One of the things that I get asked frequently is how all of this stuff about Virtual CIOs, IT governance, and technology adds any kind of meaningful value to a company. This questions crops up more and more when I am consulting with start-up companies and almost always when with growth companies. These two types of companies have management and founders who, as any good entrepreneur would, are constantly thinking about “what’s next” for their business. Wryly, this is referred to as an “exit”, or “exit strategy.”

I’ve worked with clients in the past (and employers) whose primary objective was to “flip” their company within seven years so that they can move on to the next one. While there’s nothing wrong with this strategy, there is something almost universally wrong in another key area. These entrepreneurs and their companies generally have the same spending trends, the same investment structures for their departments, and make the same type of technology missteps that result in their business having lower value when it comes time to take that exit. It’s all about real dollar value of a business.

I’ve seen this from two ways: both through involvement with companies that have been acquired, and through involvement with companies doing the acquiring. It’s a real trend that can sometimes cause a business to be valued lower than it might otherwise deserve. After all, larger, established companies will absolutely be performing their due diligence on any prospective target. They will send in auditors to asses technology problems, examine your security policies and procedures, and take a detailed inventory of all technology assets at every campus.

All of this information does right back to the decision makers. Their goal is to offer the least possible money that their target will tolerate for purchase. Seeing a sloppily run technology department or a track record of poor technology investments points to problems. It means they are going to have to make capital investments to shore up infrastructure, personnel interments to bring on staff to discover and understand the intricacies of systems, and generally gives them even more reasons to low-ball their offer. This isn’t conjecture, I’ve actually seen this happen.

One of my personal successes was when one of my former employers was acquired by a large international corporation. During the due diligence process, management was obviously grilled and everything across the organization was heavily scrutinized. When I met with those in charge of campus technology to go over our IT department, it became obvious that we were a cut above their typical acquisition. Compliments were constant as many of our practices, policies, and especially our infrastructure, were beyond even what this multi-billion dollar entity was able to accommodate, and not through their lack of trying.

When the acquisition was finalized and the shareholders were paid, I asked senior management at our new owner what impact the IT department had on the bottom-dollar. We had a very candid discussion on the topic, and I was told that the quality of our infrastructure, policies, and enforcement of policies, had direct impact in the tune of seven-figures added to our final purchase price. It made me proud that decisions that I had made added so substantially to the value of the company.

And that’s what it’s really all about. Everything an entrepreneur or senior manager in the company does is related to business value. Everything done in IT also adds to that overall value. In the case outlined above, and in countless others, the value is real. This is why Bradman Group does what it does. We want our clients to have that kind of IT advantage, so that they can maximize their company’s value across the board and do it successfully.

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Tags: quality, value

This entry was posted on Tuesday, June 17th, 2008 at 9:12 am and is filed under Executive Briefs, Virtual CIO. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.