The definition of divestiture: “the partial or full disposal of a business unit through sale, exchange, closure or bankruptcy, possibly resulting from a decision to no longer operate a business unit, if a business unit is deemed redundant after a merger or acquisition, if severing that unit increases the resale value of the firm or if a court requires the sale of a business unit to improve market competition”.
Divestitures are often bundled in together with mergers and acquisitions in the business world, but when it comes to the IT required to make a success of them, they are a very different animal. In simple terms, there is a difference in scale. A divestiture rarely means splitting an organization in half, it typically means calving off 10 or 20 percent of the business – a slice which has been deemed no longer of strategic benefit to the larger organization. So you are not moving a massive chunk of the people, meaning the challenges to a merger or acquisition are similar but different.
Divestitures vs mergers & acquisitions – the IT challenge
The key difference is one of basic status. In a merger or acquisition, by default it means bringing together two or more distinct organizations, each with its own structure in place, its own processes, policies and ways of doing things. The key to a divestiture is that it is a breakaway, it is about one piece of an organization cutting the umbilical cord and, significantly, having the chance to start over with something new from scratch.
In IT terms, this means a Greenfield situation, where the CIO of – let’s call it the ‘new’ organization – gets to write the rules from the off, with a blank piece of paper. At the same time, this can mean that when you have been used to being part of a larger organization you come to rely on certain resources just being ‘there’ – and when divesting from that mother company, you are starting from a place where you are considerably smaller and have to be more self-sufficient. The ready-made expertise you have taken for granted just isn’t there. So there is a double-edged sword – the opportunity exists to be very innovative, but there is also the potential to become frustrated – because a divestment can be a lot more complicated than people realize.
How and why cloud can be the divestiture’s friend
One thing that divestitures and mergers and acquisitions do have in common is a need to cut costs – the pressure is on the CIO to do something innovative with IT but also to ensure cost efficiencies. And that is where cloud can come to the fore.
Cloud computing helps organizations to disrupt their existing IT cost models and offer value propositions that shake up the whole way a business operates – something that seems tailor-made for the Greenfield nature of a divestiture.
Instead of having to go down the traditional route of requesting and procuring IT infrastructure and services from the ‘parent’ company IT department, the ‘new’ organization can obtain them through the cloud. The extra flexibility that cloud enables helps the ‘new’ organization to operate in a much more agile way – a big advantage to what is almost effectively a start-up enterprise – and reduce the lead times needed to design, develop, implement and test complex IT systems and environments needed to get up and running. Hand in hand with this goes the benefit of greatly reduced capital expenditure, another vital boon to a Greenfield operation.
The opportunity to think differently
In mergers and acquisitions, the business units and department heads are often constricted by policy, limited by traditional ways of doing things and of course constrained by regulation – in divestitures, not so much.
Where companies that have gone through a divestiture and find themselves in a Greenfield position, it helps to work with a partner who has experience of that situation. At Orange we have worked with many companies that have needed to get their IT systems and processes set up quickly – and that means up and running in a matter of weeks rather than in terms of quarters or half years, as is often the case in larger enterprise organizations.
The CIO in a divested organization needs to know that they can spin up their systems quickly, and by providing a wide variety of cloud platforms we help them do that. From design-built private cloud solutions to shared cloud platforms that enable the likes of Amazon Web Services, Microsoft Azure and more to prepacked SaaS applications, we help our customers hit the ground.
A divestiture is a major business event, and not one to be taken lightly – but it does present an opportunity to think outside the box. As with many disruptive incidents, IT can adapt and cloud helps bring benefits over and above expectations. It’s about embracing the change and taking the chance to create something new and original.
To read more about Orange Business Services cloud computing expertise and experience, and how we can help your company adapt and thrive in the event of a divestiture, please visit: http://www.orange-business.com/en/embrace-the-cloud