Mergers

By CIOinsight  |  Posted 06-05-2005 Print Email
Mergers

Asset management can help ensure you get the most value from the systems you acquire.

For companies with an aggressive growth strategy through acquisitions, or for a company that is about to be acquired, asset management is a must. If you don't keep good records it is impossible to estimate the true worth of your IT systems, and that can affect the value of the deal. "If you don't have good record keeping, you can't substantiate an IT asset base for an M&A," says Heine. It's imperative to look at the to-be-acquired company's processes associated with IT assets because "you could end up acquiring things that have liabilities," he says, such as software without proper licenses.

Barbara Rembeisa, president of the Inter-national Association of IT Asset Managers -(IAITAM), agrees. "We worked with a company that thought they had everything in IT under control as they went through their merger," she says. "They thought all they had to do was transfer licenses. They didn't know that the original contracts did not allow a transfer, and it ended up costing them over $400,000 just in legal fees."

Navigant International Inc., the second largest travel management business in North America, knows how complex IT integration can be during a merger. Before the Englewood, Colo.-based company, which is the product of fifty-five acquisitions and continues to acquire several companies each year, installed its IT asset management system, it would rely on its newly acquired company's IT shop to provide information on its IT assets. Navigant's team would then prepare a blueprint for the merged systems based on that information. But the reports often were incomplete, forcing Navigant to send out one of their own IT staffers to assess the situation, thereby slowing down the integration process significantly. "We did an acquisition last year where the company's IT inventory was so overestimated it was a disaster—and even they admitted it," says Jeff Klingensmith, director of field IT management. "It wouldn't have changed our decision to purchase the company, but it would have changed the negotiation price."

Klingensmith says that asset management software from Altiris significantly reduces the time it takes to convert new companies' desktops and servers to Navigant's systems. "Now we can immediately do network discovery on their systems, gather our own information and plan ahead, as opposed to them providing us with an often inaccurate list."

Proper asset management helps not just in taking on new systems, but also in off-loading them. Vendors are quick to tout cost savings as a leading reason to outsource IT, but at least some of those cost savings can be found right at home. Software license agreements are notoriously mismanaged by customers that shut them in a drawer and never look at them again. According to Rembeisa of IAITAM, which offers certification courses in asset management, "software maintenance and support just isn't being managed accurately. Some of these contracts are millions of dollars each year, and companies just pay them" without checking to make sure they're being used, she says. Analysts estimate that companies spend as much as 20 percent more in licenses than are actually ever used. Getting a handle on your assets will give you a more accurate idea of what your software licensing costs should be, which may affect your decision about whether outsourcing is the best way to save. It can also change your opinion about the value of renting software instead of buying a traditional license.

Before he installed asset management software from Peregrine in June 2004, David Fenrich, program manager of hardware and software at Cingular Wireless, admits the company wasted a lot of money on unnecessary maintenance fees. But what was once a manual process that involved many spreadsheets and much travel time—"It really wouldn't even have qualified for asset management," he says—has been automated so IT workers can quickly see how many licenses are being used, how many software programs need security patches and which pieces of leased hardware have licenses that are about to expire. So far, the company has seen an 11 percent increase in on-time lease returns, saving the company hundreds of thousands of dollars. "But where we save millions is in cost avoidance," Fenrich says. "Now that we have visibility into how our licensed software is being used, we don't need to purchase extra licenses."



 

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