Category Archives: Merger

acquisition, IBM, M&A, Merger, Opinion

CIOs look to the cloud for seamless M&A

IBM speaker

Sebastian Krause, General Manager for IBM Cloud Europe

For senior CIOs, knowing how to respond to an M&A and divesture situation is key, as mergers, acquisitions and divestitures are a critical component of business strategy.

Projections for European M&A transactions show total deal values are set to rise from US$621 billion in 2014 to US$936 billion by 2017. M&A activity is likely to be bolstered by continued positive monetary policy, with additional cross-border M&A activity likely to take place as a result of a strong US dollar, primarily in Spain, Germany, and Italy.

Increasingly, businesses are using M&A to grow their organisation, achieve economies of scale, expand product portfolios, globalise and diversify.

In the intense negotiations around this business change, IT operations are likely to face dramatic reorganisation as various stakeholders analyse existing systems and look at the potential for efficiencies.

This is about survival and the IT division is likely to be under intense scrutiny during this period, under pressure to perform critical functions such as the integration or separation of critical systems and data, the provision of an uninterrupted service during the transition period, and the prompt delivery of synergy targets. IT strategy is therefore core to any successful M&A or divestiture plan and a critical contributor to its success or failure.

Increasingly, CIOs are under pressure to meet these challenges quickly and at lower cost. Their ability to do so can even impact the way analysts assess potential deals. IT dependent synergies have been found to be responsible for a large proportion (30 to 60%) of M&A benefits, but 70% of M&As fail to meet their synergy targets in the planned timeframe.

Realising these M&A and divestiture targets for enterprise IT environments is complex and requires a holistic approach that considers public, private, IaaS, PaaS, and SaaS as well as non-cloud delivery models.

Some CIOs may approach the situation by simply making adjustments to the existing IT landscape – from CRM, ERP through to office.

This can involve singling out certain components of an established Enterprise Resource Planning (ERP) system, cloning the existing ERP environment, deploying existing systems into the acquired business asset or transferring data between differing systems with the expectation that no issues with integration will arise. These approaches have certainly worked in the past, but can be costly, challenging to implement and disruptive.

This is why many CIOs are looking at a move towards cloud-based applications and infrastructure, which can take the pain out of the M&A process. Broadly, the drivers for moving to cloud services are increased agility, speed, innovation and lowering costs.

They can help organisations going through mergers and acquisitions to realise synergy benefits more quickly, simplify integration and accelerate the change programme, reduce costs through efficiencies, mitigate costly migration investments and encourage financial flexibility.

Top cloud benefits for M&A:

  • Achieving synergy more quickly: Cloud enabled applications simplify portability, integration and deployment.
  • Lowering costs: The cloud can provide temporary burst capacity for the migration.
  • Increased financial flexibility: Cloud provides a flexible cost model, allowing organisations to easily move between CAPEX and OPEX to impact EBITA and cash flow.
  • Simplifying changes: Cloud simplifies the creation of APIs to hide the underlying complexity of multiple, overlapping systems.
  • When preparing for an M&A or divestiture, it’s worth considering what the future IT model will look like, which APIs are needed to simplify required activities and how applications can be cloud enabled for portability and deployment.

Developing a repeatable platform that delivers these benefits and simplifies M&A activities will greatly improve an organisation’s ability to grow and be successful. It may even open up new opportunities that might not have been possible without the cost, flexibility, and scalability benefits that cloud solutions can deliver.

With businesses already realising real benefits, the cloud’s role in M&A is only set to grow. By building a cloud model that works, organisations can avoid reorganising IT operations for each merger or acquisition and ensure a much more seamless transition.

Through implementing an approach that can speed the execution and success of these deals, CIOs can look to deliver value from the IT department that goes far beyond just support, to true business leadership.

Written by Sebastian Krause, General Manager for IBM Cloud Europe

Cloud Native, Database, Dell, EMC, integration, M&A, Merger, News & Analysis

EMC & Dell execs outline integration plan to create Dell Technologies

EMC Dell Integration

Dell’s Chief Integration Officer Rory Read (Right) and EMC’s COO of the Global Enterprise Services business unit Howard Elias (Left)

Speaking at EMC World in Las Vegas, Dell’s Chief Integration Officer Rory Read and EMC’s COO of the Global Enterprise Services business unit Howard Elias offered some insight into the workings of the Value Creation and Integration Office, the team built to manage the integration of EMC and Dell during the course of the merger.

The Value Creation and Integration Office was created following the announcement of the merger last year with the intention of managing the transition of taking two tech giants and moulding them into one efficient organization. Both Read and Elias have experience of overseeing such activities, Read was for example the President of Lenovo during the Intel acquisition, though there are few similarities between the pair’s previous experience and one of the largest mergers in business history.

“Both companies have some extensive experience of acquisitions and incorporating other businesses, but we couldn’t use any of the playbooks for this one,” said Elias of the current merger. But while there are few examples to draw upon to build a blueprint that is not to say it is a more complicated task. In fact, the pair argued the integration of the two organizations has been a relatively smooth journey thus far, with few major roadblocks envisioned moving towards Day 1, the team’s nickname for the deadline when Dell and EMC will cease to exist as two separate organizations.

Read

Dell’s Chief Integration Officer Rory Read

“The collisions or overlaps are very minor, this is why the integration has been very smooth so far,” said Read, with regard to the overlap in business operations between Dell and EMC. The pair drew attention to the current focus areas of both businesses to explain the smooth integration thus far. While Dell and EMC play in the same arena, to date there has been very little direct competition between the two businesses. Read claims this lack of overlap makes their job easier, but ultimately creates a host more opportunities for the new company, Dell Technologies, in the future.

While combining the revenues of the two businesses would certainly make a significant figure, the team believe the cross-selling and up-selling opportunities created by having a single business offering both the portfolios would create more prospects. “Our customer overlap isn’t large and opens up a lot of new opportunities,” said Read

In theory, by cross-selling Dell and EMC’s portfolio’s in one product offering the team believe there is an opportunity to steal market share from Dell/EMC competitors, dependent on which one is the incumbent supplier. This cross/up-selling opportunity will enable the team to exceed the combined revenues of Dell and EMC, the team claims.

The integration will not stop with EMC and Dell as the company plans to merge the channel partners as well. Details of this aspect of the integration have not been released as of yet, however Read and Elias highlighted the channel partner programmes for both organizations would be phased in. Some announcements will be made on Day 1, though the majority will take place at the end of the year, as this is a natural time for the channel partners to expect a change in operating practise.

Elias

EMC’s COO of the Global Enterprise Services business unit Howard Elias

The final hurdles the team face are the Chinese regulators, the one remaining body to have not signed off on the merger to date. While Chinese regulators have proven to be a difficulty for other organizations in the past, Read and Elias claim it should be a relatively simple process for the team. Read highlighted the fact that all other regulatory bodies had signed off on the deal 100% with no condition attached, it was a good sign when considering the Chinese regulatory process.

In terms of headcount, although there were no official figures given, Read and Elias did indicate there will be job losses as a result of the merger. Due to there being few areas where the two businesses overlap, the reduction in headcount will be low, according to Read, but as with any other merger it is unavoidable. The team will not be releasing any comments or numbers relating to job losses until Day 1.

There have been difficulties in bringing two vast organizations together according to the team, though this is unavoidable in such a task. The $67 billion deal is one of the largest in business history, and it shouldn’t surprise many that the task of integration is a vast one also, though the team are confident the methodology which is in place to create one organization, will be successful.

“This deal is on time, on plan and on budget, from the schedule we set out in October,” said Howard. “The integration and merger is running smoothly and we’ll be ready to go. Day 1 is not the end of anything, it’s the beginning of our new company.”

data centre, Datacentre, Dell, Digital Era, EMC, IoT, Merger, News & Analysis

Welcome to the cloud party – Michael Dell launches Dell Technologies

Michael Dell at EMC World

Dell Founder and CEO Michael Dell

Speaking at EMC World in Las Vegas, Dell CEO Michael Dell and EMC CEO Joe Tucci outlined the rationale behind one of history’s largest mergers, and announced the name of the industry’s latest tech giant – Dell Technologies.

The group itself will be known as Dell Technologies upon the completion of the reported $67 billion merger, though there will also be several individual operating brands. Dell’s client services group will continue to be known as Dell, with the soon-to-be merged enterprise business known as Dell EMC.

“There are certain times once every two or three generations where everything changes,” said Tucci. “The industrial revolution went on for more than 100 years and changed everything they knew back then. Many new companies were born out of the opportunities that were created, and many failed as they didn’t. We are now on the cusp of an even bigger revolution, the digital revolution.”

Tucci, speaking at what he seemingly disappointingly admitted would be his final EMC World, highlighted the vast scale of change at which the world is undergoing currently. IoT and the connected world specifically are redefining not only the way in which individuals communicate with each other, but also the way in which enterprise organizations are structured and operated. The merger enables two companies, which could potentially be perceived as being stuck in a traditional IT world, to create a new brand which can capitalize on digitalization trends.

“We have to change rapidly to be on the wave of this revolution,” said Tucci. “The merger with Dell allows the company to change the concept of the business and capitalize on the opportunities presented by the digital revolution.”

Michael Dell’s contribution to the opening keynote focused more on the rate of innovation, normalization and implementation of new technologies which are driving the digital revolution. EMC World has now been running for 15 years, debuting in 2001, the same year which saw the launch of the iPod, Sun E25k as the state of the art data centre technology and the first availability of 3G networks. Dell commented that while these once-innovations could now be seen as relics, it raise the question of what is possible during the next 15 years.

Joe and Michael

EMC CEO Joe Tucci and Dell CEO Michael Dell on stage at EMC World

“Think about 15 years from now, to the year 2031,” said Dell. “Currently, if you want to code the human genome it takes around 36 hours. In 2031 it will take 94 seconds. In 2031 more than half the cars on the road will be driverless, and there will be more than 200 million connected devices. There will be thousands of innovations which we can’t even begin to perceive. I believe that it could happen sooner as well. The marginal cost of making something intelligent is fast approaching zero.

“The new digital, connected world will require data centre infrastructure to be architected in a different way. It’s going to be cloud native and operated on a Devops methodology. EMC and Dell are merging to create a company which can deliver this concept.”

“We are combining Dell and EMC to help you navigate a successful path, to modernise your IT, reduce costs and helping you create your digital future.”

The merger itself could be evidence of the weight of the digital world and the expectations which are placed on companies to succeed in the new ecosystem. Rather than attempting to change the perception of the organization which they oversee, like IBM and Intel for instance, the merger enables Tucci and Dell to create a new brand which can be defined as how and where they desire. Unlike companies who are in the process of redefining themselves for the cloud era, Dell Technologies can position itself where-ever it chooses in the market, without worry of legacy perceptions.

Dell also claimed the new company will have a significant advantage over competitors due to the fact it will be private. Leaning on the idea Dell Technologies will not have outside influences to be concerned about as publicly trading organizations do, Dell believes the new company can invest for long-term ambition, as opposed to short-termist aims which could be perceived to damage technological innovation.

The IoT wave is continuing to grow, and as we see more devices deployed, more data collected and more cloud-orientated behaviour infiltrating the boardroom, the role of the data centre is likely to become more evident. Dell believes the modern data centre will be the centre of the new technology world, enabling innovation in an increasingly competitive market, and the merger has created a new organization which can capitalize on these trends. The success of the new company remains to be seen, though the new proposition and brand does have the potential to remove perceived doubt as to how traditional IT players can operate in “The Next Industrial Revolution” as Michael Dell highlighted.