process.

• Your system will vary depending on the structure and culture of your organization.
• See the case study on the following slide for ideas.
• It may be as simple as setting a recurring reminder in your own calendar to touch base with stakeholders.

• Ensure stakeholders have reasonable expectations about IT’s available resources, the costs of providing capacity, and the lead times required to source additional needed capacity.

Input

• List of business stakeholders
• Ideas

Output

• Capacity planning process that involves stakeholders

Materials

• Meeting rooms

Participants

• Capacity manager
• Business stakeholders
• Infrastructure team

A capacity manager in financial services wrangled stakeholders and produced results

CASE STUDY

Industry: Financial Services

Source: Interview

In financial services, availability is king

In the world of financial services, availability is absolutely crucial. High-value trades occur at all hours, and any institution that suffers outages runs the risk of losing tens of thousands of dollars, not to mention reputational damage.

People know what they want, but sometimes they have to be herded

While line of business managers and application owners understand the value of capacity management, it can be difficult to establish the working relationship necessary for a fruitful partnership.

Proactively building relationships keeps services available

He built relationships with all the department heads on the business side, and all the application owners.

• He met with department heads quarterly.
• He met with application owners and business liaisons monthly.

He established a steering committee for capacity.

He invited stakeholders to regular capacity planning meetings.

• The first half of each meeting was high-level outlook, such as business volume and IT capacity utilization, and included stakeholders from other departments.
• The second half of the meeting was more technical, serving the purpose for the infrastructure team.

He scheduled lunch and learn sessions with business analysts and project managers.

• These are the gatekeepers of information, and should know that IT needs to be involved when things come down the pipeline.

Step 3.2: Analyze data and project future needs

This step will walk you through the following activities:

• Solicit needs from the business.
• Map business needs to technical requirements, and technical requirements to infrastructure requirements.
• Identify inefficiencies in order to remedy them.
• Compare the data across business, component, and service levels, and project your capacity needs.

This involves the following participants:

• Capacity manager
• Infrastructure team members
• Business stakeholders

Outcomes of this step

• Model of how business processes relate to technical requirements and their demand on infrastructure
• Method for projecting future demand for your organization’s infrastructure
• Comparison of current capacity usage to projected demand

“Nobody tells me anything!” – the capacity manager’s lament

Sometimes “need to know” doesn’t register with sales or marketing. Nearly every infrastructure manager can share a story about a time when someone has made a decision that has critically impacted IT infrastructure without letting anyone in IT in on the “secret.”

In brief

Imagine working for a media company as an infrastructure capacity manager. Now imagine that the powers that be have decided to launch a content-focused web service. Seems like something they would do, right? Now imagine you find out about it the same way the company’s subscribers do. This actually happened – and it shouldn’t have. But a similar lack of alignment makes this a real possibility for any organization. If you don’t establish a systematic plan for soliciting and incorporating business requirements, prepare to lose a chunk of your free time. The business should never be able to say, in response to “nobody tells me anything,” “nobody asked.”

Pictured: an artist’s rendering of the capacity manager in question.

Directly solicit requirements from the business

3.2a 30 minutes per stakeholder

Once you’ve established, firmly, that everyone’s on the same team, meet individually with the stakeholders to assess capacity.

Instructions

1. Schedule a one-on-one meeting with each line of business manager (stakeholders identified in 3.1). Ideally this will be recurring.

• Experienced capacity managers suggest doing this monthly.

• What are some upcoming major initiatives?
• Is the department going to expand or contract in a noticeable way?
• Have customers taken to a particular product more than others?

Input

• Stakeholder opinions

Output

• Business requirements

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

Sometimes line of business managers will evade or ignore you when you come knocking. They do this because they don’t know and they don’t want to give you the wrong information. Explain that a best guess is all you can ask for and allay their fears.

Below, you will find more details about what to look for when soliciting information from the line of business manager you’ve roped into your scheme.

1. Consider the following:

• Projected sales pipeline
• Business growth
• Seasonal cycles
• Marketing campaigns
• New applications and features
• New products and services

Directly solicit requirements from the business (optional)

3.2a 1 hour

IT staff and line of business staff come with different skillsets. This can lead to confusion, but it doesn’t have to. Develop effective information solicitation techniques.

Instructions

1. Gather your IT staff in a room with a whiteboard. As a group, select a gold service/line of business manager you would like to use as a “practice dummy.”
2. Have everyone write down a question they would ask of the line of business representative in a hypothetical business/service capacity discussion.
3. As a group discuss the merits of the questions posed:

• Are they likely to yield productive information?
• Are they too vague or specific?
• Is the person in question likely to know the answer?
• Is the information requested a guarded trade secret?

Input

• Workshop participants’ ideas

Output

• Interview skills

Materials

• Whiteboard
• Markers
• Sticky notes

Participants

• Capacity manager
• Infrastructure staff

Map business needs to technical requirements, and technical requirements to infrastructure requirements

3.2b 5 hours

When it comes to mapping technical requirements, IT alone has the ability to effectively translate business needs.

Instructions

1. Use your notes from stakeholder meetings to assess the impact of any changes on gold systems.
2. For each system brainstorm with infrastructure staff (and any technical experts as necessary) about what the information gleaned from stakeholder discussions. Consider the following discussion points:

• How has demand for the service been trending? Does it match what the business is telling us?
• Have we had availability issues in the past?
• Has the business been right with their estimates in the past?

• E.g. how much RAM does a new email user require?

Input

• Business needs

Output

• Technical and infrastructure requirements

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

Adapt the analysis to the needs of your organization. One capacity manager called the one-to-one mapping of business process to infrastructure demand the Holy Grail of capacity management. If this level of precision isn’t attainable, develop your own working estimates using the higher-level data

Avoid putting too much faith in the cloud as a solution to your problem

Has the rise of on-demand, functionally unlimited services eliminated the need for capacity and availability management?

Info-Tech Insight

The cloud comes at the cost of detailed performance data. Sourcing a service through an SLA with a third party increases the need to perform your own performance testing of gold level applications. See performance monitoring.

Beware Parkinson’s law

A consequence of our infinite capacity for creativity, people have the enviable skill of making work. In 1955, C. Northcote Parkinson pointed out this fact in The Economist . What are the implications for capacity management?

"It is a commonplace observation that work expands so as to fill the time available for its completion. Thus, an elderly lady of leisure can spend the entire day in writing and despatching a postcard to her niece at Bognor Regis. An hour will be spent in finding the postcard, another in hunting for spectacles, half-an-hour in a search for the address, an hour and a quarter in composition, and twenty minutes in deciding whether or not to take an umbrella when going to the pillar-box in the next street."

C. Northcote Parkinson, The Economist, 1955

Info-Tech Insight

If you give people lots of capacity, they will use it. Most shops are overprovisioned, and in some cases that’s throwing perfectly good money away. Don’t be afraid to prod if someone requests something that doesn’t seem right.

Optimally align demand and capacity

When it comes to managing your capacity, look for any additional efficiencies.

Questions to ask:

• Are there any infrastructure services that are not being used to their full potential, sitting idle, or allocated to non-critical or zombie functions?
  • Are you managing your virtual servers? If, for example, you experience a seasonal spike in demand, are you leaving virtual machines running after the fact?
• Do your organization’s policies and your infrastructure setup allow for the use of development resources for production during periods of peak demand?
• Can you make organizational or process changes in order to satisfy demand more efficiently?

In brief

Who isn’t a sports fan? Big games mean big stakes for pool participants and armchair quarterbacks—along with pressure on the network as fans stream games from their work computers. One organization suffered from this problem, and, instead of taking a hardline and banning all streams, opted to stream the game on a large screen in a conference room where those interested could work for its duration. This alleviated strain on the network and kept staff happy.

Shutting off an idle cloud to cut costs

CASE STUDY

Industry:Professional Services

Source:Interview

24/7 AWS = round-the-clock costs

A senior developer realized that his development team had been leaving AWS instances running without any specific reason.

Why?

The development team appreciated the convenience of an always-on instance and, because the people spinning them up did not handle costs, the problem wasn’t immediately apparent.

Resolution

In his spare time over the course of a month, the senior developer wrote a program to manage the servers, including shutting them down during times when they were not in use and providing remote-access start-up when required. His team alone saved $30,000 in costs over the next six months, and his team lead reported that it would have been more than worth paying the team to implement such a project on company time.

Identify inefficiencies in order to remediate them

3.2c 20 minutes per service

Instructions

1. Gather the infrastructure team together and discuss existing capacity and demand. Use the inputs from your data analysis and stakeholder meetings to set the stage for your discussion.
2. Solicit ideas about potential inefficiencies from your participants:

• Are VMs effectively allocated? If you need 7 VMs to address a spike, are those VMs being reallocated post-spike?
• Are developers leaving instances running in the cloud?
• Are particular services massively overprovisioned?
• What are the biggest infrastructure line items? Are there obvious opportunities for cost reduction there?

Input

• Gold systems
• Data inputs

Output

• Inefficiencies

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

The most effective capacity management takes a holistic approach and looks at the big picture in order to find ways to eliminate unnecessary infrastructure usage, or to find alternate or more efficient sources of required capacity.

Dodging the toll troll by rerouting traffic

CASE STUDY

Industry:Telecommunications

Source: Interview

High-cost lines

The capacity manager at a telecommunications provider mapped out his firm’s network traffic and discovered they were using a number of VP circuits (inter building cross connects) that were very expensive on the scale of their network.

Paying the toll troll

These VP circuits were supplying needed network services to the telecom provider’s clients, so there was no way to reduce this demand.

Resolution

The capacity manager analyzed where the traffic was going and compared this to the cost of the lines they were using. After performing the analysis, he found he could re-route much of the traffic away from the VP circuits and save on costs while delivering the same level of service to their users.

Compare the data across business, component, and service levels, and project your capacity needs

3.2d 2 hour session/meeting

Make informed decisions about capacity. Remember: retain all documentation. It might come in handy for the justification of purchases.

Instructions

1. Using either a dedicated tool or generic spreadsheet software like Excel or Sheets, evaluate capacity trends. Ask the following questions:

• Are there times when application performance degraded, and the service level was disrupted?
• Are there times when certain components or systems neared, reached, or exceeded available capacity?
• Are there seasonal variations in demand?
• Are there clear trends, such as ongoing growth of business activity or the usage of certain applications?
• What are the ramifications of trends or patterns in relation to infrastructure capacity?

Compare current capacity to your projections

3.2e Section 5 of the Capacity Plan Template

Capacity management (and, by extension, availability management) is a combination of two balancing acts: cost against capacity and supply and demand.*

Instructions

1. Compare your projections with your reality. You already know whether or not you have enough capacity given your lead times. But do you have too much? Compare your sub-component capacity projections to your current state.
2. Highlight any outliers. Is there a particular service that is massively overprovisioned?
3. Evaluate the reasons for the overprovisioning.

• Is the component critically important?
• Did you get a great deal on hardware?
• Is it an oversight?

*Office of Government Commerce 2001, 119.

In brief

The fractured nature of the capacity management space means that every organization is going to have a slightly different tooling strategy. No vendor has dominated, and every solution requires some level of customization. One capacity manager (a cloud provider, no less!) relayed a tale about a capacity management Excel sheet programmed with 5,000+ lines of code. As much work as that is, a bespoke solution is probably unavoidable.

If you want additional support, have our analysts guide you through this phase as part of an Info-Tech workshop.

Book a workshop with our Info-Tech analysts:

• To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-Tech analyst team.
• Info-Tech analysts will join you and your team onsite at your location or welcome you to Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.
• Contact your account manager (www.infotech.com/account), or email Workshops@InfoTech.com for more information.

The following are sample activities that will be conducted by Info-Tech analysts with your team:

3.2

Map business needs to technical requirements and technical requirements to infrastructure requirements

The analyst will guide workshop participants in using their organization’s data to map out the relationships between applications, technical requirements, and the underlying infrastructure usage.

Phase 3 Guided Implementation

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of 2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

PHASE 4

Identify and Mitigate Risks

Step 4.1: Identify and mitigate risks

This step will walk you through the following activities:

• Identify potential risks.
• Determine strategies to mitigate risks.
• Complete your capacity management plan.

This involves the following participants:

• Capacity manager
• Infrastructure team members
• Business stakeholders

Outcomes of this step

• Strategies for reducing risks
• Capacity management plan

Understand what happens when capacity/availability management fails

1. Services become unavailable. If availability and capacity management are not constantly practiced, an inevitable consequence is downtime or a reduction in the quality of that service. Critical sub-component failures can knock out important systems on their own.
2. Money is wasted. In response to fears about availability, it’s entirely possible to massively overprovision or switch entirely to a pay-as-you-go model. This, unfortunately, brings with it a whole host of other problems, including overspending. Remember: infinite capacity means infinite potential cost.
3. IT remains reactive and is unable to contribute more meaningfully to the organization. If IT is constantly putting out capacity/availability-related fires, there is no room for optimization and activities to increase organizational maturity. Effective availability and capacity management will allow IT to focus on other work.

Mitigate availability and capacity risks

Availability: how often a service is usable (that is to say up and not too degraded to be effective). Consequences of reduced availability can include financial losses, impacted customer goodwill, and reduced faith in IT more generally.

Causes of availability issues:

• Poor capacity management – a service becomes unavailable when there is insufficient supply to meet demand. This is the result of poor capacity management.
• Scheduled maintenance – services go down for maintenance with some regularity. This needs to be baked into service-level negotiations with vendors.
• Vendor outages – sometimes vendors experience unplanned outages. There is typically a contract provision that covers unplanned outages, but that doesn’t change the fact that your service will be interrupted.

Capacity: a particular component’s/service’s/business’ wiggle room. In other words, its usage ceiling.

Causes of capacity issues:

• Poor demand management – allowing users to run amok without any regard for how capacity is sourced and paid for.
• Massive changes in legitimate demand – more usage means more demand.
• Poor capacity planning – predictable changes in demand that go unaddressed can lead to capacity issues.

Add additional potential causes of availability and capacity risks as needed

4.1a 30 minutes

Availability and capacity issues can stem from a number of different causes. Include a list in your availability and capacity management plan.

Instructions

1. Gather the group together. Go around the room and have participants provide examples of incidents and problems that have been the result of availability and capacity issues.
2. Pose questions to the group about the source of those availability and capacity issues.

• What could have been done differently to avoid these issues?
• Was the availability/capacity issue a result of a faulty internal/external SLA?

Input

• Capacity Snapshot Tool results

Output

• Additional sources of availability and capacity risks

Materials

• Capacity Plan Template

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

Availability and capacity problems result in incidents, critical incidents, and problems. These are addressed in a separate project (incident and problem management), but information about common causes can streamline that process.

Identify capacity risks and mitigate them

4.1b 30 minutes

Based on your understanding of your capacity needs (through written SLAs and informal but regular meetings with the business) highlight major risks you foresee.

Instructions

1. Make a chart with two columns on a whiteboard. They should be labelled “risk” and “mitigation” respectively.
2. Record risks to capacity you have identified in earlier activities.

• Refer to the Capacity Snapshot Tool for components that are highlighted in red and yellow. These are specific components that present special challenges. Identify the risk(s) in as much detail as possible. Include service and business risks as well.
• Examples: a marketing push will put pressure on the web server; a hiring push will require more Office 365 licenses; a downturn in registration will mean that fewer VMs will be required to run the service.

Input

• Capacity Snapshot Tool results

Output

• Inefficiencies

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

It’s an old adage, but it checks out: don’t come to the table armed only with problems. Be a problem solver and prove IT’s value to the organization.

Identify capacity risks and mitigate them (cont.)

4.1b 1.5 hours

Instructions (cont.)

3. Begin developing mitigation strategies. Options for responding to known capacity risks fall into one of two camps:

• Acceptance: responding to the risk is costlier than acknowledging its existence without taking any action. For gold systems, acceptance is typically not acceptable.
• Mitigation: limiting/reducing, eliminating, or transferring risk (Herrera) comprise the sort of mitigation discussed here.
  • Limiting/reducing: taking steps to improve the capacity situation, but accepting some level of risk (spinning up a new VM, pushing back on demands from the business, promoting efficiency).
  • Eliminating: the most comprehensive (and most expensive) mitigation strategy, elimination could involve purchasing a new server or, at the extreme end, building a new datacenter.
  • Transfer: “robbing Peter to pay Paul,” in the words of capacity manager Todd Evans, is one potential way to limit your exposure. Is there a less critical service that can be sacrificed to keep your gold service online?

Input

• Capacity Snapshot Tool results

Output

• Capacity risk mitigations

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Insight

It’s an old adage, but it checks out: don’t come to the table armed only with problems. Be a problem solver and prove IT’s value to the organization.

Identify availability risks and mitigate them

4.1c 30 minutes

While capacity management is a form of availability management, it is not the only form. In this activity, outline the specific nature of threats to availability.

Instructions

1. Make a chart with two columns on a whiteboard. They should be labelled “risk” and “mitigation” respectively.
2. Begin brainstorming general availability risks based on the following sources of information/categories:

• Vendor outages
• Disaster recovery
• Historical availability issues

Input

• Capacity Snapshot Tool results

Output

• Availability risks and mitigations

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Info-Tech Best Practice

A dynamic central repository is a good way to ensure that availability issues stemming from a variety of causes are captured and mitigated.

Identify availability risks and mitigate them (cont.)

4.1c 1.5 hours

Although it is easier said than done, identifying potential mitigations is a crucial part of availability management as an activity.

Instructions (cont.)

3. Begin developing mitigation strategies. Options for responding to known capacity risks fall into one of two camps:

• Acceptance – responding to the risk is costlier than taking it on. Some unavailability is inevitable, between maintenance and unscheduled downtime. Record this, though it may not require immediate action.
• Mitigation strategies:
  • Limiting/reducing – taking steps to increase availability of critical systems. This could include hot spares for unreliable systems or engaging a new vendor.
  • Eliminating – the most comprehensive (and most expensive) mitigation strategy. It could include selling.
  • Transfer – “robbing Peter to pay Paul,” in the words of capacity manager Todd Evans, is one potential way to limit your exposure. Is there a less critical service that can be sacrificed to keep your gold service online?

Input

• Capacity Snapshot Tool results

Output

• Availability risks and mitigations

Materials

• Whiteboard
• Markers

Participants

• Capacity manager
• Infrastructure staff

Iterate on the process and present your completed availability and capacity management plan

The stakeholders consulted as part of the process will be interested in its results. Share them, either in person or through a collaboration tool.

The current status of your availability and capacity management plan should be on the agenda for every stakeholder meeting. Direct the stakeholders’ attention to the parts of the document that are relevant to them, and solicit their thoughts on the document’s accuracy. Over time you should get a pretty good idea of who among your stakeholder group is skilled at projecting demand, and who over- or underestimates, and by how much. This information will improve your projections and, therefore, your management over time.

Info-Tech Insight

Use the experience gained and the artifacts generated to build trust with the business. The meetings should be regular, and demonstrating that you’re actually using the information for good is likely to make hesitant participants in the process more likely to open up.

If you want additional support, have our analysts guide you through this phase as part of an Info-Tech workshop.

Book a workshop with our Info-Tech analysts:

• To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-Tech analyst team.
• Info-Tech analysts will join you and your team onsite at your location or welcome you to Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.
• Contact your account manager (www.infotech.com/account), or email Workshops@InfoTech.com for more information.

The following are sample activities that will be conducted by Info-Tech analysts with your team:

4.1

Identify capacity risks and mitigate them

The analyst will guide workshop participants in identifying potential risks to capacity and determining strategies for mitigating them.

Phase 4 Guided Implementation

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of 2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

Insight breakdown

Insight 1

Components are critical to availability and capacity management.

The CEO doesn’t care about the SMTP server. She cares about meeting customer needs and producing profit. For IT capacity and availability managers, though, the devil is in the details. It only takes one faulty component to knock out a service. Keep track and keep the lights on.

Insight 2

Ask what the business is working on, not what they need.

If you ask them what they need, they’ll tell you – and it won’t be cheap. Find out what they’re going to do, and use your expertise to service those needs. Use your IT experience to estimate the impact of business and service level changes on the components that secure the availability you need.

Insight 3

Cloud shmoud.

The role of the capacity manager might be changing with the advent of the public cloud, but it has not disappeared. Capacity managers in the age of the cloud are responsible for managing vendor relationships, negotiating external SLAs, projecting costs and securing budgets, reining in prodigal divisions, and so on.

Summary of accomplishment

Knowledge Gained

• Impact of downtime on the organization
• Gold systems
• Key dependencies and sub-components
• Strategy for monitoring components
• Strategy for soliciting business needs
• Projected capacity needs
• Availability and capacity risks and mitigations

Processes Optimized

• Availability management
• Capacity management

Deliverables Completed

• Business Impact Analysis
• Capacity Plan Template

Project step summary

Client Project: Develop an Availability and Capacity Management Plan

1. Conduct a business impact analysis
2. Assign criticality ratings to services
3. Define your monitoring strategy
4. Implement your monitoring tool/aggregator
5. Solicit business needs and gather data
6. Analyze data and project future needs
7. Identify and mitigate risks

Info-Tech Insight

This project has the ability to fit the following formats:

• Onsite workshop by Info-Tech Research Group consulting analysts.
• Do-it-yourself with your team.
• Remote delivery via Info-Tech Guided Implementation.

Research contributors and experts

Adrian Blant, Independent Capacity Consultant, IT Capability Solutions

Adrian has over 15 years' experience in IT infrastructure. He has built capacity management business processes from the ground up, and focused on ensuring a productive dialogue between IT and the business.

James Zhang, Senior Manager Disaster Recovery, AIG Technology

James has over 20 years' experience in IT and 10 years' experience in capacity management. Throughout his career, he has focused on creating new business processes to deliver value and increase efficiency over the long term.

Mayank Banerjee, CTO, Global Supply Chain Management, HelloFresh

Mayank has over 15 years' experience across a wide range of technologies and industries. He has implemented highly automated capacity management processes as part of his role of owning and solving end-to-end business problems.

Mike Lynch, Consultant, CapacityIQ

Mike has over 20 years' experience in IT infrastructure. He takes a holistic approach to capacity management to identify and solve key problems, and has developed automated processes for mapping performance data to information that can inform business decisions.

Paul Waguespack, Manager of Application Systems Engineering, Tufts Health Plan

Paul has over 10 years' experience in IT. He has specialized in implementing new applications and functionalities throughout their entire lifecycle, and integrating with all aspects of IT operations.

Richie Mendoza, IT Consultant, SMITS Inc.

Richie has over 10 years' experience in IT infrastructure. He has specialized in using demand forecasting to guide infrastructure capacity purchasing decisions, to provide availability while avoiding costly overprovisioning.

Rob Thompson, President, IT Tools & Process

Rob has over 30 years’ IT experience. Throughout his career he has focused on making IT a generator of business value. He now runs a boutique consulting firm.

Todd Evans, Capacity and Performance Management SME, IBM

Todd has over 20 years' experience in capacity and performance management. At Kaiser Permanente, he established a well-defined mapping of the businesses workflow processes to technical requirements for applications and infrastructure.

Bibliography

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Allen, Katie. “Work Also Shrinks to Fit the Time Available: And We Can Prove It.” The Guardian. 25 Oct. 2017.

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Hill, Jon. How to Do Capacity Planning. TeamQuest. 24 Oct. 2017. Web.

“How to Create an SLA in 7 Easy Steps.” ITSM Perfection. 25 Oct. 2017. Web.

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IT Service Criticality. U of Bristol. 24 Oct. 2017. Web.

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Longoria, Gina. “Hewlett Packard Enterprise Goes After Amazon Public Cloud in Enterprise Storage.” Forbes. 2 Dec. 2016. Web.

Maheshwari, Umesh. “Understanding Storage Capacity.” NimbleStorage. 7 Jan. 2016. Web.

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Create a Buyer Persona and Journey

Make it easier to market, sell, and achieve product-market fit with deeper buyer understanding.

EXECUTIVE BRIEF

Executive Summary

Your Challenge

B2B marketers without documented personas and journeys often experience the following:

• Contacts fail to convert to leads because messaging fails to resonate with buyers.
• Products fail to reach targets given shallow understanding of buyer needs.
• Sellers’ emails go unopened, and attempts at discovery fail due to no understanding of buyer challenges, pain points, and needs.

Without a deeper understanding of buyer needs and how they buy, B2B marketers will waste time and precious resources targeting the incorrect personas.

Common Obstacles

Despite being critical elements, organizations struggle to build personas due to:

• A lack of alignment and collaboration among marketing, product, and sales.
• An internal focus; or a lack of true customer centricity.
• A lack of tools and techniques for building personas and buyer journeys.

In today’s Agile development environment, combined with the pressure to generate revenues quickly, high tech marketers often skip the steps necessary to go deeper to build buyer understanding.

SoftwareReviews’ Approach

With a common framework and target output, clients will:

• Align marketing, sales, and product, and collaborate together to share current knowledge on buyer personas and journeys.
• Target 12-15 customers and prospects to interview and validate insights. Share that with customer-facing staff.
• Activate the insights for more customer-centric lead generation, product development, and selling.

Clients who activate findings from buyer personas and journeys will see a 50% results improvement.

SoftwareReviews Insight:
Buyer personas and buyer journeys are essential ingredients in go-to-market success, as they inform for product, marketing, sales, and customer success who we are targeting and how to engage with them successfully.

Buyer personas and journeys: A go-to-market critical success factor

Marketers – large and small – will fail to optimize product-market fit, lead generation, and sales effectiveness without well-defined buyer personas and a buyer journey.

Critical Success Factors of a Successful G2M Strategy:

• Opportunity size and business case
• Buyer personas and journey
• Competitively differentiated product hypothesis
• Buyer-validated commercial concept
• Sales revenue plan and program cost budget
• Consolidated communications to steering committee

Jeff Golterman, Managing Director, SoftwareReviews Advisory

“44% of B2B marketers have already discovered the power of Personas.”
– Hasse Jansen, Boardview.io!, 2016

Documenting buyer personas enables success beyond marketing

Documenting buyer personas has several essential benefits to marketing, sales, and product teams:

• Achieve a better understanding of your target buyer – by building a detailed buyer persona for each type of buyer and keeping it fresh, you take a giant step toward becoming a customer-centric organization.
• Team alignment on a common definition – will happen when you build buyer personas collaboratively and among those teams that touch the customer.
• Improved lead generation – increases dramatically when messaging and marketing assets across your lead generation engine better resonate with buyers because you have taken the time to understand them deeply.
• More effective selling – is possible when sellers apply persona development output to their interactions with prospects and customers.
• Better product-market fit – increases when product teams more deeply understand for whom they are designing products. Documenting buyer challenges, pain points, and unmet needs gives product teams what they need to optimize product adoption.

“It’s easier buying gifts for your best friend or partner than it is for a stranger, right? You know their likes and dislikes, you know the kind of gifts they’ll have use for, or the kinds of gifts they’ll get a kick out of. Customer personas work the same way, by knowing what your customer wants and needs, you can present them with content targeted specifically to their wants and needs.”
– Emma Bilardi, Product Marketing Alliance, 2020

Buyer understanding activates just about everything

Without the deep buyer insights that persona and journey capture enables, marketers are suboptimized.

Buyer Persona and Journey

• Product design
• Customer targeting
• Personalization
• Messaging
• Content marketing
• Lead gen & scoring
• Sales Effectiveness
• Customer retention

“Marketing eutopia is striking the all-critical sweet spot that adds real value and makes customers feel recognized and appreciated, while not going so far as to appear ‘big brother’. To do this, you need a deep understanding of your audience coming from a range of different data sets and the capability to extract meaning.”
– Plexure, 2020

Does your organization need buyer persona and journey updating?

“Yes,” if experiencing one or more key challenges:

• Sales time is wasted on unqualified leads
• Website abandon rates are high
• Lead gen engine click-through rates are low
• Ideal customer profile is ill defined
• Marketing asset downloads are low
• Seller discovery with prospects is ineffective
• Sales win/loss rates drop due to poor product-market fit
• Higher than desired customer churn

SoftwareReviews Advisory Insight:
Marketers developing buyer personas and journeys that lack agreement among Marketing, Sales, and Product of personas to target will squander precious time and resources throughout the customer targeting and acquisition process.

Outcomes and benefits

Building your buyer persona and journey using our methodology will enable:

• Greater stakeholder alignment – when marketing, product, and sales agree on personas, less time is wasted on targeting alternate personas.
• Improved product-market fit – when buyers see both pain-relieving features and value-based pricing, “because you asked vs. guessed,” win rates increase.
• Greater open and click-through rates – because you understood buyer pain points and motivations for solution seeking, you’ll see higher visits and engagement with your lead gen engine, and because you asked “what asset types do you find most helpful” your CTAs become ”lead-gen magnets” because you’ve offered the right asset types in your content marketing strategy.
• More qualified leads – because you defined a more accurate ideal customer profile (ICP) and your lead scoring algorithm has improved, sellers see more qualified leads.
• Increased sales cycle velocity – since you learned from personas their content and engagement preferences and what collateral types they need during the down-funnel sales discussions, sales calls are more productive and sales cycles shrink.

Our methodology for buyer persona and journey creation

Our approach provides interview guides and templates to help rebuild buyer persona

Our methodology will enable you to align your team on why it’s important to capture the most important attributes of buyer persona including:

• Functional – helps you find and locate your target personas
• Emotive – deepens team understanding of buyer initiatives, motivations for seeking alternatives, challenges they face, pain points for your offerings to address, and terminology that describes the “space”
• Solution – enables greater product market fit
• Behavioral – clarifies how to communicate with personas and understand their content preferences

Buyer journeys are constantly shifting

If you didn’t remap buyer journeys in 2021, you may be losing to competitors that did. Leaders remap buyer journey frequently.

• The multi-channel buyer journey is constantly changing. Today’s B2B buyer uses industry research sites, vendor content marketing assets, software reviews sites, contacts with vendor salespeople, events participation, peer networking, consultants, emails, social media sites, and electronic media to research purchasing decisions.
• COVID-19 has dramatically decreased face-to-face interaction. We estimate a B2B buyer spent 20-25% more time online in 2021 than pre-COVID-19 researching software buying decisions. This has diminished the importance of face-to-face selling and given dramatic rise to digital selling and outbound marketing.
• Content marketing has exploded, but without mapping the buyer journey and knowing where – by channel –and when – by buyer journey step – to offer content marketing assets, we will fail to convert prospects into buyers.

“~2/3 of [B2B] buyers prefer remote human interactions or digital self-service.” And during Aug. ‘20 to Feb. ‘21, use of digital self-service to interact with sales reps leapt by more than 10% for both researching and evaluating new suppliers.”
– Liz Harrison, Dennis Spillecke, Jennifer Stanley, and Jenny Tsai McKinsey & Company, 2021

SoftwareReviews Advisory Insight:
Marketers are advised to update their buyer journey annually and with greater frequency when the human vs. digital mix is affected due to events such as COVID-19 and as emerging media such as AR shifts asset-type usage and engagement options.

Our approach helps you define the buyer journey

Because marketing leaders need to reach buyers through the right channel with the right message at the right time during their decision cycle, you’ll benefit by using questionnaires that enable you to build the below easily and quickly.

You’ll be more successful by following our overall guidance

Overarching insight

Buyer personas and buyer journeys are essential ingredients in go-to-market success, as they inform for product, marketing, sales, and customer success who we are targeting and how to engage with them successfully.

Align Your Team

Marketers developing buyer personas and journeys that lack agreement among Marketing, Sales, and Product of personas to target will squander precious time and resources throughout the customer targeting and acquisition process.

Jump-Start Persona Development

Marketing leaders leverage the buyer persona knowledge not only from in-house experts in areas such as sales and executives but from analysts that speak with their buyers each and every day.

Buyer Interviews Are a Must

While leaders will get a fast start by interviewing sellers, executives, and analysts, you will fail to craft the right messages, build the right marketing assets, and design the best buyer journey if you skip buyer interviews.

Watch for Disruption

Leaders will update their buyer journey annually and with greater frequency when the human vs. digital mix is effected due to events such as COVID-19 and as emerging media such as AR and VR shifts the way buyers engage.

Advanced Buyer Journey Discovery

Digital marketers that ramp up lead gen engine capabilities to capture “wins” and measure engagement back through the lead gen and nurturing engines will build a more data-driven view of the buyer journey. Target to build this advanced capability in your initial design.

Tools and templates to speed your success

This blueprint is accompanied by supporting deliverables to help you gather team insights, interview customers and prospects, and summarize results for ease in communications.

To support your buyer persona and journey creation, we’ve created the enclosed tools

Buyer Persona Creation Template

A PowerPoint template to aid the capture and summarizing of your team’s insights on the buyer persona.

Buyer Persona and Journey Interview Guide and Data Capture Tool

For interviewing customers and prospects, this tool is designed to help you interview personas and summarize results for up to 15 interviewees.

Buyer Persona and Journey Summary Template

A PowerPoint template into which you can drop your buyer persona and journey interviewees list and summary findings.

SoftwareReviews offers two levels of support to best suit your needs

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful."

The "do-it-yourself" step-by-step instructions begin with Phase 1.

Guided Implementation

"Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

A Guided Implementation is a series of analysts inquiries with you and your team.

Diagnostics and consistent frameworks are used throughout each option.

Guided Implementation

A Guided Implementation (GI) is series of calls with a SoftwareReviews Advisory analyst to help implement our best practices in your organization.

For guidance on marketing applications, we can arrange a discussion with an Info-Tech analyst.

Your engagement managers will work with you to schedule analyst calls.

What does our GI on buyer persona and journey mapping look like?

Drive an Aligned Initial Draft of Buyer Persona

• Call #1: Collaborate on vision for buyer persona and the buyer journey. Review templates and sample outputs. Identify your team.
• Call #2: Review work in progress on capturing working team knowledge of buyer persona elements.
• Call #3: (Optional) Review Info-Tech’s research-sourced persona insights.
• Call #4: Validate the persona WIP with Info-Tech analysts. Review buyer interview approach and target list.

Interview Buyers and Validate Persona and Journey

• Call #5: Revise/review interview guide and final interviewee list; schedule interviews.
• Call #6: Review interim interview finds; adjust interview guide.
• Call #7: Use interview findings to validate/update persona and build journey map.
• Call #8: Add supporting analysts to final stakeholder review.

Prepare Communications and Educate Stakeholders

• Call #9: Review output templates completed with final persona and journey findings.
• Call #10: Add supporting analysts to stakeholder education meetings for support and help with addressing questions/issues.

Workshop overview

Contact your account representative for more information. workshops@infotech.com 1-888-670-8889

Phase 1
Drive an Aligned Initial Draft of Buyer Persona

This Phase walks you through the following activities:

• Develop an understanding of what comprises a buyer persona and journey, including their importance to overall go-to-market strategy and execution.
• Sample outputs.

This Phase involves the following stakeholders:

• Program leadership
• Product Marketing
• Product Management
• Representative(s) from Sales
• Executive Leadership

1.1 Establish the team and align on shared vision

Input

• Typically a joint recognition that buyer personas have not been fully documented.
• Identify working team members/participants (see below), and an executive sponsor.

Output

• Communication of team members involved and the make-up of steering committee and working team
• Alignment of team members on a shared vision of “Why Build Buyer Personas and Journey” and what key attributes define both.

Materials

• N/A

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• CMO/Sponsoring Executive Working Team – typically representatives in Product Marketing, Product Management, and Sales
• SoftwareReviews marketing analyst

60 minutes

1. Schedule inquiry with working team members and walk the team through the Buyer Persona and Journey Executive Brief PowerPoint presentation.
2. Optional: Have the (SoftwareReviews Advisory) SRA analyst walk the team through the Buyer Persona and Journey Executive Brief PowerPoint presentation as part of your session.

Review the Create a Buyer Persona Executive Brief (Slides 3-14)

1.2 Document team knowledge of buyer persona

Input

• Working team member knowledge

Output

• Initial draft of your buyer persona

Materials

• Buyer Persona Creation Template

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• CMO/Sponsoring Executive (optional)
• Working Team – typically representatives in Product Marketing, Product Management, and Sales

2-3 sessions of 60 minutes each

1. Schedule meeting with working team members and, using the Buyer Persona Template, lead the team in a discussion that documents current team knowledge of the target buyer persona.
2. Lead the team to prioritize an initial, single, most important persona and to collaborate to complete the template (and later, the buyer journey). Once the team learns the process for working on the initial persona, the development of additional personas will become more efficient.
3. Place the PowerPoint template in a shared drive for team collaboration. Expect to schedule several 60-minute meets. Quicken collaboration by encouraging team to “do their homework” by sharing persona knowledge within the shared drive version of the template. Your goal is to get to an initial agreed upon version that can be shared for additional validation with industry analyst(s) in the next step.

Download the Buyer Persona Creation Template

1.3 Validate with industry analysts

Input

• Identify gaps in persona from previous steps

Output

• Further validated buyer persona

Materials

• Bring your Buyer Persona Creation Template to the meeting to share with analysts

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• CMO/Sponsoring Executive (Optional)
• Working Team – typically representatives in Product Marketing, Product Management, and Sales
• Info-Tech analyst covering your product category and SoftwareReviews marketing analyst

30 minutes

1. Schedule meeting with working team members and discuss which persona areas require further validation from an Info-Tech analyst who has worked closely with those buyers within your persona.

60 minutes

2. Schedule an inquiry with the appropriate Info-Tech analyst and SoftwareReviews Advisory analyst to share current findings and see:
   1. Info-Tech analyst provide content feedback given what they know about your target persona and product category.
   2. SoftwareReviews Advisory analyst provide feedback on persona approach and to coach any gaps or important omissions.
3. Tabulate results and update your persona summary. At this point you will likely require additional validation through interviews with customers and prospects.

1.4 Identify interviewees and prepare for interviews

Input

• Identify segments within which you require persona knowledge
• Understand your persona insight gaps

Output

• List of interviewees

Materials

• Interviewee recording template on following slide
• Interview guide questions found within the Buyer Persona and Journey Interview Guide and data Capture Tool

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales

1-2 weeks

1. Identify the types of customers and prospects that will best represent your target persona. Choose interviewees that when interviewed will inform key differences among key segments (geographies, company size, mix of customers and prospects, etc.).
2. Recruit interviewees and schedule interviews for 45 minutes.
3. Keep track of Interviewees using the slide following this one.
4. In preparation for interviews, review the Buyer Persona and Journey Interview Guide and Data Capture Tool. Review the two sets of questions:
   1. Buyer Persona-Related – use to validate areas where you still have gaps in your persona, OR if you are starting with a blank persona and wish to build your personas entirely based on customer and prospect interviews.
   2. Buyer-Journey Related, which we will focus on in the next phase.

Download the Buyer Persona and Journey Interview Guide and Data Capture Tool

Phase 2
Interview Buyers and Validate Persona and Journey

This Phase walks you through the following activities:

• Developing final interview guide.
• Interviewing buyers and customers.
• Adjusting approach.
• Validating buyer persona.
• Crafting buyer journey
• Gaining analyst feedback.

This Phase involves the following stakeholders:

• Program leadership
• Product Marketing
• Representative(s) from Sales

2.1 Hold interviews

Input

• List of interviewees
• Final list of questions

Output

• Buyer perspectives on their personas and buyer journeys

Materials

• Buyer Persona and Journey Interview Guide and data Capture Tool

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales

1-2 weeks

1. Hold interviews and adjust your interviewing approach as you go along. Uncover where you are not getting the right answers, check with working team and analysts, and adjust.

Download the Buyer Persona and Journey Interview Guide and Data Capture Tool

2.2 Use interview findings to validate what’s needed for activation

Input

• List of interviewees
• Final list of questions

Output

• Buyer perspectives on their personas and buyer journeys
• Stakeholder feedback that actionable insights are resulting from interviews

Materials

• Buyer Persona Creation Template
• Buyer Persona and Journey Interview Guide and Data Capture Tool

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales
• SoftwareReviews marketing analyst

2 hours

1. Convene your team, with marketing analysts, and test early findings: It’s wise to test initial interview results to check that you are getting the right insights to understand and validate key challenges, pain points, needs, and other vital areas pertaining to the buyer persona. Are the answers you are getting enabling you to complete the Summary slides for later communications and training for Sales?
2. Check when doing buyer journey interviews that you are getting actionable answers that drive messaging, what asset types are needed, what the marketing channel mix is, and other vital insights to activate the results. Are the answers you are getting adequate to give guidance to campaigners, content marketers, and sales enablement?
3. See the following slides for detailed questions that need to be answered satisfactorily by your team members that need to “activate” the results.

Download the Buyer Persona and Journey Interview Guide and Data Capture Tool

2.2.1 Are you getting what you need from interviews to inform the buyer persona?

Test that you are on the right track:

1. Are you getting the functional answers so you can guide sellers to the right roles? Can you guide marketers/campaigners to the right “Ideal Customer Profile” for lead scoring?
2. Are you capturing the right emotive areas that will support message crafting? Solutioning? SEM/SEO?
3. Are you capturing insights into “how they decide” so sellers are well informed on the decision-making dynamics?
4. Are you getting a strong understanding of content, interaction preferences, and news and information sources so sellers can outreach more effectively, you can pinpoint media spend, and content marketing can create the right assets?

2.2.2 Are you getting what you need from interviews to support the buyer journey?

Our approach helps you define the buyer journey

Because marketing leaders need to reach buyers through the right channel with the right message at the right time during their decision cycle, you’ll benefit by using questionnaires that enable you to build the below easily and quickly.

2.3 Continue interviews

Input

• Final adjustments to list of interview questions

Output

• Final buyer perspectives on their personas and buyer journeys

Materials

• Buyer Persona Creation Template
• Buyer Persona and Journey Interview Guide and data Capture Tool

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales

1-2 weeks

1. Continue customer and prospect interviews.
2. Ensure you are gaining the segment perspectives needed.
3. Complete the “Summary” columns within the Buyer Persona and Journey Interview Guide and Data Capture Tool.

Download the Buyer Persona and Journey Interview Guide and Data Capture Tool

Phase 3
Prepare Communications and Educate Stakeholders

This Phase walks you through the following activities:

• Creating outputs for key stakeholders
• Communicating final findings and supporting marketing, sales, and product activation.

This Phase involves the following stakeholders:

• Program leadership
• Product Marketing
• Product Management
• Sales
• Field Marketing/Campaign Management
• Executive Leadership

3.1 Summarize interview results and convene full working team and steering committee for final review

Input

• Buyer persona and journey interviews detail

Output

• Buyer perspectives on their personas and buyer journeys

Materials

• Buyer Persona and Journey Interview Guide and Data Capture Tool
• Buyer Persona and Journey Summary Template

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• CMO/Sponsoring Executive (Optional)
• Working Team – typically representatives in Product Marketing, Product Management, and Sales
• SoftwareReviews marketing analyst

1-2 hours

1. Summarize interview results within the Buyer Persona and Journey Summary Template.

Download the Buyer Persona and Journey Interview Guide and Data Capture Tool

Download the Buyer Persona and Journey Summary Template

3.2 Convene executive steering committee and working team to review results

Input

• Buyer persona and journey interviews summary

Output

• Buyer perspectives on their personas and buyer journeys

Materials

• Buyer Persona and Journey Summary Template

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales

1-2 hours

1. Present final persona and journey results to the steering committee/executives and to working group using the summary slides interview results within the Buyer Persona and Journey Summary Template to finalize results.

Download the Buyer Persona and Journey Summary Template

3.3 Convene stakeholder meetings to activate results

Input

• Buyer persona and journey interviews summary

Output

Activation of key learnings to drive:

• Better product –market fit
• Lead gen
• Sales effectiveness
• Awareness

Materials

• Buyer Persona and Journey Summary Template

Participants

• Initiative Manager – individual leading the buyer persona and journey initiative
• Working Team – typically representatives in Product Marketing, Product Management, and Sales
• Stakeholder team members (see left)

4-5 hours

Present final persona and journey results to each stakeholder team. Key presentations include:

1. Product team to validate product market fit.
2. Content marketing to provide messaging direction for the creation of awareness and lead gen assets.
3. Campaigners/Field Marketing for campaign-related messaging and to identify asset types required to be designed and delivered to support the buyer journey.
4. Social media strategists for social post copy, and PR for other awareness-building copy.
5. Sales enablement/training to enable updating of sales collateral, proposals, and sales training materials. Sellers to help with their targeting, prospecting, and crafting of outbound messaging and talk tracks.

Download the Buyer Persona and Journey Summary Template

Summary of Accomplishment

Problem Solved

With the help of this blueprint, you have deepened your and your colleagues’ buyer understanding at both the persona “who they are” level and the buyer journey “how do they buy” level. You are among the minority of marketing leaders that have fully documented a buyer persona and journey – congratulations!

The benefits of having led your team through the process are significant and include the following:

• Better alignment of customer/buyer-facing teams such as in product, marketing, sales, and customer success.
• Messaging that can be used by marketing, sales, and social teams that will resonate with buyer initiatives, pain points, sought-after “pain relief,” and value.
• Places in the digital and physical universe where your prospects “hang out” so you can optimize your media spend.
• More effective use of marketing assets and sales collateral that align with the way your prospect needs to consume information throughout their buyer journey to make a decision in your solution area.

And by capturing and documenting your buyer persona and journey even for a single buyer type, you have started to build the “institutional strength” to apply the process to other roles in the decision-making process or for when you go after new and different buyer types for new products. And finally, by bringing your team along with you in this process, you have also led your team in becoming a more customer-focused organization – a strategic shift that all organizations should pursue.

If you would like additional support, contact us and we’ll make sure you get the professional expertise you need.

Contact your account representative for more information.

info@softwarereviews.com

1-888-670-8889

Related Software Reviews Research

Optimize Lead Generation With Lead Scoring

• Save time and money and improve your sales win rates when you apply our methodology to score contacts with your lead gen engine more accurately and pass better qualified leads over to your sellers.
• Our methodology teaches marketers to develop your own lead scoring approach based upon lead/contact profile vs. your Ideal Customer Profile (ICP) and scores contact engagement. Applying the methodology to arrive at your own approach to scoring will mean reduced lead gen costs, higher conversion rates, and increased marketing-influenced wins.

Bibliography

Bilardi, Emma. “How to Create Buyer Personas.” Product Marketing Alliance, July 2020. Accessed Dec. 2021.

Harrison, Liz, Dennis Spillecke, Jennifer Stanley, and Jenny Tsai. “Omnichannel in B2B sales: The new normal in a year that has been anything but.” McKinsey & Company, 15 March 2021. Accessed Dec. 2021.

Jansen, Hasse. “Buyer Personas – 33 Mind Blowing Stats.” Boardview.io!, 19 Feb. 2016. Accessed Jan. 2022.

Raynor, Lilah. “Understanding The Changing B2B Buyer Journey.” Forbes Agency Council, 18 July 2021. Accessed Dec. 2021.

Simpson, Jon. “Finding Your Audience: The Importance of Developing a Buyer Persona.” Forbes Agency Council, 16 May 2017. Accessed Dec. 2021.

“Successfully Executing Personalized Marketing Campaigns at Scale.” Plexure, 6 Jan. 2020. Accessed Dec 2020.

Ulwick, Anthony W. JOBS TO BE DONE: Theory to Practice. E-book, Strategyn, 1 Jan. 2017. Accessed Jan. 2022.

Mergers & Acquisitions: The Buy Blueprint

For IT leaders who want to have a role in the transaction process when their business is engaging in an M&A purchase.

EXECUTIVE BRIEF

Analyst Perspective

Don’t wait to be invited to the M&A table, make it.

Brittany Lutes
Research Analyst,
CIO Practice
Info-Tech Research Group

Ibrahim Abdel-Kader
Research Analyst,
CIO Practice
Info-Tech Research Group

IT has always been an afterthought in the M&A process, often brought in last minute once the deal is nearly, if not completely, solidified. This is a mistake. When IT is brought into the process late, the business misses opportunities to generate value related to the transaction and has less awareness of critical risks or inaccuracies.

To prevent this mistake, IT leadership needs to develop strong business relationships and gain respect for their innovative suggestions. In fact, when it comes to modern M&A activity, IT should be the ones suggesting potential transactions to meet business needs, specifically when it comes to modernizing the business or adopting digital capabilities.

IT needs to stop waiting to be invited to the acquisition or divestiture table. IT needs to suggest that the table be constructed and actively work toward achieving the strategic objectives of the business.

Executive Summary

Your Challenge

There are four key scenarios or entry points for IT as the acquiring organization in M&As:

• IT can suggest an acquisition to meet the business objectives of the organization.
• IT is brought in to strategy plan the acquisition from both the business’ and IT’s perspectives.
• IT participates in due diligence activities and valuates the organization potentially being acquired.
• IT needs to reactively prepare its environment to enable the integration.

Consider the ideal scenario for your IT organization.

Common Obstacles

Some of the obstacles IT faces include:

• IT is often told about the transaction once the deal has already been solidified and is now forced to meet unrealistic business demands.
• The business does not trust IT and therefore does not approach IT to define value or reduce risks to the transaction process.
• The people and culture element are forgotten or not given adequate priority.

These obstacles often arise when IT waits to be invited into the transaction process and misses critical opportunities.

Info-Tech's Approach

Prepare for a growth/integration transaction by:

• Recognizing the trend for organizations to engage in M&A activity and the increased likelihood that, as an IT leader, you will be involved in a transaction in your career.
• Creating a standard strategy that will enable strong program management.
• Properly considering all the critical components of the transaction and integration by prioritizing tasks that will reduce risk, deliver value, and meet stakeholder expectations.

Info-Tech Insight

As the number of merger, acquisition, and divestiture transactions continues to increase, so too does IT’s opportunity to leverage the growing digital nature of these transactions and get involved at the onset.

The changing M&A landscape

Businesses will embrace more digital M&A transactions in the post-pandemic world

• When the pandemic occurred, businesses reacted by either pausing (61%) or completely cancelling (46%) deals that were in the mid-transaction state (Deloitte, 2020). The uncertainty made many organizations consider whether the risks would be worth the potential benefits.
• However, many organizations quickly realized the pandemic is not a hindrance to M&A transactions but an opportunity. Over 16,000 American companies were involved in M&A transactions in the first six months of 2021 (The Economist). For reference, this had been averaging around 10,000 per six months from 2016 to 2020.
• In addition to this transaction growth, organizations have increasingly been embracing digital. These trends increase the likelihood that, as an IT leader, you will engage in an M&A transaction. However, it is up to you when you get involved in the transactions.

The total value of transactions in the year after the pandemic started was $1.3 billion – a 93% increase in value compared to before the pandemic. (Nasdaq)

Virtual deal-making will be the preferred method of 55% of organizations in the post-pandemic world. (Wall Street Journal, 2020)

Your challenge

IT is often not involved in the M&A transaction process. When it is, it’s often too late.

• The most important driver of an acquisition is the ability to access new technology (DLA Piper), and yet 50% of the time, IT isn’t involved in the M&A transaction at all (IMAA Institute, 2017).
• Additionally, IT’s lack of involvement in the process negatively impacts the business:
  • Most organizations (60%) do not have a standardized approach to integration (Steeves and Associates).
  • Weak integration teams contribute to the failure of 70% of M&A integrations (The Wall Street Journal, 2019).
  • Less than half (47%) of organizations actually experience the positive results sought by the M&A transaction (Steeves and Associates).
• Organizations pursuing M&A and not involving IT are setting themselves up for failure.

Only half of M&A deals involve IT (Source: IMAA Institute, 2017)

Common Obstacles

These barriers make this challenge difficult to address for many organizations:

• IT is rarely afforded the opportunity to participate in the transaction deal. When IT is invited, this often happens later in the process where integration will be critical to business continuity.
• IT has not had the opportunity to demonstrate that it is a valuable business partner in other business initiatives.
• One of the most critical elements that IT often doesn’t take the time or doesn’t have the time to focus on is the people and leadership component.
• IT waits to be invited to the process rather then actively involving themselves and suggesting how value can be added to the process.

In hindsight, it’s clear to see: Involving IT is just good business.

47% of senior leaders wish they would have spent more time on IT due diligence to prevent value erosion. (Source: IMAA Institute, 2017)

“40% of acquiring businesses discovered a cybersecurity problem at an acquisition.” (Source: Okta)

Info-Tech's approach

Acquisitions & Divestitures Framework

Acquisitions and divestitures are inevitable in modern business, and IT’s involvement in the process should be too. This progression is inspired by:

1. The growing trend for organizations to increase, decrease, or evolve through these types of transactions.
2. Transactions that are driven by digital motivations, requiring IT’s expertise.
3. A maturing business perspective of IT, preventing the difficulty that IT is faced with when invited into the transaction process late.
4. There never being such a thing as a true merger, making the majority of M&A activity either acquisitions or divestitures.

The business’ view of IT will impact how soon IT can get involved

There are four key entry points for IT

1. Innovator: IT suggests an acquisition to meet the business objectives of the organization.
2. Business Partner: IT is brought in to strategy plan the acquisition from both the business’ and IT’s perspective.
3. Trusted Operator: IT participates in due diligence activities and valuates the organization potentially being acquired.
4. Firefighter: IT reactively engages in the integration with little time to prepare.

Merger, acquisition, and divestiture defined

Merger

A merger looks at the equal combination of two entities or organizations. Mergers are rare in the M&A space, as the organizations will combine assets and services in a completely equal 50/50 split. Two organizations may also choose to divest business entities and merge as a new company.

Acquisition

The most common transaction in the M&A space, where an organization will acquire or purchase another organization or entities of another organization. This type of transaction has a clear owner who will be able to make legal decisions regarding the acquired organization.

Divestiture

An organization may decide to sell partial elements of a business to an acquiring organization. They will separate this business entity from the rest of the organization and continue to operate the other components of the business.

Info-Tech Insight

A true merger does not exist, as there is always someone initiating the discussion. As a result, most M&A activity falls into acquisition or divestiture categories.

Buying vs. selling

The M&A process approach differs depending on whether you are the executive IT leader on the buy side or sell side

This blueprint is only focused on the buy side:

• More than two organizations could be involved in a transaction.
• Examples of buy-related scenarios include:
  • Your organization is buying another organization with the intent of having the purchased organization keep its regular staff, operations, and location. This could mean minimal integration is required.
  • Your organization is buying another organization in its entirety with the intent of integrating it into your original company.
  • Your organization is buying components of another organization with the intent of integrating them into your original company.
• As the purchasing organization, you will probably be initiating the purchase and thus will be valuating the selling organization during due diligence and leading the execution plan.

The sell side is focused on:

• Examples of sell-related scenarios include:
  • Your organization is selling to another organization with the intent of keeping its regular staff, operations, and location. This could mean minimal separation is required.
  • Your organization is selling to another organization with the intent of separating to be a part of the purchasing organization.
  • Your organization is engaging in a divestiture with the intent of:
    • Separating components to be part of the purchasing organization permanently.
    • Separating components to be part of a spinoff and establish a unit as a standalone new company.
• As the selling organization, you could proactively seek out suitors to purchase all or components of your organization, or you could be approached by an organization.

For more information on divestitures or selling your entire organization, check out Info-Tech’s Mergers & Acquisitions: The Sell Blueprint.

Core business timeline

For IT to be valuable in M&As, you need to align your deliverables and your support to the key activities the business and investors are working on.

Info-Tech’s methodology for Buying Organizations in Mergers, Acquisitions, or Divestitures

Potential metrics for each phase

The IT executive’s role in the buying transaction is critical

And IT leaders have a greater likelihood than ever of needing to support a merger, acquisition, or divestiture.

1. Reduced Risk

   IT can identify risks that may go unnoticed when IT is not involved.

2. Increased Accuracy

   The business can make accurate predictions around the costs, timelines, and needs of IT.

3. Faster Integration

   Faster integration means faster value realization for the business.

4. Informed Decision Making

   IT leaders hold critical information that can support the business in moving the transaction forward.

5. Innovation

   IT can suggest new opportunities to generate revenue, optimize processes, or reduce inefficiencies.

The IT executive’s critical role is demonstrated by:

• Reduced Risk

  47% of senior leaders wish they would have spent more time on IT due diligence to prevent value erosion (IMAA Institute, 2017).

• Increased Accuracy

  87% of respondents to a Deloitte survey effectively conducted a virtual deal, with a focus on cybersecurity and integration (Deloitte, 2020).

• Faster Integration

  Integration costs range from as low as $4 million to as high as $3.8 billion, making the process an investment for the organization (CIO Dive).

• Informed Decision Making

  Only 38% of corporate and 22% of private equity firms include IT as a significant aspect in their transaction approach (IMAA Institute, 2017).

• Innovation

  Successful CIOs involved in M&As can spend 70% of their time on aspects outside of IT and 30% of their time on technology and delivery (CIO).

Playbook benefits

IT Benefits

• IT will be seen as an innovative partner to the business, and its suggestions and involvement in the organization will lead to benefits, not hindrances.
• Develop a streamlined method to valuate the potential organization being purchased and ensure risk management concerns are brought to the business’ attention immediately.
• Create a comprehensive list of items that IT needs to do during the integration that can be prioritized and actioned.

Business Benefits

• The business will get accurate and relevant information about the organization being acquired, ensuring that the anticipated value of the transaction is correctly planned for.
• Fewer business interruptions will happen, because IT can accurately plan for and execute the high-priority integration tasks.
• The business can make a fair offer to the purchased organization, having properly valuated all aspects being bought, including the IT environment.

Insight summary

Overarching Insight

As an IT executive, take control of when you get involved in a growth transaction. Do this by proactively identifying acquisition targets, demonstrating the value of IT, and ensuring that integration of IT environments does not lead to unnecessary and costly decisions.

Proactive Insight

CIOs on the forefront of digital transformation need to actively look for and suggest opportunities to acquire or partner on new digital capabilities to respond to rapidly changing business needs.

Discovery & Strategy Insight

IT organizations that have an effective M&A program plan are more prepared for the buying transaction, enabling a successful outcome. A structured strategy is particularly necessary for organizations expected to deliver M&As rapidly and frequently.

Due Diligence & Preparation Insight

Most IT synergies can be realized in due diligence. It is more impactful to consider IT processes and practices (e.g. contracts and culture) in due diligence rather than later in the integration.

Execution & Value Realization Insight

IT needs to realize synergies within the first 100 days of integration. The most successful transactions are when IT continuously realizes synergies a year after the transaction and beyond.

Blueprint deliverables

Key Deliverable: M&A Buy Playbook

The M&A Buy Playbook should be a reusable document that enables your IT organization to successfully deliver on any acquisition transaction.

M&A Buy One-Pager

See a one-page overview of each phase of the transaction.

M&A Buy Case Studies

Read a one-page case study for each phase of the transaction.

M&A Integration Project Management Tool (SharePoint)

Manage the integration process of the acquisition using this SharePoint template.

M&A Integration Project Management Tool (Excel)

Manage the integration process of the acquisition using this Excel tool if you can’t or don’t want to use SharePoint.

Info-Tech offers various levels of support to best suit your needs

Diagnostics and consistent frameworks used throughout all four options

Guided Implementation

What does a typical GI on this topic look like?

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is between 6 to 10 calls over the course of 2 to 4 months.

Proactive Phase

• Call #1: Scope requirements, objectives, and your specific challenges.

Discovery & Strategy Phase

• Call #2: Determine stakeholders and their perspectives of IT.
• Call #3: Identify how M&A could support business strategy and how to communicate.

Due Diligence & Preparation Phase

• Call #4: Establish a transaction team and acquisition strategic direction.
• Call #5: Create program metrics and identify a standard integration strategy.
• Call #6: Assess the potential organization(s).
• Call #7: Identify the integration program plan.

Execution & Value Realization Phase

• Call #8: Establish employee transitions to retain key staff.
• Call #9: Assess IT’s ability to deliver on the acquisition transaction.

The Buy Blueprint

Phase 1

Proactive

This phase will walk you through the following activities:

• Conduct the CEO-CIO Alignment diagnostic
• Conduct the CIO Business Vision diagnostic
• Visualize relationships among stakeholders to identify key influencers
• Group stakeholders into categories
• Prioritize your stakeholders
• Plan to communicate
• Valuate IT
• Assess the IT/digital strategy
• Determine pain points and opportunities
• Align goals to opportunities
• Recommend growth opportunities

This phase involves the following participants:

• IT and business leadership

What is the Proactive phase?

Embracing the digital drivers

As the number of merger, acquisition, or divestiture transactions driven by digital means continues to increase, IT has an opportunity to not just be involved in a transaction but actively seek out potential deals.

In the Proactive phase, the business is not currently considering a transaction. However, the business could consider one to reach its strategic goals. IT organizations that have developed respected relationships with the business leaders can suggest these potential transactions.

Understand the business’ perspective of IT, determine who the critical M&A stakeholders are, valuate the IT environment, and examine how it supports the business goals in order to suggest an M&A transaction.

In doing so, IT isn’t waiting to be invited to the transaction table – it’s creating it.

Goal: To support the organization in reaching its strategic goals by suggesting M&A activities that will enable the organization to reach its objectives faster and with greater-value outcomes.

Proactive Prerequisite Checklist

Before coming into the Proactive phase, you should have addressed the following:

• Understand what mergers, acquisitions, and divestitures are.
• Understand what mergers, acquisitions, and divestitures mean for the business.
• Understand what mergers, acquisitions, and divestitures mean for IT.

Review the Executive Brief for more information on mergers, acquisitions, and divestitures for purchasing organizations.

Proactive

Step 1.1

Identify M&A Stakeholders and Their Perspective of IT

Activities

• 1.1.1 Conduct the CEO-CIO Alignment diagnostic
• 1.1.2 Conduct the CIO Business Vision diagnostic
• 1.1.3 Visualize relationships among stakeholders to identify key influencers
• 1.1.4 Group stakeholders into categories
• 1.1.5 Prioritize your stakeholders
• 1.16 Plan to communicate

This step involves the following participants:

• IT executive leader
• IT leadership
• Critical M&A stakeholders

Outcomes of Step

Understand how the business perceives IT and establish strong relationships with critical M&A stakeholders.

Business executives' perspectives of IT

Leverage diagnostics and gain alignment on IT’s role in the organization

• To suggest or get involved with a merger, acquisition, or divestiture, the IT executive leader needs to be well respected by other members of the executive leadership team and the business.
• Specifically, the Proactive phase relies on the IT organization being viewed as an Innovator within the business.
• Identify how the CEO/business executive currently views IT and where they would like IT to move within the Maturity Ladder.
• Additionally, understand how other critical department leaders view IT and how they view the partnership with IT.

Misalignment in target state requires further communication between the CIO and CEO to ensure IT is striving toward an agreed-upon direction.

Info-Tech’s CIO Business Vision (CIO BV) diagnostic measures a variety of high-value metrics to provide a well-rounded understanding of stakeholder satisfaction with IT.

Business Satisfaction and Importance for Core Services

The core services of IT are important when determining what IT should focus on. The most important services with the lowest satisfaction offer the largest area of improvement for IT to drive business value.

1.1.1 Conduct the CEO-CIO Alignment diagnostic

Input: IT organization expertise and the CEO-CIO Alignment diagnostic

Output: An understanding of an executive business stakeholder’s perception of IT

Materials: CEO-CIO Alignment diagnostic, M&A Buy Playbook

Participants: IT executive/CIO, Business executive/CEO

1. The CEO-CIO Alignment diagnostic can be a powerful input. Speak with your Info-Tech account representative to conduct the diagnostic. Use the results to inform current IT capabilities.
2. You may choose to debrief the results of your diagnostic with an Info-Tech analyst. We recommend this to help your team understand how to interpret and draw conclusions from the results.
3. Examine the results of the survey and note where there might be specific capabilities that could be improved.
4. Determine whether there are any areas of significant disagreement between the you and the CEO. Mark down those areas for further conversations. Additionally, take note of areas that could be leveraged to support growth transactions or support your rationale in recommending growth transactions.

Download the sample report.

Record the results in the M&A Buy Playbook.

1.1.2 Conduct the CIO Business Vision diagnostic

2 weeks

Input: IT organization expertise, CIO BV diagnostic

Output: An understanding of business stakeholder perception of certain IT capabilities and services

Materials: CIO Business Vision diagnostic, Computer, Whiteboard and markers, M&A Buy Playbook

Participants: IT executive/CIO, Senior business leaders

1. The CIO Business Vision (CIO BV) diagnostic can be a powerful tool for identifying IT capability focus areas. Speak with your account representative to conduct the CIO BV diagnostic. Use the results to inform current IT capabilities.
2. You may choose to debrief the results of your diagnostic with an Info-Tech analyst. We recommend this to help your team understand how to interpret the results and draw conclusions from the diagnostic.
3. Examine the results of the survey and take note of any IT services that have low scores.
4. Read through the diagnostic comments and note any common themes. Especially note which stakeholders identified they have a favorable relationship with IT and which stakeholders identified they have an unfavorable relationship. For those who have an unfavorable relationship, identify if they will have a critical role in a growth transaction.

Download the sample report.

Record the results in the M&A Buy Playbook.

Create a stakeholder network map for M&A transactions

Follow the trail of breadcrumbs from your direct stakeholders to their influencers to uncover hidden stakeholders.

Example:

Legend
• Black arrows indicate the direction of professional influence
• Dashed green arrows indicate bidirectional, informal influence relationships

Info-Tech Insight

Your stakeholder map defines the influence landscape that the M&A transaction will occur within. This will identify who holds various levels of accountability and decision-making authority when a transaction does take place.

Use connectors to determine who may be influencing your direct stakeholders. They may not have any formal authority within the organization, but they may have informal yet substantial relationships with your stakeholders.

1.1.3 Visualize relationships among stakeholders to identify key influencers

1-3 hours

Input: List of M&A stakeholders

Output: Relationships among M&A stakeholders and influencers

Materials: M&A Buy Playbook

Participants: IT executive leadership

1. The purpose of this activity is to list all the stakeholders within your organization that will have a direct or indirect impact on the M&A transaction.
2. Determine the critical stakeholders, and then determine the stakeholders of your stakeholders and consider adding each of them to the stakeholder list.
3. Assess who has either formal or informal influence over your stakeholders; add these influencers to your stakeholder list.
4. Construct a diagram linking stakeholders and their influencers together.
   • Use black arrows to indicate the direction of professional influence.
   • Use dashed green arrows to indicate bidirectional, informal influence relationships.

Record the results in the M&A Buy Playbook.

Categorize your stakeholders with a prioritization map

A stakeholder prioritization map helps IT leaders categorize their stakeholders by their level of influence and ownership in the merger, acquisition, or divestiture process.

There are four areas in the map, and the stakeholders within each area should be treated differently.

Players – players have a high interest in the initiative and the influence to effect change over the initiative. Their support is critical, and a lack of support can cause significant impediment to the objectives.

Mediators – mediators have a low interest but significant influence over the initiative. They can help to provide balance and objective opinions to issues that arise.

Noisemakers – noisemakers have low influence but high interest. They tend to be very vocal and engaged, either positively or negatively, but have little ability to enact their wishes.

Spectators – generally, spectators are apathetic and have little influence over or interest in the initiative.

1.1.4 Group stakeholders into categories

30 minutes

Input: Stakeholder map, Stakeholder list

Output: Categorization of stakeholders and influencers

Materials: Flip charts, Markers, Sticky notes, M&A Buy Playbook

Participants: IT executive leadership, Stakeholders

1. Identify your stakeholders’ interest in and influence on the M&A process as high, medium, or low by rating the attributes below.
2. Map your results to the model to the right to determine each stakeholder’s category.

Level of Influence

• Power: Ability of a stakeholder to effect change.
• Urgency: Degree of immediacy demanded.
• Legitimacy: Perceived validity of stakeholder’s claim.
• Volume: How loud their “voice” is or could become.
• Contribution: What they have that is of value to you.

Level of Interest

How much are the stakeholder’s individual performance and goals directly tied to the success or failure of the product?

Record the results in the M&A Buy Playbook.

Prioritize your stakeholders

There may be too many stakeholders to be able to manage them all. Focus your attention on the stakeholders that matter most.

Consider the three dimensions for stakeholder prioritization: influence, interest, and support. Support can be determined by answering the following question: How significant is that stakeholder to the M&A or divestiture process?

These parameters are used to prioritize which stakeholders are most important and should receive your focused attention.

1.1.5 Prioritize your stakeholders

30 minutes

Input: Stakeholder matrix

Output: Stakeholder and influencer prioritization

Materials: Flip charts, Markers, Sticky notes, M&A Buy Playbook

Participants: IT executive leadership, M&A/divestiture stakeholders

1. Identify the level of support of each stakeholder by answering the following question: How significant is that stakeholder to the M&A transaction process?
2. Prioritize your stakeholders using the prioritization scheme on the previous slide.

Record the results in the M&A Buy Playbook.

Define strategies for engaging stakeholders by type

Info-Tech Insight

Each group of stakeholders draws attention and resources away from critical tasks. By properly identifying stakeholder groups, the IT executive leader can develop corresponding actions to manage stakeholders in each group. This can dramatically reduce wasted effort trying to satisfy Spectators and Noisemakers while ensuring the needs of Mediators and Players are met.

1.1.6 Plan to communicate

30 minutes

Input: Stakeholder priority, Stakeholder categorization, Stakeholder influence

Output: Stakeholder communication plan

Materials: Flip charts, Markers, Sticky notes, M&A Buy Playbook

Participants: IT executive leadership, M&A/divestiture stakeholders

The purpose of this activity is to make a communication plan for each of the stakeholders identified in the previous activities, especially those who will have a critical role in the M&A transaction process.

1. In the M&A Buy Playbook, input the type of influence each stakeholder has on IT, how they would be categorized in the M&A process, and their level of priority. Use this information to create a communication plan.
2. Determine the methods and frequency of communication to keep the necessary stakeholder satisfied and maintain or enhance IT’s profile within the organization.

Record the results in the M&A Buy Playbook.

Proactive

Step 1.2

Assess IT’s Current Value and Method to Achieve a Future State

Activities

• 1.2.1 Valuate IT
• 1.2.2 Assess the IT/digital strategy

This step involves the following participants:

• IT executive leader
• IT leadership
• Critical stakeholders to M&A

Outcomes of Step

Identify critical opportunities to optimize IT and meet strategic business goals through a merger, acquisition, or divestiture.

How to valuate your IT environment

And why it matters so much

• Valuating your current organization’s IT environment is a critical step that all IT organizations should take, whether involved in an M&A or not, to fully understand what it might be worth.
• The business investments in IT can be directly translated into a value amount. For every $1 invested in IT, the business might be gaining $100 in value back or possibly even loosing $100.
• Determining, documenting, and communicating this information ensures that the business takes IT’s suggestions seriously and recognizes why investing in IT is so critical.
• There are three ways a business or asset can be valuated:
  • Cost Approach: Look at the costs associated with building, purchasing, replacing, and maintaining a given aspect of the business.
  • Market Approach: Look at the relative value of a particular aspect of the business. Relative value can fluctuate and depends on what the markets and consequently society believe that particular element is worth.
  • Discounted Cash Flow Approach: Focus on what the potential value of the business could be or the intrinsic value anticipated due to future profitability.
(Source: “Valuation Methods,” Corporate Finance Institute)

Four ways to create value through digital

1. Reduced costs
2. Improved customer experience
3. New revenue sources
4. Better decision making
(Source: McKinsey & Company)

1.2.1 Valuate IT

1 day

Input: Valuation of data, Valuation of applications, Valuation of infrastructure and operations, Valuation of security and risk

Output: Valuation of IT

Materials: Relevant templates/tools listed on the following slides, Capital budget, Operating budget, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership

The purpose of this activity is to demonstrate that IT is not simply an operational functional area that diminishes business resources. Rather, IT contributes significant value to the business.

1. Review each of the following slides to valuate IT’s data, applications, infrastructure and operations, and security and risk. These valuations consider several tangible and intangible factors and result in a final dollar amount.
2. Input the financial amounts identified for each critical area into a summary slide. Use this information to determine where IT is delivering value to the organization.

Info-Tech Insight

Consistency is key when valuating your IT organization as well as other IT organizations throughout the transaction process.

Record the results in the M&A Buy Playbook.

Data valuation

Data valuation identifies how you monetize the information that your organization owns.

Create a data value chain for your organization

When valuating the information and data that exists in an organization, there are many things to consider.

Info-Tech has two tools that can support this process:

1. Information Asset Audit Tool: Use this tool first to take inventory of the different information assets that exist in your organization.
2. Data Valuation Tool: Once information assets have been accounted for, valuate the data that exists within those information assets.

Instructions

1. Using the Data Valuation Tool, start gathering information based on the eight steps above to understand your organization’s journey from data to value.
2. Identify the data value spectrum. (For example: customer sales service, citizen licensing service, etc.)
3. Fill out the columns for data sources, data collection, and data first.
4. Capture data analysis and related information.
5. Then capture the value in data.
6. Add value dimensions such as usage, quality, and economic dimensions.
   • Remember that economic value is not the only dimension, and usage/quality has a significant impact on economic value.
7. Collect evidence to justify your data valuation calculator (market research, internal metrics, etc.).
8. Finally, calculate the value that has a direct correlation with underlying value metrics.

Application valuation

Calculate the value of your IT applications

When valuating the applications and their users in an organization, consider using a business process map. This shows how business is transacted in the company by identifying which IT applications support these processes and which business groups have access to them. Info-Tech has a business process mapping tool that can support this process:

• Enterprise Integration Process Mapping Tool: Complete this tool first to map the different business processes to the supporting applications in your organization.

Instructions

1. Start by calculating user costs. This is the product of the (# of users) × (% of time spent using IT) × (fully burdened salary).
2. Identify the revenue per employee and divide that by the average cost per employee to calculate the derived productivity ratio (DPR).
3. Once you have calculated the user costs and DPR, multiply those total values together to get the application value.

User Costs			Total User Costs	Derived Productivity Ratio (DPR)		Total DPR	Application Value
# of users	% time spent using IT	Fully burdened salary	Multiply values from the 3 user costs columns	Revenue per employee	Average cost per employee	(Revenue P.E) ÷ (Average cost P.E)	(User costs) X (DPR)



4. Once the total application value is established, calculate the combined IT and business costs of delivering that value. IT and business costs include inflexibility (application maintenance), unavailability (downtime costs, including disaster exposure), IT costs (common costs statistically allocated to applications), and fully loaded cost of active (full-time equivalent [FTE]) users.
5. Calculate the net value of applications by subtracting the total IT and business costs from the total application value calculated in step 3.

IT and Business Costs				Total IT and Business Costs	Net Value of Applications
Application maintenance	Downtime costs (include disaster exposure)	Common costs allocated to applications	Fully loaded costs of active (FTE) users	Sum of values from the four IT and business costs columns	(Application value) – (IT and business costs)

(Source: CSO)

Infrastructure valuation

Assess the foundational elements of the business’ information technology

The purpose of this exercise is to provide a high-level infrastructure valuation that will contribute to valuating your IT environment.

Calculating the value of the infrastructure will require different methods depending on the environment. For example, a fully cloud-hosted organization will have different costs than a fully on-premises IT environment.

Instructions:

1. Start by listing all of the infrastructure-related items that are relevant to your organization.
2. Once you have finalized your items column, identify the total costs/value of each item.
   • For example, total software costs would include servers and storage.
3. Calculate the total cost/value of your IT infrastructure by adding all of values in the right column.

For additional support, download the M&A Runbook for Infrastructure and Operations.

Risk and security

Assess risk responses and calculate residual risk

The purpose of this exercise is to provide a high-level risk assessment that will contribute to valuating your IT environment. For a more in-depth risk assessment, please refer to the Info-Tech tools below:

1. Risk Register Tool
2. Security M&A Due Diligence Tool

Instructions

1. Review the probability and impact scales below and ensure you have the appropriate criteria that align to your organization before you conduct a risk assessment.
2. Identify the probability of occurrence and estimated financial impact for each risk category detail and fill out the table on the right. Customize the table as needed so it aligns to your organization.

Probability of Risk Occurrence	Occurrence Criteria (Classification; Probability of Risk Event Within One Year)
Negligible	Very Unlikely; ‹20%
Very Low	Unlikely; 20 to 40%
Low	Possible; 40 to 60%
Moderately Low	Likely; 60 to 80%
Moderate	Almost Certain; ›80%

Note: If needed, you can customize this scale with the severity designations that you prefer. However, make sure you are always consistent with it when conducting a risk assessment.

1.2.2 Assess the IT/digital strategy

4 hours

Input: IT strategy, Digital strategy, Business strategy

Output: An understanding of an executive business stakeholder’s perception of IT, Alignment of IT/digital strategy and overall organization strategy

Materials: Computer, Whiteboard and markers, M&A Buy Playbook

Participants: IT executive/CIO, Business executive/CEO

The purpose of this activity is to review the business and IT strategies that exist to determine if there are critical capabilities that are not being supported.

Ideally, the IT and digital strategies would have been created following development of the business strategy. However, sometimes the business strategy does not directly call out the capabilities it requires IT to support.

1. On the left half of the corresponding slide in the M&A Buy Playbook, document the business goals, initiatives, and capabilities. Input this information from the business or digital strategies. (If more space for goals, initiatives, or capabilities is needed, duplicate the slide).
2. On the other half of the slide, document the IT goals, initiatives, and capabilities. Input this information from the IT strategy and digital strategy.

For additional support, see Build a Business-Aligned IT Strategy.

Record the results in the M&A Buy Playbook.

Proactive

Step 1.3

Drive Innovation and Suggest Growth Opportunities

Activities

• 1.3.1 Determine pain points and opportunities
• 1.3.2 Align goals with opportunities
• 1.3.3 Recommend growth opportunities

This step involves the following participants:

• IT executive leader
• IT leadership
• Critical M&A stakeholders

Outcomes of Step

Establish strong relationships with critical M&A stakeholders and position IT as an innovative business partner that can suggest growth opportunities.

1.3.1 Determine pain points and opportunities

1-2 hours

Input: CEO-CIO Alignment diagnostic, CIO Business Vision diagnostic, Valuation of IT environment, IT-business goals cascade

Output: List of pain points or opportunities that IT can address

Materials: Computer, Whiteboard and markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Business stakeholders

The purpose of this activity is to determine the pain points and opportunities that exist for the organization. These can be external or internal to the organization.

1. Identify what opportunities exist for your organization. Opportunities are the potential positives that the organization would want to leverage.
2. Next, identify pain points, which are the potential negatives that the organization would want to alleviate.
3. Spend time considering all the options that might exist, and keep in mind what has been identified previously.

Opportunities and pain points can be trends, other departments’ initiatives, business perspectives of IT, etc.

Record the results in the M&A Buy Playbook.

1.3.2 Align goals with opportunities

1-2 hours

Input: CEO-CIO Alignment diagnostic, CIO Business Vision diagnostic, Valuation of IT environment, IT-business goals cascade, List of pain points and opportunities

Output: An understanding of an executive business stakeholder’s perception of IT, Foundations for growth strategy

Materials: Computer, Whiteboard and markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Business stakeholders

The purpose of this activity is to determine whether a growth or separation strategy might be a good suggestion to the business in order to meet its business objectives.

1. For the top three to five business goals, consider:
   1. Underlying drivers
   2. Digital opportunities
   3. Whether a growth or reduction strategy is the solution
2. Just because a growth or reduction strategy is a solution for a business goal does not necessarily indicate M&A is the way to go. However, it is important to consider before you pursue suggesting M&A.

Record the results in the M&A Buy Playbook.

1.3.3 Recommend growth opportunities

1-2 hours

Input: Growth or separation strategy opportunities to support business goals, Stakeholder communication plan, Rationale for the suggestion

Output: M&A transaction opportunities suggested

Materials: M&A Buy Playbook

Participants: IT executive/CIO, Business executive/CEO

The purpose of this activity is to recommend a merger, acquisition, or divestiture to the business.

1. Identify which of the business goals the transaction would help solve and why IT is the one to suggest such a goal.
2. Leverage the stakeholder communication plan identified previously to give insight into stakeholders who would have a significant level of interest, influence, or support in the process.

Info-Tech Insight

With technology and digital driving many transactions, leverage this opening and begin the discussions with your business on how and why an acquisition would be a great opportunity.

Record the results in the M&A Buy Playbook.

By the end of this Proactive phase, you should:

Be prepared to suggest M&A opportunities to support your company’s goals through growth or acquisition transactions

Key outcome from the Proactive phase

Develop progressive relationships and strong communication with key stakeholders to suggest or be aware of transformational opportunities that can be achieved through growth or reduction strategies such as mergers, acquisitions, or divestitures.

Key deliverables from the Proactive phase

• Business perspective of IT examined
• Key stakeholders identified and relationship to the M&A process outlined
• Ability to valuate the IT environment and communicate IT’s value to the business
• Assessment of the business, digital, and IT strategies and how M&As could support those strategies
• Pain points and opportunities that could be alleviated or supported through an M&A transaction
• Acquisition or buying recommendations

The Buy Blueprint

Phase 2

Discovery & Strategy

This phase will walk you through the following activities:

• Create the mission and vision
• Identify the guiding principles
• Create the future-state operating model
• Determine the transition team
• Document the M&A governance
• Create program metrics
• Establish the integration strategy
• Conduct a RACI
• Create the communication plan
• Assess the potential organization(s)

This phase involves the following participants:

• IT executive/CIO
• IT senior leadership
• Company M&A team

Workshop Overview

Contact your account representative for more information.
workshops@infotech.com 1-888-670-8889

What is the Discovery & Strategy phase?

Pre-transaction state

The Discovery & Strategy phase during an acquisition is a unique opportunity for many IT organizations. IT organizations that can participate in the acquisition transaction at this stage are likely considered a strategic partner of the business.

For one-off acquisitions, IT being invited during this stage of the process is rare. However, for organizations that are preparing to engage in many acquisitions over the coming years, this type of strategy will greatly benefit from IT involvement. Again, the likelihood of participating in an M&A transaction is increasing, making it a smart IT leadership decision to, at the very least, loosely prepare a program plan that can act as a strategic pillar throughout the transaction.

During this phase of the pre-transaction state, IT will also be asked to participate in ensuring that the potential organization being sought will be able to meet any IT-specific search criteria that was set when the transaction was put into motion.

Goal: To identify a repeatable program plan that IT can leverage when acquiring all or parts of another organization’s IT environment, ensuring customer satisfaction and business continuity

Discovery & Strategy Prerequisite Checklist

Before coming into the Discovery & Strategy phase, you should have addressed the following:

• Understand the business perspective of IT.
• Know the key stakeholders and have outlined their relationships to the M&A process.
• Be able to valuate the IT environment and communicate IT's value to the business.
• Understand the rationale for the company's decisions to pursue an acquisition and the opportunities or pain points the acquisition should address.

Discovery & Strategy

Step 2.1

Establish the M&A Program Plan

Activities

• 2.1.1 Create the mission and vision
• 2.1.2 Identify the guiding principles
• 2.1.3 Create the future-state operating model
• 2.1.4 Determine the transition team
• 2.1.5 Document the M&A governance
• 2.1.6 Create program metrics

This step involves the following participants:

• IT executive/CIO
• IT senior leadership
• Company M&A team

Outcomes of Step

Establish an M&A program plan that can be repeated across acquisitions.

The vision and mission statements clearly articulate IT’s aspirations and purpose

The IT vision statement communicates a desired future state of the IT organization, whereas the IT mission statement portrays the organization’s reason for being. While each serves its own purpose, they should both be derived from the business context implications for IT.

2.1.1 Create the mission and vision statements

2 hours

Input: Business objectives, IT capabilities, Rationale for the transaction

Output: IT’s mission and vision statements for growth strategies tied to mergers, acquisitions, and divestitures

Materials: Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to create mission and vision statements that reflect IT’s intent and method to support the organization as it pursues a growth strategy.

1. Review the definitions and characteristics of mission and vision statements.
2. Brainstorm different versions of the mission and vision statements.
3. Edit the statements until you get to a single version of each that accurately reflects IT’s role in the growth process.

Record the results in the M&A Buy Playbook.

Guiding principles provide a sense of direction

IT guiding principles are shared, long-lasting beliefs that guide the use of IT in constructing, transforming, and operating the enterprise by informing and restricting IT investment portfolio management, solution development, and procurement decisions.

IT principles must be carefully constructed to make sure they are adhered to and relevant

Info-Tech has identified a set of characteristics that IT principles should possess. These characteristics ensure the IT principles are relevant and followed in the organization.

Approach focused. IT principles should be focused on the approach – how the organization is built, transformed, and operated – as opposed to what needs to be built, which is defined by both functional and non-functional requirements.

Business relevant. Create IT principles that are specific to the organization. Tie IT principles to the organization’s priorities and strategic aspirations.

Long lasting. Build IT principles that will withstand the test of time.

Prescriptive. Inform and direct decision making with actionable IT principles. Avoid truisms, general statements, and observations.

Verifiable. If compliance can’t be verified, people are less likely to follow the principle.

Easily Digestible. IT principles must be clearly understood by everyone in IT and by business stakeholders. IT principles aren’t a secret manuscript of the IT team. IT principles should be succinct; wordy principles are hard to understand and remember.

Followed. Successful IT principles represent a collection of beliefs shared among enterprise stakeholders. IT principles must be continuously communicated to all stakeholders to achieve and maintain buy-in.

In organizations where formal policy enforcement works well, IT principles should be enforced through appropriate governance processes.

Consider the example principles below

2.1.2 Identify the guiding principles

2 hours

Input: Business objectives, IT capabilities, Rationale for the transaction, Mission and vision statements

Output: IT’s guiding principles for growth strategies tied to mergers, acquisitions, and divestitures

Materials: Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to create the guiding principles that will direct the IT organization throughout the growth strategy process.

1. Review the role of guiding principles and the examples of guiding principles that organizations have used.
2. Brainstorm different versions of the guiding principles. Each guiding principle should start with the phrase “We will…”
3. Edit and consolidate the statements until you have a list of approximately eight to ten statements that accurately reflect IT’s role in the growth process.
4. Review the guiding principles every six months to ensure they continue to support the delivery of the business’ growth strategy goals.

Record the results in the M&A Buy Playbook.

Create two IT teams to support the transaction

IT M&A Transaction Team

• The IT M&A Transaction Team should consist of the strongest members of the IT team who can be expected to deliver on unusual or additional tasks not asked of them in normal day-to-day operations.
• The roles selected for this team will have very specific skills sets or deliver on critical integration capabilities, making their involvement in the combination of two or more IT environments paramount.
• These individuals need to have a history of proving themselves very trustworthy, as they will likely be required to sign an NDA as well.
• Expect to have to certain duplicate capabilities or roles across the M&A transaction team and operational team.

IT Operational Team

• This group is responsible for ensuring the business operations continue.
• These employees might be those who are newer to the organization but can be counted on to deliver consistent IT services and products.
• The roles of this team should ensure that end users or external customers remain satisfied.

Key capabilities to support M&A

Consider the following capabilities when looking at who should be a part of the M&A transaction team.

Employees who have a significant role in ensuring that these capabilities are being delivered will be a top priority.

Infrastructure

• Systems Integration
• Data Management

Business Focus

• Service-Level Management
• Enterprise Architecture
• Stakeholder Management
• Project Management

Risk & Security

• Privacy Management
• Security Management
• Risk & Compliance Management

Build a lasting and scalable operating model

An operating model is an abstract visualization, used like an architect’s blueprint, that depicts how structures and resources are aligned and integrated to deliver on the organization’s strategy.

It ensures consistency of all elements in the organizational structure through a clear and coherent blueprint before embarking on detailed organizational design.

The visual should highlight which capabilities are critical to attaining strategic goals and clearly show the flow of work so that key stakeholders can understand where inputs flow in and outputs flow out of the IT organization.

As you assess the current operating model, consider the following:

• Does the operating model contain all the necessary capabilities your IT organization requires to be successful?
• What capabilities should be duplicated?
• Are there individuals with the skill set to support those roles? If not, is there a plan to acquire or develop those skills?
• A dedicated project team strictly focused on M&A is great. However, is it feasible for your organization? If not, what blockers exist?

Info-Tech Insight

Investing time up-front getting the operating model right is critical. This will give you a framework to rationalize future organizational changes, allowing you to be more iterative and allowing your model to change as the business changes.

2.1.3 Create the future-state operating model

4 hours

Input: Current operating model, IT strategy, IT capabilities, M&A-specific IT capabilities, Business objectives, Rationale for the transaction, Mission and vision statements

Output: Future-state operating model

Materials: Operating model, Capability overlay, Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to establish what the future-state operating model will be if your organization needs to adjust to support a growth transaction.

1. Ensuring that all the IT capabilities are identified by the business and IT strategy, document your organization’s current operating model.
2. Identify what core capabilities would be critical to the buying transaction process and integration. Highlight and make copies of those capabilities in the M&A Buy Playbook.
3. Arrange the capabilities to clearly show the flow of inputs and outputs. Identify critical stakeholders of the process (such as customers or end users) if that will help the flow.
4. Ensure the capabilities that will be decentralized are clearly identified. Decentralized capabilities do not exist within the central IT organization but rather in specific lines of businesses or products to better understand needs and deliver on the capability.

An example operating model is included in the M&A Buy Playbook. This process benefits from strong reference architecture and capability mapping ahead of time.

Record the results in the M&A Buy Playbook.

2.1.4 Determine the transition team

Input: IT capabilities, Future-state operating model, M&A-specific IT capabilities, Business objectives, Rationale for the transaction, Mission and vision statements

Output: Transition team

Materials: Reference architecture, Organizational structure, Flip charts/whiteboard, Markers

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to create a team that will support your IT organization throughout the transaction. Determining which capabilities and therefore which roles will be required ensures that the business will continue to get the operational support it needs.

1. Based on the outcome of activity 2.1.3, review the capabilities that your organization will require on the transition team. Group capabilities into functional groups containing capabilities that are aligned well with one another because they have similar responsibilities and functionalities.
2. Replace the capabilities with roles. For example, stakeholder management, requirements gathering, and project management might be one functional group. Project management and stakeholder management might combine to create a project manager role.
3. Review the examples in the M&A Buy Playbook and identify which roles will be a part of the transition team.

For more information, see Redesign Your Organizational Structure

What is governance?

And why does it matter so much to IT and the M&A process?

• Governance is the method in which decisions get made, specifically as they impact various resources (time, money, and people).
• Because M&A is such a highly governed transaction, it is important to document the governance bodies that exist in your organization.
• This will give insight into what types of governing bodies there are, what decisions they make, and how that will impact IT.
• For example, funds to support integration need to be discussed, approved, and supplied to IT from a governing body overseeing the acquisition.
• A highly mature IT organization will have automated governance, while a seemingly non-existent governance process will be considered ad hoc.

2.1.5 Document M&A governance

1-2 hours

Input: List of governing bodies, Governing body committee profiles, Governance structure

Output: Documented method on how decisions are made as it relates to the M&A transaction

Materials: Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to determine the method in which decisions are made throughout the M&A transaction as it relates to IT. This will require understanding both governing bodies internal to IT and those external to IT.

1. First, determine the other governance structures within the organization that will impact the decisions made about M&A. List out these bodies or committees.
2. Create a profile for each committee that looks at the membership, purpose of the committee, decision areas (authority), and the process of inputs and outputs. Ensure IT committees that will have a role in this process are also documented. Consider the benefits realized, risks, and resources required for each.
3. Organize the committees into a structure, identifying the committees that have a role in defining the strategy, designing and building, and running.

Record the results in the M&A Buy Playbook.

Current-state structure map – definitions of tiers

Strategy: These groups will focus on decisions that directly connect to the strategic direction of the organization.

Design & Build: The second tier of groups will oversee prioritization of a certain area of governance as well as design and build decisions that feed into strategic decisions.

Run: The lowest level of governance will be oversight of more-specific initiatives and capabilities within IT.

Expect tier overlap. Some committees will operate in areas that cover two or three of these governance tiers.

Measure the IT program’s success in terms of its ability to support the business’ M&A goals

Upper management will measure IT’s success based on your ability to support the underlying reasons for the M&A. Using business metrics will help assure business stakeholders that IT understands their needs and is working with the business to achieve them.

Business-Specific Metrics

• Revenue Growth: Increase in the top line as seen by market expansion, product expansion, etc. by percentage/time.
• Synergy Extraction: Reduction in costs as determined by the ability to identify and eliminate redundancies over time.
• Profit Margin Growth: Increase in the bottom line as a result of increased revenue growth and/or decreased costs over time.

IT-Specific Metrics

• IT operational savings and cost reductions due to synergies: Operating expenses, capital expenditures, licenses, contracts, applications, infrastructure over time.
• Reduction in IT staff expense and headcount: Decreased budget allocated to IT staff, and ability to identify and remove redundancies in staff.
• Meeting or improving on IT budget estimates: Delivering successful IT integration on a budget that is the same or lower than the budget estimated during due diligence.
• Meeting or improving on IT time-to-integration estimates: Delivering successful IT integration on a timeline that is the same or shorter than the timeline estimated during due diligence.
• Business capability support: Delivering the end state of IT that supports the expected business capabilities and growth.

Establish your own metrics to gauge the success of IT

Establish SMART M&A Success Metrics

• What should IT consider when looking to identify potential additions, deletions, or modifications that will either add value to the organization or reduce costs/risks?
• Provide a definition of synergies.
• IT operational savings and cost reductions due to synergies: Operating expenses, capital expenditures, licenses, contracts, applications, infrastructure.
• Reduction in IT staff expense and headcount: Decreased budget allocated to IT staff, and ability to identify and remove redundancies in staff.
• Meeting or improving on IT budget estimates: Delivering successful IT integration on a budget that is the same or lower than the budget estimated during due diligence.
• Meeting or improving on IT time-to-integration estimates: Delivering successful IT integration on a timeline that is the same or shorter than the timeline estimated during due diligence.
• Revenue growth: Increase in the top line as a result, as seen by market expansion, product expansion, etc.
• Synergy extraction: Reduction in costs, as determined by the ability to identify and eliminate redundancies.
• Profit margin growth: Increase in the bottom line as a result of increased revenue growth and/or decreased costs.

Metrics for each phase

2.1.6 Create program metrics

1-2 hours

Input: IT capabilities, Mission, vision, and guiding principles, Rationale for the acquisition

Output: Program metrics to support IT throughout the M&A process

Materials: Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to determine how IT’s success throughout a growth transaction will be measured and determined.

1. Document a list of appropriate metrics on the whiteboard. Remember to include metrics that demonstrate the business impact. You can use the sample metrics listed on the previous slide as a starting point.
2. Set a target and deadline for each metric. This will help the group determine when it is time to evaluate progression.
3. Establish a baseline for each metric based on information collected within your organization.
4. Assign an owner for tracking each metric as well as someone to be accountable for performance.

Record the results in the M&A Buy Playbook.

Discovery & Strategy

Step 2.2

Prepare IT to Engage in the Acquisition

Activities

• 2.2.1 Establish the integration strategy
• 2.2.2 Conduct a RACI
• 2.2.3 Create the communication plan
• 2.2.4 Assess the potential organization(s)

This step involves the following participants:

• IT executive/CIO
• IT senior leadership
• Company M&A team

Outcomes of Step

Identify IT’s plan of action when it comes to the acquisition and align IT’s integration strategy with the business’ M&A strategy.

Integration strategies

There are several IT integration strategies that will help you achieve your target technology environment.

IT Integration Strategies

• Absorption. Convert the target organization’s strategy, structure, processes, and/or systems to that of the acquiring organization.
• Best-of-Breed. Pick and choose the most effective people, processes, and technologies to form an efficient operating model.
• Transformation Retire systems from both organizations and use collective capabilities, data, and processes to create something entirely new.
• Preservation Retain individual business units that will operate within their own capability. People, processes, and technologies are unchanged.

The approach IT takes will depend on the business objectives for the M&A.

• Generally speaking, the integration strategy is well understood and influenced by the frequency of and rationale for acquiring.
• Based on the initiatives generated by each business process owner, you need to determine the IT integration strategy that will best support the desired target technology environment.

Key considerations when choosing an IT integration strategy include:

• What are the main business objectives of the M&A?
• What are the key synergies expected from the transaction?
• What IT integration best helps obtain these benefits?
• What opportunities exist to position the business for sustainable growth?

Absorption and best-of-breed

Review highlights and drawbacks of absorption and best-of-breed integration strategies

Absorption

Highlights
• Recommended for businesses striving to reduce costs and drive efficiency gains.
• Economies of scale realized through consolidation and elimination of redundant applications.
• Quickest path to a single company operation and systems as well as lower overall IT cost.

Drawbacks
• Potential for disruption of the target company’s business operations.
• Requires significant business process changes.
• Disregarding the target offerings altogether may lead to inferior system decisions that do not yield sustainable results.

Best-of-Breed

Highlights
• Recommended for businesses looking to expand their market presence or acquire new products. Essentially aligning the two organizations in the same market.
• Each side has a unique offering but complementing capabilities.
• Potential for better buy-in from the target because some of their systems are kept, resulting in willingness to

Drawbacks
• May take longer to integrate because it tends to present increased complexity that results in higher costs and risks.
• Requires major integration efforts from both sides of the company. If the target organization is uncooperative, creating the desired technology environment will be difficult.

Transformation and preservation

Review highlights and drawbacks of transformation and preservation integration strategies

Transformation

Highlights
• This is the most customized approach, although it is rarely used.
• It is essential to have an established long-term vision of business capabilities when choosing this path.
• When executed correctly, this approach presents potential for significant upside and creation of sustainable competitive advantages.

Drawbacks
• This approach requires extensive time to implement, and the cost of integration work may be significant.
• If a new system is created without strategic capabilities, the organizations will not realize long-term benefits.
• The cost of correcting complexities at later stages in the integration effort may be drastic.

Preservation

Highlights
• This approach is appropriate if the merging organizations will remain fairly independent, if there will be limited or no communication between companies, and if the companies’ market strategies, products, and channels are entirely distinct.
• Environment can be accomplished quickly and at a low cost.

Drawbacks
• Impact to each business is minimal, but there is potential for lost synergies and higher operational costs. This may be uncontrollable if the natures of the two businesses are too different to integrate.
• Reduced benefits and limited opportunities for IT integration.

2.2.1 Establish the integration strategy

1-2 hours

Input: Business integration strategy, Guiding principles, M&A governance

Output: IT’s integration strategy

Materials: Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to determine IT’s approach to integration. The approach might differ slightly from transaction to transaction. However, the business’ approach to transactions should give insight into the general integration strategy IT should adopt.

1. Make sure you have clearly articulated the business objectives for the M&A, the technology end state for IT, and the magnitude of the overall integration.
2. Review and discuss the highlights and drawbacks of each type of integration.
3. Use Info-Tech’s Integration Posture Selection Framework on the next slide to select the integration posture that will appropriately enable the business. Consider these questions during your discussion:
   1. What are the main business objectives of the M&A? What key IT capabilities will need to support business objectives?
   2. What key synergies are expected from the transaction? What opportunities exist to position the business for sustainable growth?
   3. What IT integration best helps obtain these benefits?

Record the results in the M&A Buy Playbook.

Integration Posture Selection Framework

2.2.2 Conduct a RACI

1-2 hours

Input: IT capabilities, Transition team, Integration strategy

Output: Completed RACI for transition team

Materials: Reference architecture, Organizational structure, Flip charts/whiteboard, Markers, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to identify the core accountabilities and responsibilities for the roles identified as critical to your transition team. While there might be slight variation from transaction to transaction, ideally each role should be performing certain tasks.

1. First, identify a list of critical tasks that need to be completed to support the purchase or acquisition. For example:
   • Communicate with the company M&A team.
   • Identify critical IT risks that could impact the organization after the transaction.
   • Identify key artifacts to collect and review during due diligence.
2. Next, identify at the activity level which role is accountable or responsible for each activity. Enter an A for accountable, R for responsible, or A/R for both.

Record the results in the M&A Buy Playbook.

Communication and change

Prepare key stakeholders for the potential changes

• Anytime you are starting a project or program that will depend on users and stakeholders to give up their old way of doing things, change will force people to become novices again, leading to lost productivity and added stress.
• Change management can improve outcomes for any project where you need people to adopt new tools and procedures, comply with new policies, learn new skills and behaviors, or understand and support new processes.
• M&As move very quickly, and it can be very difficult to keep track of which stakeholders you need to be communicating with and what you should be communicating.
• Not all organizations embrace or resist change in the same ways. Base your change communications on your organization’s cultural appetite for change in general.
  • Organizations with a low appetite for change will require more direct, assertive communications.
  • Organizations with a high appetite for change are more suited to more open, participatory approaches.

Three key dimensions determine the appetite for cultural change:

• Power Distance. Refers to the acceptance that power is distributed unequally throughout the organization.
  In organizations with a high power distance, the unequal power distribution is accepted by the less powerful employees.
• Individualism. Organizations that score high in individualism have employees who are more independent. Those who score low in individualism fall into the collectivism side, where employees are strongly tied to one another or their groups.
• Uncertainty Avoidance. Describes the level of acceptance that an organization has toward uncertainty. Those who score high in this area find that their employees do not favor uncertain situations, while those that score low in this area find that their employees are comfortable with change and uncertainty.

2.2.3 Create the communication plan

1-2 hours

Input: IT’s M&A mission, vision, and guiding principles, M&A transition team, IT integration strategy, RACI

Output: IT’s M&A communication plan

Materials: Flip charts/whiteboard, Markers, RACI, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to create a communication plan that IT can leverage throughout the initiative.

1. Create a structured communication plan that allows for continuous communication with the integration management office, senior management, and the business functional heads.
2. Outline key topics of communication, with stakeholders, inputs, and outputs for each topic.
3. Review Info-Tech’s example communication plan in the M&A Buy Playbook and update it with relevant information.
4. Does this communication plan make sense for your organization? What doesn’t make sense? Adjust the communication guide to suit your organization.

Record the results in the M&A Buy Playbook.

Assessing potential organizations

As soon as you have identified organizations to consider, it’s imperative to assess critical risks. Most IT leaders can attest that they will receive little to no notice when they have to assess the IT organization of a potential purchase. As a result, having a standardized template to quickly gauge the value of the business can be critical.

Ways to Assess

1. News: Assess what sort of news has been announced in relation to the organization. Have they had any risk incidents? Has a critical vendor announced working with them?
2. LinkedIn: Scan through the LinkedIn profiles of employees. This will give you a sense of what platforms they have based on their employees.
3. Trends: Some industries will have specific solutions that are relevant and popular. Assess what the key players are (if you don’t already know) to determine the solution.
4. Business Architecture: While this assessment won’t perfect, try to understand the business’ value streams and the critical business and IT capabilities that would be needed to support them.

2.2.4 Assess the potential organization(s)

1-2 hours

Input: Publicized historical risk events, Solutions and vendor contracts likely in the works, Trends

Output: IT’s valuation of the potential organization(s) for acquisition

Materials: M&A Buy Playbook

Participants: IT executive/CIO

The purpose of this activity is to assess the organization(s) that your organization is considering purchasing.

1. Complete the Historical Valuation Worksheet in the M&A Buy Playbook to understand the type of IT organization that your company may inherit and need to integrate with.
   • The business likely isn’t looking for in-depth details at this time. However, as the IT leader, it is your responsibility to ensure critical risks are identified and communicated to the business.
2. Use the information identified to help the business narrow down which organizations should be targeted for the acquisition.

Record the results in the M&A Buy Playbook.

By the end of this pre-transaction phase you should:

Have a program plan for M&As and a repeatable M&A strategy for IT when engaging in growth transactions

Key outcomes from the Discovery & Strategy phase

• Be prepared to analyze and recommend potential organizations that the business can acquire or merge with, using a strong program plan that can be repeated across transactions.
• Create a M&A strategy that accounts for all the necessary elements of a transaction and ensures sufficient governance, capabilities, and metrics exist.

Key deliverables from the Discovery & Strategy phase

• Create vision and mission statements
• Establish guiding principles
• Create a future-state operating model
• Identify the key roles for the transaction team
• Identify and communicate the M&A governance
• Determine target metrics
• Identify the M&A operating model
• Select the integration strategy framework
• Conduct a RACI for key transaction tasks for the transaction team
• Document the communication plan

M&A Buy Blueprint

Phase 3

Due Diligence & Preparation

This phase will walk you through the following activities:

• Drive value with a due diligence charter
• Identify data room artifacts
• Assess technical debt
• Valuate the target IT organization
• Assess culture
• Prioritize integration tasks
• Establish the integration roadmap
• Identify the needed workforce supply
• Estimate integration costs
• Create an employee transition plan
• Create functional workplans for employees
• Align project metrics with identified tasks

This phase involves the following participants:

• IT executive/CIO
• IT senior leadership
• Company M&A team
• Business leaders
• Prospective IT organization
• Transition team

Workshop Overview

Contact your account representative for more information.
workshops@infotech.com 1-888-670-8889

What is the Due Diligence & Preparation phase?

Mid-transaction state

The Due Diligence & Preparation phase during an acquisition is a critical time for IT. If IT fails to proactively participate in this phase, IT will have to merely react to integration expectations set by the business.

While not all IT organizations are able to participate in this phase, the evolving nature of M&As to be driven by digital and technological capabilities increases the rationale for IT being at the table. Identifying critical IT risks, which will inevitably be business risks, begins during the due diligence phase.

This is also the opportunity for IT to plan how it will execute the planned integration strategy. Having access to critical information only available in data rooms will further enable IT to successfully plan and execute the acquisition to deliver the value the business is seeking through a growth transaction.

Goal: To thoroughly evaluate all potential risks associated with the organization(s) being pursued and create a detailed plan for integrating the IT environments

Due Diligence Prerequisite Checklist

Before coming into the Due Diligence & Preparation phase, you must have addressed the following:

• Understand the rationale for the company's decisions to pursue an acquisition and what opportunities or pain points the acquisition should alleviate.
• Identify the key roles for the transaction team.
• Identify the M&A governance.
• Determine target metrics.
• Select an integration strategy framework.
• Conduct a RACI for key transaction tasks for the transaction team.

Before coming into the Due Diligence & Preparation phase, we recommend addressing the following:

• Create vision and mission statements.
• Establish guiding principles.
• Create a future-state operating model.
• Identify the M&A operating model.
• Document the communication plan.
• Examine the business perspective of IT.
• Identify key stakeholders and outline their relationship to the M&A process.
• Be able to valuate the IT environment and communicate IT’s value to the business.

The Technology Value Trinity

Delivery of Business Value & Strategic Needs

• Digital & Technology Strategy

  The identification of objectives and initiatives necessary to achieve business goals.

• IT Operating Model

  The model for how IT is organized to deliver on business needs and strategies.

• Information & Technology Governance

  The governance to ensure the organization and its customers get maximum value from the use of information and technology.

All three elements of the Technology Value Trinity work in harmony to deliver business value and achieve strategic needs. As one changes, the others need to change as well.

• Digital and IT Strategy tells you what you need to achieve to be successful.
• IT Operating Model and Organizational Design is the alignment of resources to deliver on your strategy and priorities.
• Information & Technology Governance is the confirmation of IT’s goals and strategy, which ensures the alignment of IT and business strategy. It’s the mechanism by which you continuously prioritize work to ensure that what is delivered is in line with the strategy. This oversight evaluates, directs, and monitors the delivery of outcomes to ensure that the use of resources results in the achieving the organization’s goals.

Too often strategy, operating model and organizational design, and governance are considered separate practices. As a result, “strategic documents” end up being wish lists, and projects continue to be prioritized based on who shouts the loudest – not based on what is in the best interest of the organization.

Due Diligence & Preparation

Step 3.1

Assess the Target Organization

Activities

• 3.1.1 Drive value with a due diligence charter
• 3.1.2 Identify data room artifacts
• 3.1.3 Assess technical debt
• 3.1.4 Valuate the target IT organization
• 3.1.5 Assess culture

This step involves the following participants:

• IT executive/CIO
• IT senior leadership
• Company M&A team
• Business leaders
• Prospective IT organization
• Transition team

Outcomes of Step

This step of the process is when IT should actively evaluate the target organization being pursued for acquisition.

3.1.1 Drive value with a due diligence charter

1-2 hours

Input: Key roles for the transaction team, M&A governance, Target metrics, Selected integration strategy framework, RACI of key transaction tasks for the transaction team

Output: IT Due Diligence Charter

Materials: M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to create a charter leveraging the items completed in the previous phase, as listed on the Due Diligence Prerequisite Checklist slide, to gain executive sign-off.

1. In the IT Due Diligence Charter in the M&A Buy Playbook, complete the aspects of the charter that are relevant for you and your organization.
2. We recommend including these items in the charter:
   • Communication plan
   • Transition team roles
   • Goals and metrics for the transaction
   • Integration strategy
   • Acquisition RACI
3. Once the charter has been completed, ensure that business executives agree to the charter and sign off on the plan of action.

Record the results in the M&A Buy Playbook.

3.1.2 Identify data room artifacts

4 hours

Input: Future-state operating model, M&A governance, Target metrics, Selected integration strategy framework, RACI of key transaction tasks for the transaction team

Output: List of items to acquire and review in the data room

Materials: Critical domain lists on following slides, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Company M&A team, Transition team

The purpose of this activity is to create a list of the key artifacts that should be asked for and reviewed during the due diligence process.

1. Review the lists on the following pages as a starting point. Identify which domains, stakeholders, artifacts, and information should be requested for the data room. This information should be directed to the target organization.
2. IT leadership may or may not be asked to enter the data room directly. Therefore, it’s important that you clearly identify these artifacts.
3. List each question or concern, select the associated workstream in the M&A Buy Playbook, and update the status of the information retrieval.
4. Use the comments section to document your discoveries or concerns.

Record the results in the M&A Buy Playbook.

Critical domains

Understand the key stakeholders and outputs for each domain

Each critical domain will likely have different stakeholders who know that domain best. Communicate with these stakeholders throughout the M&A process to make sure you are getting accurate information and interpreting it correctly.

Critical domains (continued)

Understand the key stakeholders and outputs for each domain

Assess the target organization’s technical debt

The other organization could be costly to purchase if not yet modernizing.

• Consider the potential costs that your business will have to spend to get the other IT organization modernized or even digital.
• This will be highly affected by your planned integration strategy.
• A best-of-breed strategy might simply mean there's little to bring over from the other organization’s environment.
• It’s often challenging to identify a direct financial cost for technical debt. Consider direct costs but also assess categories of impact that can have a long-term effect on your business: lost customer, staff, or business partner goodwill; limited flexibility and resilience; and health, safety, and compliance impacts.
• Use more objective measures to track subjective impact. For example, consider the number of customers who could be significantly affected by each tech debt in the next quarter.

Focus on solving the problems you need to address.

Analyzing technical debt has value in that the analysis can help your organization make better risk management and resource allocation decisions.

Review these examples of technical debt

Do you have any of these challenges?

Applications

• Inefficient or incomplete code
• Fragile or obsolete systems of record that limit the implementation of new functionality
• Out-of-date IDEs or compilers
• Unsupported applications

Data & Analytics

• Data presented via API that does not conform to chosen standards (EDI, NRF-ARTS, etc.)
• Poor data governance
• No transformation between OLTP and the data warehouse
• Heavy use of OLTP for reporting
• Lack of AI model and decision governance, maintenance

End-User Computing

• Aging and slow equipment
• No configuration management
• No MDM/UEM

Security

• Unpatched/unpatchable systems
• Legacy firewalls
• No data classification system
• “Perimeter” security architecture
• No documented security incident response
• No policies, or unenforced policies

Operations

• Incomplete, ineffective, or undocumented business continuity and disaster recovery plans
• Insufficient backups or archiving
• Inefficient MACD processes
• Application sprawl with no record of installed applications or licenses
• No ticketing or ITSM system
• No change management process
• No problem management process
• No event/alert management

Infrastructure

• End-of-life/unsupported equipment
• Aging power or cooling systems
• Water- or halon-based data center fire suppression systems
• Out-of-date firmware
• No DR site
• Damaged or messy cabling
• Lack of system redundancy
• Integrated computers on business equipment (e.g. shop floor equipment, medical equipment) running out-of-date OS/software

Project & Portfolio Management

• No project closure process
• Ineffective project intake process
• No resource management practices

“This isn’t a philosophical exercise. Knowing what you want to get out of this analysis informs the type of technical debt you will calculate and the approach you will take.” (Scott Buchholz, CTO, Deloitte Government & Public Services Practice, The Wall Street Journal, 2015)

3.1.3 Assess technical debt

1-2 hours

Input: Participant views on organizational tech debt, Five to ten key technical debts, Business impact scoring scales, Reasonable next-quarter scenarios for each technical debt, Technical debt business impact analysis

Output: Initial list of tech debt for the target organization

Materials: Whiteboard, Sticky notes, Technical Debt Business Impact Analysis Tool, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Business leaders, Transition team

The purpose of this activity is to assess the technical debt of the other IT organization. Taking on unnecessary technical debt is one of the biggest risks to the IT environment

1. This activity can be completed by leveraging the blueprint Manage Your Technical Debt, specifically the Technical Debt Business Impact Analysis Tool. Complete the following activities in the blueprint:
   • 1.2.1 Identify your technical debt
   • 1.2.2 Select tech debt for your impact analysis
   • 2.2.2 Estimate tech debt impact
   • 2.2.3 Identify the most-critical technical debts
2. Review examples of technical debt in the previous slide to assist you with this activity.
3. Document the results from tab 3, Impact Analysis, in the M&A Buy Playbook if you are trying to record all artifacts related to the transaction in one place.

Record the results in the M&A Buy Playbook.

How to valuate an IT environment

And why it matters so much

• Valuating the target organization’s IT environment is a critical step to fully understand what it might be worth. Business partners are often not in the position to valuate the IT aspects to the degree that you would be.
• The business investments in IT can be directly translated to a value amount. Meaning for every $1 invested in IT, the business might be gaining $100 in value back or possibly even loosing $100.
• Determining, documenting, and communicating this information ensures that the business takes IT’s suggestions seriously and recognizes why investing in IT can be so critical.
• There are three ways a business or asset can be valuated:
  • Cost Approach: Look at the costs associated with building, purchasing, replacing, and maintaining a given aspect of the business.
  • Market Approach: Look at the relative value of a particular aspect of the business. Relative value can fluctuate and depends on what the markets and consequently society believe that particular element is worth.
  • Discounted Cash Flow Approach: Focus on what the potential value of the business could be or the intrinsic value anticipated due to future profitability.

The IT valuation conducted during due diligence can have a significant impact on the final financials of the transaction for the business.

3.1.4 Valuate the target IT organization

1 day

Input: Valuation of data, Valuation of applications, Valuation of infrastructure and operations, Valuation of security and risk

Output: Valuation of target organization’s IT

Materials: Relevant templates/tools, Capital budget, Operating budget, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, Prospective IT organization

The purpose of this activity is to valuate the other IT organization.

1. Review each of slides 42 to 45 to generate a valuation of IT’s data, applications, infrastructure, and security and risk. These valuations consider several tangible and intangible factors and result in a final dollar amount. For more information on this activity, review Activity 1.2.1 from the Proactive phase.
2. Identify financial amounts for each critical area and add the financial output to the summary slide in the M&A Buy Playbook.
3. Compare this information against your own IT organization’s valuation.
   1. Does it add value to your IT organization?
   2. Is there too much risk to accept if this transaction goes through?

Info-Tech Insight

Consistency is key when valuating your IT organization as well as other IT organizations throughout the transaction process.

Record the results in the M&A Buy Playbook.

Culture should not be overlooked, especially as it relates to the integration of IT environments

• There are three types of culture that need to be considered.
• Most importantly, this transition is an opportunity to change the culture that might exist in your organization’s IT environment.
• Make a decision on which type of culture you’d like IT to have post-transition.

Target Organization’s Culture

The culture that the target organization is currently embracing. Their established and undefined governance practices will lend insight into this.

Your Organization’s Culture

The culture that your organization is currently embracing. Examine people’s attitudes and behaviors within IT toward their jobs and the organization.

Ideal Culture

What will the future culture of the IT organization be once integration is complete? Are there aspects that your current organization and the target organization embrace that are worth considering?

Culture categories

Map the results of the IT Culture Diagnostic to an existing framework

Culture Considerations

• What culture category was dominant for each IT organization?
• Do you share the same dominant category?
• Is your current dominant culture category the most ideal to have post-integration?

3.1.5 Assess Culture

3-4 hours

Input: Cultural assessments for current IT organization, Cultural assessment for target IT organization

Output: Goal for IT culture

Materials: IT Culture Diagnostic, M&A Buy Playbook

Participants: IT executive/CIO, IT senior leadership, IT employees of current organization, IT employees of target organization, Company M&A team

The purpose of this activity is to assess the different cultures that might exist within the IT environments of both organizations. More importantly, your IT organization can select its desired IT culture for the long term if it does not already exist.

1. Complete this activity by leveraging the blueprint Fix Your IT Culture, specifically the IT Culture Diagnostic. Fill out the diagnostic for the IT department in your organization:
   1. Answer the 16 questions in tab 2, Diagnostic.
   2. Find out your dominant culture and review recommendations in tab 3, Results.
2. Document the results from tab 3, Results, in the M&A Buy Playbook if you are trying to record all artifacts related to the transaction in one place.
3. Repeat the activity for the target organization.
4. Leverage the information to determine what the goal for the culture of IT will be post-integration if it will differ from the current culture.

Record the results in the M&A Buy Playbook.

Due Diligence & Preparation

Step 3.2

Prepare to Integrate

Activities

• 3.2.1 Prioritize integration tasks
• 3.2.2 Establish the integration roadmap
• 3.2.3 Identify the needed workforce supply
• 3.2.4 Estimate integration costs
• 3.2.5 Create an employee transition plan
• 3.2.6 Create functional workplans for employees
• 3.2.7 Align project metrics with identified tasks

This step involves the following participants:

• IT executive/CIO
• IT senior leadership
• Transition team
• Company M&A team

Outcomes of Step

Have an established plan of action toward integration across all domains and a strategy toward resources.

Don’t underestimate the importance of integration preparation

Integration is the process of combining the various components of one or more organizations into a single organization.

80% of integration should happen within the first two years. (Source: CIO Dive)

70% of M&A IT integrations fail due to components that could and should be addressed at the beginning. (Source: The Wall Street Journal, 2019)

Info-Tech Insight

Integration is not rationalization. Once the organization has integrated, it can prepare to rationalize the IT environment.

Integration needs

Identify your domain needs to support the target technology environment

Set up a meeting with your IT due diligence team to:

• Address data, applications, infrastructure, and other domain gaps.
• Discuss the people and processes necessary to achieve the target technology environment and support M&A business objectives.

Use this opportunity to:

• Identify data and application complexities between your organization and the target organization.
• Identify the IT people and process gaps, redundancies, and initiatives.
• Determine your infrastructure needs and identify redundancies.
  • Does IT have the infrastructure to support the applications and business capabilities of the resultant enterprise?
  • Identify any gaps between the current infrastructure in both organizations and the infrastructure required in the resultant enterprise.
  • Identify any redundancies.
  • Determine the appropriate IT integration strategies.
• Document your gaps, redundancies, initiatives, and assumptions to help you track and justify the initiatives that must be undertaken and help estimate the cost of integration.

Integration implications

Understand the implications for integration with respect to each target technology environment

Integration implications (continued)

Understand the implications for integration with respect to each target technology environment

Integration implications (continued)

Understand the implications for integration with respect to each target technology environment

Integration implications (continued)

Understand the implications for integration with respect to each target technology environment

3.2.1 Prioritize integration tasks

2 hours

Input: Integration tasks, Transition team, M&A RACI

Output: Prioritized integration list

Materials: Integration task checklist, Integration roadmap

Participants: IT executive/CIO, IT senior leadership, Company M&A team

The purpose of this activity is to prioritize the different integration tasks that your organization has identified as necessary to this transaction. Some tasks might not be relevant for this particular transaction, and others might be critical.

1. Download the SharePoint or Excel version of the M&A Integration Project Management Tool. Identify which integration tasks you want as part of your project plan. Alter or remove any tasks that are irrelevant to your organization. Add in tasks you think are missing.
2. When deciding criticality of the task, consider the effect on stakeholders, those who are impacted or influenced in the process of the task, and dependencies (e.g. data strategy needs to be addressed first before you can tackle its dependencies, like data quality).
3. Feel free to edit the way you measure criticality. The standard tool leverages a three-point scale. At the end, you should have a list of tasks in priority order based on criticality.

Record the updates in the M&A Integration Project Management Tool (SharePoint).

Record the updates in the M&A Integration Project Management Tool (Excel).

Integration checklists

Prerequisite Checklist

• Build the project plan for integration and prioritize activities
  • Plan first day
  • Plan first 30/100 days
  • Plan first year
• Create an organization-aligned IT strategy
• Identify critical stakeholders
• Create a communication strategy
• Understand the rationale for the acquisition or purchase
• Develop IT's purchasing strategy
• Determine goal opportunities
• Create the mission and vision statements
• Create the guiding principles
• Create program metrics
• Consolidate reports from due diligence/data room
• Conduct culture assessment
• Create a transaction team
• Assess workforce demand and supply
• Plan and communicate potential layoffs
• Create an employee transition plan
• Identify the IT investment

Business

• Design an enterprise architecture
• Document your business architecture
• Identify and assess all of IT's risks

Leadership/IT Executive

• Build an IT budget
• Structure operating budget
• Structure capital budget
• Identify the needed workforce demand vs. capacity
• Establish and monitor key metrics
• Communicate value realized/cost savings

Data

• Confirm data strategy
• Confirm data governance
• Data architecture
• Data sources
• Data storage (on-premises vs. cloud)
• Enterprise content management
• Compatibility of data types between organizations
• Cleanliness/usability of target organization data sets
• Identify data sets that need to be combined to capture synergies/drive core capabilities
• Reporting and analytics capabilities

Applications

• Prioritize and address critical applications
  • ERP
  • CRM
  • Email
  • HRIS
  • Financial
  • Sales
  • Risk
  • Security
• Leverage application rationalization framework to determine applications to keep, terminate, or create
• Develop method of integrating applications
• Model critical applications that have dependencies on one another
• Identify the infrastructure capacity required to support critical applications

Operations

• Communicate helpdesk/service desk information
• Manage sales access to customer data
• Determine locations and hours of operation
• Consolidate phone lists and extensions
• Synchronize email address books

Integration checklists (continued)

Infrastructure

• Determine single network access
• Manage organization domains
• Consolidate data centers
• Compile inventory of vendors, versions, switches, and routers
• Review hardware lease or purchase agreements
• Review outsourcing/service provider agreements
• Review service-level agreements
• Assess connectivity linkages between locations
• Plan to migrate to a single email system if necessary

Vendors

• Establish a sustainable vendor management office
• Review vendor landscape
• Identify warranty options
• Rationalize vendor services and solutions
• Identify opportunities to mature the security architecture

People

• Design an IT operating model
• Redesign your IT organizational structure
• Conduct a RACI
• Conduct a culture assessment and identify goal IT culture
• Build an IT employee engagement program
• Determine critical roles and systems/process/products they support
• Create a list of employees to be terminated
• Create employee transition plans
• Create functional workplans