Besides obvious benefits like scale, market share, coverage and product-/technology leadership, a major driver behind M&A is the financial synergy (savings) realized by merging and standardizing the IT infrastructure.
In many sectors like Financial Services, Insurance, Telco, Retail, Government and Service Providers / Outsourcers, IT is one of the biggest costs of doing business. Hence, it’s an obvious place to start looking for optimization and savings even as early as in the due diligence phase.
Often this is a spreadsheet exercise combined with benchmarks, past experiences, interviews, and gut feelings. What if this could be fact based and provide a sorted list of saving opportunities incl. an estimate on how difficult it would be implement?
This is where ITBI and SMT Data’s services and partners come into play.
IT – where to look for savings.
In large corporation in the sectors mentioned above, yearly IT costs are typically split in 60% “Run the business” / IT-operations and 40% “Change the business” / Software development.
Even with agile development and DevOps in place and good shape, software development doesn’t often provide significant “low hanging fruits” for optimization and cost reductions.
But the good news is that IT-operations is an obvious place to start, and can provide significant savings both before, under and after a merger.
SMT Data’s software solution ITBI™ is targeted at the major IT infrastructure costs (Mainframes, Servers, Cloud and software licenses) whether this is operated in-house or outsourced.
Phase 1: Baseline – what do we have and what do we actually need
Phase 1, can run during the due diligence or right after.
Depending on platforms, log-data about capacity and performance are collected in an automated fashion for typically 5 weeks with little or no installation required on the infrastructure from which data is collected. Based on this, ITBI and our Professional Services create:
- Baselines for capacity and performance for the major cost drivers
- Guidance for lowering baselines / saving costs before merger
- Combined baselines for the installations to be merged
- Guidance for savings on e.g. outsourcing costs, software licenses, cloud that can be negotiated prior to or after the merger
If the organization is using IBM Mainframe, this is typically the most critical and expensive platform for running the business. Based on our 30+ years’ experience and working with customers globally, we see a 10-15% potential for technical optimization (no application changes) on average. As mainframes store historical system log-data and ITBIaaS for z/OS has an automated process for creating analysis around capacity and costs, our consultants can deliver a report that precisely describes the opportunities for optimization.
If mainframes are operated in-house, 60% of the TCO is monthly variable and if outsourced this is 90+%.
From project start until the first savings are delivered is only 2-3 months.
Servers / Cloud running Windows and Linux:
Where mainframes are one big black box, servers and cloud are typically thousands of units.
IT operations tend to focus on “operational stability” and focus on what’s running “hot / red”. However, “Red servers” are only around 5% of the installation and “Green servers” which are properly configured, running smoothly and predicably, account for another 15-25%.
The rest are “Blue servers” which are over-configured and have a great potential for rightsizing.
Phase 2: Optimizing before merging
There are always some low hanging fruits that should be harvested right away. Sometimes, these optimizations of e.g. decommissioning “zombie servers” or optimizing mainframe peaks can more than fund the on-going investment in ITBI and SMT Data Professional Services.
Phase 3: Optimizing under the merger
By ensuring the “to be” platform is rightsized from the beginning, savings are obtained in the migration phase as well.
Use the guidance to negotiate and select the right contracts for outsourcing, cloud and software licenses
Phase 4: Continuously run IT as a Business, by understanding Who/What is using What, When and at What cost
With ITBI installed, there will be a constant focus on targeting IT cost savings / cost avoidance and a fact-based communication between Business, Software development and IT-operations.
This is ensured by “business mapping” where the technical data is tagged with information linking technical terms like job, transaction, or server to business terms such as application and the organization / department using the capacity. And with a cost mapping, it’s possible to do show back or charge back to the busines based on the actual costs of running the IT.
How to get started:
Phase 1 can run as a project that includes ITBIaaS and SMT Data Professional Services. The outcome will be a report highlighting the main potentials for optimization.
Phase 2 – 4 would require an on-going contract for ITBIaaS plus selected services from SMT Data – e.g. our Managed Services that will deliver a monthly or quarterly look at capacity and performance optimization.
SMT Data has helped a number of customers delivering infrastructure savings in connection to M&A activities. Contact us today to hear more.