In May 2003, Nicholas Carr, editor at large of Harvard Business Review, published an article titled "IT Doesn’t Matter." While the title itself is certainly provocative to those in IT or relying on IT investment, its premise was even more controversial.

 

Carr postulates that IT "is inevitably headed in the same direction as the railroads, the telegraph, electricity, and the internal combustion engine becoming, in economic terms, just ordinary factors of production, or commodity inputs." Carr maintains that because the key pieces of IT are "getting commoditized," they do not matter from a strategic standpoint and confer "less advantage to early adopters." 

 

This essay has sparked much response filling many pages on the ether of the Web and in the pages of many respected periodicals. Still, what do Carr’s thoughts have to do with those famous words from Senator Marcy?

 

In the bowels of corporate mergers and acquisitions, you may realize that Mr. Carr has a point. Having been involved in such processes as an acquiring company and the acquired, I have seen the potential that the victory of the win can breed, an arrogance of superiority of method, process, mindset, and even technology. The "competitive advantage" of technologies can be overlooked into obscurity, leaving in its place the mediocrity of a victory dance.

 

Any successful company that is preparing for sale approaches technology investment decisions differently than one focused on an infinite future. The center of attention is on creating perceived and real value for an acquirer. This will motivate the highest price.  Having the latest desktops or group network hardware or even software will often not be there. The return per dollar invested in technology during this stage of a businesses lifecycle will be low unless that investment will add to the sales price. Additionally, the timeframe for ROI (return on investment) is more narrowly defined; best guesstimates of timeframe of return are not acceptable.

 

The reason for this may be best understood by looking at the benefit to resale value that different renovations may have for your home.  Realistically, aside from universal cultural value (i.e. kitchens and bathrooms), the way you like customizing your home may not add real value to the tastes and likes of any potential buyer. Similarly, one of the spoils of the victory of the buy is imposing technology tastes and preferences; "out with the old and in with the new."

 

Still, if you are preparing to acquire, there are some basics that you should look at during the due diligence process and throughout the purchase process.

What should an acquirer ask of IT before the sale? Depending on the industry, size of acquiree, and much more, the questions will vary. Still, there is universal research to be done.

On a personal note
My Chief Information Officer role at Textilease Corp. is coming to end, subsequent to its sale. I begin the journey of seeking other opportunities. Periodically, I will share the view of the unemployment line that unfortunately has too many of us in IT in it lately. If you just want to talk, you may reach me at 410-736-9875.

CHAIM YUDKOWSKY, CPA, CITP, is president of Byte of Success Inc., a technology consulting company specializing in helping small and mid-size business grow using technology. He is available for both consultation and speaking. His Byte of Success column explores the world of technology for accountants and finance professionals. He can be reached at 301-937-4555 x3030.