Digitally transforming your organization to operate primarily in the cloud means minimized costs, increased flexibility, and the ability to provide better customer support. It also means,though, that it’s easier to lose control of technology spending and communication across departments. Imagine, now, how a merger or acquisition can highlight both the benefits and drawbacks of these cloud pros and cons.
Recently, Deloitte published a blog post that compiled three ways cloud computing enables mergers and acquisitions, making the process better and smoother for everyone involved.
Author David Linthicum specifies that this is because the cloud’s ability to exchange data intra-cloud is faster, easier and less expensive, because security systems can be synced in a fraction of the time traditional legacy security integration, and because the cloud encourages common data semantics and promotes a single source of truth on what is considered a customer, inventory, product, etc.
Linthicum begins his article on cloud as the answer to life, the universe and acquisitions by saying, “it’s difficult to bring together the IT systems of both companies, and synergy can take years, not months to achieve. Both the customers and investors can become underwhelmed by the progress, and the company often pays the price by falling short of expectations.”
This is very true. We think, however, that while the cloud can help to alleviate these issues, it cannot remove them entirely. Especially once two organizations reach a certain size and reliance on cloud-based processes and storage, approaching a cloud-based merger under the belief that things will go smoothly by default is a mistake.
It’s also true that “cloud computing and its ability to more easily merge IT systems” can benefit merging companies, as Linthicum says, and that “cloud-based resources can be allocated as needed, and public cloud-based systems can easily work and play well with each other.”
But what are some of the potential “gotchas” of a cloud-based merger? Where are the scenarios in which both companies could end up losing money and compromising security because of SaaS?
Here are four of the most common pitfalls to watch out for when merging corporations that are already digitally transformed:
- Employees logging onto new systems with different levels of training and different guidelines. We’ve outlined five ways to build a secure culture, but all organizations exist at varying levels of cybersecurity maturity. If you acquire a company that has done less training on security risks with its employees, inviting them to access your systems could open security rifts that will be difficult to track with all the other acquisition activities going on.
- Disgruntled employees (on both sides). Change is hard. Whether your company is purchased by another and your employees are forced to assimilate, or your company purchases another and your employees need to welcome outsiders into their comfortable day-to-day, not everyone will take it well. There’s a good chance they’ll come around, but in the meantime, you’re allowing unhappy workers to access sensitive data in new systems. Watch for signs of malicious activity as you merge corporations.
- Wasting money while one organization or the other runs out duplicate contracts. There’s a good chance the merging organizations will have dual licenses to some of the most common software. Considering Gartner estimates most organizations overspend on cloud by 30% on their own, a merger may represent a period of significant overspend. There may be no way around it, but knowing which software license subscriptions each organization is paying for, and being able to track their usage and renewal dates, is priceless during a time of such upheaval at cloud-based companies.
- Higher chance of overpaying for duplicate functionality and unused licenses. Again, this happens under the status quo, too, but during a merger, it becomes even more difficult to tell who’s using what, who needs a license renewed and who will never use a license because another subscription provides the same functionality with more familiarity. Only when you track licenses, usage and functionality can you determine how your newly-combined organization can use the cloud most efficiently.
Overall, we still encourage organizations to move to the cloud for many reasons – the enablement of smooth mergers and acquisitions is one of them. Deloitte is right on that. We just want to caution those of you eagerly approaching a merger that just because SaaS enables collaboration and combination doesn’t mean you can just look the other way when it comes to your software. There’s a lot to consider. The good news is, just by being aware of the places where cloud-based processes can allow money and security to fall through the cracks, you’re in a better position to prevent it.