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 However, expect outdated and inaccurate application information.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 Business owners are often outdated or inaccurate.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.