Today’s rapid digital evolution has resulted in the transformation of M&As. Traditionally, M&As focus on four core aspects: global expansion and increasing operations in foreign markets; expanding product offerings and acquiring new technology; retaining talent during the M&A process (a time often fraught with high employee churn); and preventing security breaches when both companies face high risks (since neither has visibility into the infrastructure of the other).
But increasingly, M&As are also part of a company’s innovation strategy, used as the catalyst for digital transformation within the enterprise. The CIO’s role in this is therefore more prominent than ever. This is the focus of a recent IDC Perspective report, Mergers and Acquisitions: Part 2 — The CIO Role in the Age of Digital Transformation, which explores how executives that lead M&A IT projects must now focus on digital transformation as well. As the report explains, in order to remain competitive in a global landscape, CIOs must establish team-based competency and a formal governance plan early on in the process.
Digital Transformation in Today’s M&As
Expanding the scope of a traditional M&A to include enterprise-level digital transformation adds complexity to an already challenging process – but there are innumerable benefits to making this shift. Digital transformation can mean a range of things that pertain to digitizing an aspect of the business – whether that’s leveraging new systems, adopting technology to drive better customer engagement, or automating legacy processes that encumber IT teams.
There are four common scenarios in which digital transformation drives the M&A decision. In a full digital transformation, the M&A focuses on acquisition, completely merging the culture and processes of the selling company with the buyer. The goal is for market and revenue growth by expansion. In this case, migrating the IT architecture of the acquired company seamlessly and securely is paramount, as this impacts all employees, partners, vendors, and customers from both companies.
When pursuing selective digital transformation, the M&A goal is to share competencies and synergies across organizations, and often results in some integration of IT infrastructure. This is more characteristic of a merger or joint venture. In this scenario, unlike a full acquisition, a CIO must determine how to make the whole greater than the sum of its parts (and how to work with his or her counterpart CIOs) which may retain some autonomy.
Moderate digital transformation is also the result of a joint venture, but in this case, a company is often pursuing new regional or market presence. While the CIO of the parent company will govern decision-making, coordinating with teams in other regions (with other languages and processes) can be time-consuming and put strain on resources.
Minimal digital transformation occurs when a buying company acquires a selling company because it has the IT team and infrastructure they are seeking for their own business. In this scenario, there is little digital transformation, but the selling company’s infrastructure is transferred over to the purchasing company.
The Critical Role of Identity
In each scenario outlined above, adding an identity layer can provide the automation, visibility, and security IT teams need throughout the process. Identity access management helps CIOs to accelerate the IT migration during M&As while facilitating a seamless experience for employees, partners, and customers. By simplifying this process – in any scenario – a CIO is freed to focus on the strategic elements that will drive the future state of the business.
The team at Okta has worked with global leaders on M&As of all sizes, leveraging the breadth and depth of the Okta Integration Network. The network supports third-party vendors, directories, VPNs, and MFAs, while maintaining the technology companies already have. This shifts the focus from labor-intensive due diligence to an environment of innovation, when everyone is freed to focus on his or her strategic strengths. For example, by leveraging Okta’s Single Sign-On, Multi-Factor Authentication, and Universal Directory, Broadcom Limited has seen a 30% faster time-to-productivity for new users, even while doing one-to-two acquisitions per year.
A Cloud-First Approach
Thinking cloud-first during this process is also critical. It enables enterprises to leverage applications and services that simply cannot scale with legacy, on-prem technology. As Fred Magee writes in the IDC report, “CIOs will be best served if they're able to imagine their businesses in future terms by understanding how the cloud can transform business structure and redefine what it means to be a business at all.” Moving to the cloud allows employees the flexibility to work from anywhere and collaborate across different business units and regions, while giving IT teams visibility into the levels of access partners, vendors, and users have across the organization.
Cloud-based identity access management is the key control point to integrate users across different organizations to the applications and services they need. The products in the Okta Identity Cloud are built on the industry’s most reliable and secure platform. Okta provides IT teams with a single source of truth for all users – across the enterprise – and gives employees day-one access to the tools and information they need.
With such tools available, it’s important that CIOs shift their thinking of M&As and measure success based on innovation and digital transformation, whether this is increased customer retention, improved employee productivity, or decreased costs through automation. And as the owner of end-to-end technology, CIOs must ensure this innovation extends through the various altitudes of acquired businesses they manage – all the way to the customer.
To read more about the role of the CIO in digital transformation due diligence, download IDC’s Report, Mergers and Acquisitions: Part 2 — The CIO Role in the Age of Digital Transformation.