Net Neutrality – 10/22/2009

The US government is proposing broad new regulations for telecommunications and cable internet service providers.

The new proposals appear to target specific providers for regulation and government oversight. Specifically, Massachusetts Senator Ed Markey has proposed the Internet Freedom Preservation Act of 2009, or the “Net Neutrality” bill, outlining government policies to impose new governance and restrictions targeting telecommunications and cable providers AT&T, Verizon, Time Warner and Comcast.

The proposed is based on the unfounded fear that service providers will “control who can and cannot offer content, services and applications over the Internet utilizing such networks.”

The Markey bill indicates the vast majority of consumers receive services from only one or two dominant internet service providers. And, the bill says the national economy could be harmed “if” these providers interfered with access to internet applications.

The bill proposes regulations imposing equal treatment (eg price/performance) of all internet traffic and content, regardless of content type and delivery costs. Specifically, the legislation proposes internet service providers could not sell prioritized internet applications or services.

One of the main problems with the proposed legislation is the lack of recognition of costs to provide internet services. Some applications, such as video are bandwidth hogs and require significantly greater network infrastructure and associated costs to deliver when compared to the network infrastructure costs to deliver email access. Under the proposed legislation, services providers would have to charge the low bandwidth users (casual browsers and email readers) more to offset for the higher costs of the video users. One result of the proposed legislation would be less consumer choice and a hidden “bandwidth hog tax”. Today, most service providers offer tiered products and pricing to consumers and businesses to account for the additional costs to deliver bandwidth intensive applications. You pay more if you use more under the tiered pricing model. These are not “discriminatory” practices. Rather, tiered pricing and application prioritization are sound business models delivering reliable, profitable product choices and unburdened internet ecommerce. Consumers and businesses currently have choices. The proposed legislation takes away choice and increases costs to consumers and businesses.

Another problem with the legislation is, certain applications such as voice and video over the internet require prioritization and special treatment to work properly. The proposed legislation makes existing application prioritization products and networking practices illegal. Internet service providers would have to dismantle these services to make all internet applications “equal” with no prioritization schema. The new legislation would kill off reliable voice and video over the internet as we know it.

The other problem with the Net Neutrality legislation is anti-trust and federal trade regulations are already in place to protect consumers and business from monopolistic practices and unfair trade. For example, when AT&T disconnected MCI customers in 1974, MCI filed and won a successful anti-trust lawsuit resulting in breakup of the AT&T monopoly. Another example is, the Federal Trade Commission recently investigated possible antitrust violations caused by the Apple and Google sharing two board directors. Arthur Levinson has since stepped down from both Apple and Google boards.

The US government would better use taxpayer dollars and valuable legislation time by asking two questions:

Which companies are hiring lobbyists and launching advertising campaigns promoting Net Neutrality legislation?

What is their agenda?

Net Neutrality legislation is not needed. Consumers would have less choice and higher costs. Internet service providers would incur additional costs and compliance overhead. Taxpayers would pay higher taxes to create and support additional government oversight organizations.

What business and consumers need is effective interpretation, oversight and enforcement of existing laws and regulations.

Disclosure – Joe Tighe has no paid relationships, products or endorsements from any company, political or government organization cited in this article.

Due Diligence - Application Inventory Strategy

Acquire business application information during the due diligence phase. Adopt a strategy that will identify the most critical applications in advance of the acquisition and focus the available task resources on critical business applications first. Where the target company lacks application information, immediately allocate skilled M&A IT resources to reverse engineer applications.

Key business applications are often undocumented or misunderstood by the target company.

A company with mature information technology internal controls will have documented detailed application interface inventories. Business application stakeholders and lead information technology personnel for each application will be documented. However, many IT departments do not have mature internal controls and systems documentations, in particular startup companies or smaller enterprise organizations.

In most merger and acquisition programs, expect minimal application inventory documentation. Review the target company business continuity plan first for information. However, expect outdated and inaccurate application information. Key applications may missing from the documentation. Additionally, there is often no technical description of the application interfaces or technology owners. Business owners are often outdated or inaccurate. Be prepared to assign experienced M&A system engineers to reverse engineer applications. In addition, be prepared to assign skilled M&A systems analysts to interview business units to identify ALL key applications an to interview software developers to identify application programming interfaces. And, expect a low level of cooperation and urgency from the acquired company development team.

Expect significant application data gaps and identify the risks early on, during the due diligence process if possible. Some development departments operate independently from the operations departments creating additional gaps in integration knowledge. Allocate sufficient time to perform discover to understand the application programming interfaces. External contract engineers can be utilized to reverse engineer applications and provide interface inventories where needed.

Include adequate discovery time and resources to close the application knowledge gaps. The following resources should be allocated as part of the overall IT M&A program:

· Expend 75% of the interface collection time to get the best data you can obtain through existing personnel and documentation.
· Fill in the blanks with reverse engineering and best guess interface data.
· Run a trial cutover on non-essential low priority servers and desktops to identify those systems that could significantly impact the business.
· Be prepared to expend the remaining 25% of resources to resolve the critical systems issues that cropped up during conversion.

In my experience, these ensure successful IT M&A program outcomes. And, you will focus the integration team on core systems having the greatest impact on the business.

Scaling Project Management

Project Management Scale – Acquisition Integration

Be careful how you scale the information technology integration project management effort. You might get it.

That’s Obvious

IT Infrastructure integration efforts can be brought to a standstill by excessive project management controls.

In one mid-size enterprise organization merger, the project management office (PMO) was often a valued change agent in the IT infrastructure conversion project effort. However, the type of project management controls and processes applied were often over-scaled, overly complicated and more suited for large scale government programs. If your project management team is oversized, you can expect excessive overhead costs and staff meetings driven by junior staff members adding little value to the process. A large project management organization may offer an excellent training ground for junior staff and contract consultants however, the resulting output will often be of low quality or unusable. The overhead administrative costs relative to the size of the acquisition may be unacceptable.

By scaling the project management effort to a mid-sized acquisition, a simplified set of project controls and a much smaller project staff may be sufficient for the effort.

Project Management Scaling Strategy

The first rule of organization is to scale to fit the size of the task.

For mid-sized acquisition efforts, consider limiting the project management office staff to two or three key members. Ensure the project management staff reports to the acquiring company’s program management office. This will serve to appropriately size the integration organization to the task, provide appropriate governance and ensure alignment of the local project management teams with the acquiring company integration objectives.

Trim the fat.

Supply Chain Efficiency

It is essential to perform an assessment of the supply chain efficiency during the due diligence phase of the merger and acquisition process. The target company will probably not support the overall merger/acquisition goals.

Tip: Set up an independent M&A supply chain with full purchasing authority.

In a recent acquistion, the buyer chose to use the target company staff and processes to acquire equipment and services. During the implementation of the project, every infrastructure project manager, the program manager and work stream leader noted the ineffective supply chain and sourcing of equipment and services. Delays of 60 days were the norm. The merger teams discussed the issue and agreed the delays were rooted in cultural inertia at the target company.