Technology Strategy Is Key To Your Growth

Source: RSMUS.com, Jonathan Caforio and Chris Wetmore

Companies that want to achieve growth and manage risk today must have a solid technology strategy. For deal-makers looking to buy a company or a company readying itself for a sale, typical due diligence entails a review of the company’s financials, taxes, operations and legal standing. And even though technology has become more central to operations of most companies, some buyers and company owners are not taking the time to understand the company’s technology platform, which could lead to undesirable results later on down the road.

As one industry expert put it: “It’s like buying a car that looks great, but never checking the motor. You need to look under the hood.”

Technology is at the very core of all businesses today and buyers, in particular, need to review all potential investment opportunities with a technology strategy in mind. It’s important to note that this is not relegated to certain industries. Across all industry verticals technology is both an enabler of top-line growth and bottom-line savings, as well as a first line of defense for security and privacy concerns.

####Growth and savings
To understand a company’s technology environment, an in-depth assessment needs to be completed on a company’s technology platform. This type of assessment should give investors or company owners insight into how they can create value and how the company’s current technology will help or hinder future growth objectives.

It’s important to understand:

What systems the company has in place

How the company’s technology strategy aligns with its growth strategy

What the company has historically invested in its technology

What technology initiatives the company has completed
If there are ways to enhance revenue with the adoption of new technology

If the use of third-party vendors would boost performance initiatives

The age of the technology

How the company is using data

####Data
Estimates say that the volume of data companies produce today doubles every two years. Some companies do not even realize they are collecting data that they can turn into meaningful information that can give a company a deeper understanding of its historical performance and help with forecasting by identifying trends in their customer base and the market. This can add tremendous value at any company.

####Security and privacy concerns
Just as it is important to understand how technology can help a company save money and grow, it is critical to understand what technology risks are prevalent. Some technologies that will create risks include old servers, homegrown technology solutions, or an information technology (IT) manager that really isn’t right for the role. For example, one private equity firm was looking at buying a company and realized the IT director was working with an outdated flip phone. This gave the buyers pause about the director’s ability to move the company forward from a technology and digital standpoint.

And all companies are at risk. Look no further than Yahoo! Inc.’s massive breach, where at least 500 million users’ names, email addresses, phone numbers, birthdates, hashed passwords, and in some cases encrypted or unencrypted security questions and answers were stolen from the company’s network in late 2014.

The breach, which came to light just two months after Verizon announced plans to acquire Yahoo for $4.83 billion in cash, could have a significant financial impact on the deal at best. At worst, the deal could be called off. Investors who have a good grasp on a target company’s technology will absolutely have the advantage at the negotiation table.

Investors and company owners should:
Identify and assess the security of the company’s most sensitive data, such as employee and customer information, trade secrets and proprietary information

Review all data controls and processes

Learn of all past security breaches

Learn what breach response plans are in place

Understand what third-party technology the company is using and what risk it poses

Understand the maintenance of the company’s security systems and if they are kept up to date

Investors and company owners need to carefully consider the consequences of operating a company with out-of-date or less-than-optimal technology. Companies with technology lapses should be considering the cost and timeline to implement the right technology. Smart investors and company owners know that the correct use of technology enables competitive differentiation in today’s digital era and will positively affect their operations and the bottom line.

http://rsmus.com/what-we-do/industries/private-equity/technology-strategy-is-key-to-your-growth.html?cmpid=eml:pegpitch:0005