Phil Brown (PB): Most businesses are probably not aware of the importance and value of their IT systems, and don’t take much notice until something goes wrong. IT is often outsourced, and when it works it’s not an issue.
It’s important for a business to understand what software and systems are in place. Are they owned by the business or are they licensed? What rights does a business have, can they be taken away? Are there any obligations on the suppliers to support the software?
There is a lot that can go wrong, and in some cases can deeply affect the running, future plans, and even the value of a business.
Melissa Conlon (MC): This is why it’s so important for a business to know everything it can about its computer systems and software. Legacy systems are a real issue. They can be anything with code – the building blocks of any software – that was written three years ago to 20 years ago.
The software can become ‘legacy’ if the original developer is unavailable to help fix issues, or if the code complexity increases by adding to it over the years. A system could also be inherited from someone else.
Most businesses simply tend to keep re-engineering and hope to extend the software’s life as long as possible.
PB: As well as practical issues like that, you just need to look at the recent Tesco Bank hacking incident to see how important data security is to a business. I read that half of UK organisations expect to be a victim of cyber-crime. With legacy systems, old code is being archived in a way that leaves a real vulnerability that can be exploited.
This is clearly not a long-term solution, and can have a real impact on how a business is prepared for growth.
MC: Also, constraints in growth can be software-related. A business wants to do something new, in a new way, but the software the systems are written around won’t let it happen.
Gaining 100,000 new customers might be great for the business, but if the computer systems that process orders can’t accept that many, the company can be massively limited in its potential.
An often-quoted survey found that 75 per cent of failed mergers and acquisitions were unsuccessful due to a failure to meet requirements of IT and software.
PB: I liken it to purchasing property. You would get a thorough surveyor’s report for property, but most of the time people don’t think about doing the same for the computer software that is allowing the business to operate. Traditionally in M&A activity, the operational aspects of a business are studied, but the software is often overlooked.
From our point of view it’s important that you see that information upfront so you know what you’re purchasing.
MC: At the end of the day, why would a business acquire your company if the computer systems in place seriously limit its growth, and pose all sorts of technical challenges to get the systems to merge along with the business?
It’s important to look at the software in the same way as any other business asset. Will it crash, degradation in performance, security issues – often a company is worth a lot less because of the work that is needed to be done on the IT systems.