Abstract
In the modern corporate scenario, speed and agility are pivotal to maintaining competitive sustainability. Therefore, business restructuring through divestitures is increasing and creating differentiability among contemporaries. The recent economic headwinds have allowed organizations to rethink traditional growth channels and shift their focus toward building resilience and generating long-term value.
Mergers and acquisitions (M&A) refers to integrating two or more organizations to create a single, more prominent organization. Divestiture, conversely, is the antipode of integration and involves the “separation” of IT from one entity to form another. It is the company selling off a business unit, subsidiary or assets. It is a strategic decision with far-reaching implications. The macroeconomic trends, the need to diversify operations to sustain competition and the need to gain access to new technologies are a few of the driving pillars of these strategic decisions.
Divestiture: A technology enabler
Divestiture involves a plethora of intricate pursuits, including due diligence, valuation analysis, negotiations and IT separation, among others. IT separation is a critical aspect of any divestiture, as it involves separating different IT systems, business processes, applications and the underlying infrastructure of the companies involved.
However, IT separation is an arduous task. It can be challenging due to disparate IT systems, entanglement risks and a lack of leadership resources, thereby creating issues in designing and executing new operating models, processes and cultural parallels between the involved organizations. It involves data migration, separation of end-user devices, application separation, server and storage separation and other underlying IT infrastructure. In addition, it requires talent separation, which is one of the central tenets of organizational change management and needs to be handled with the utmost strategic prudence.
The organization across verticals lacks divestiture execution maturity. This lack of capabilities is susceptible enough to inflict long-term strategic hurdles on the parent company and have a tangible, negative impact on the carve-out project itself. The key challenges faced by organizations during a divestiture include:
- Selecting the right technology and reducing the cost
- Maintaining business as usual and keeping the lights on
- Data compliance and software licensing issues
- Functional dependencies between shared entities and tools
- The myopic vision of the target state and disparate architectures
- Selecting the appropriate hosting strategy and process standardization
- Workforce challenges
According to a Bain report, 50% of companies undergoing a separation fail to create any new shareholder value two years later, and 25% destroy a significant amount of shareholder value in the process. This clearly showcases that there is a need for end-to-end separation management services.
Critical triggers for divestiture services
The dynamic market situation and the need to streamline customer services are some of the pivotal triggers driving the demand for managed services for accelerated transition and service management.
Several trends that are propelling the divestiture services market include:
- Lack of skilled talent required to support the divestiture program
- Minimizing transition service agreement (TSA) costs to focus on achieving the end goal
- Constructing a best practice divestiture playbook to have a readymade template to execute transition programs
- Streamlining the workforce concerning cultural alignment, talent retention, workforce transition, etc.
HCLTech’s offering for divestiture programs to enable seamless and fast-paced transitions
HCLTech's offering for divestiture presents a wide range of managed services, including hybrid cloud, data migration, digital workplace, network, cybersecurity and service orchestration, through the lens of various towers. The solution delivers seamless IT separation through a comprehensive framework and can provide end-to-end services, ranging from consulting and advisory to integration to operations. We leverage a dedicated partner ecosystem of technology OEMs under cloud, network, end-user computing, service management and cybersecurity towers. As an ecosystem orchestrator provide bespoke, best-in-class services from this network of marquee technology partners and innovators.
It is a one-stop service offering that covers the entire lifecycle from consulting and advisory to implementation, including people, processes, governance and technology transformation.
The HCLTech solution enables the customers to:
- Negate business disruption with minimal end-user impact
- Ensure speed and achieve TSA exit timeline
- Reduce costs by exiting TSA fast and transform as soon as possible
- Preserve the intrinsic value of the new entity in terms of revenue, IPs, etc.
- Leverage flexibility to adapt to scope changes
- Mitigate risk with anticipation of the most common challenges in such divestiture programs
Benefits:
The success of a divestiture project depends on various factors, including effective IT separation, cultural fit, leadership and management expertise. Therefore, companies must plan and execute the IT integration process carefully and have a clear roadmap to ensure a smooth transition and minimize disruptions. However, companies must be aware of the IT challenges and address them promptly to ensure a successful separation process. HCLTech’s Divestiture program focuses on solutions for: people, process, tech, cost and program management. The key benefits include:
- Simplification of IT through a 360-degree partnership with OEM vendors
- Cost optimization of infrastructure, license and operation: Minimal user impact with enhanced user experience owing to distinct credentials in OCM and new ways of working
- Cost-optimized solution
- App rationalization and technology modernization
- Security compliance
- Seamless end-user migration
- Process synergy
- Quick solution delivery
- Fast and efficient contracts
- Data for business value
How we are ensuring business resilience and transformation
HCLTech has successfully executed various M&A-related engagements and continues to participate in complex assignments related to M&A and divestiture. It has a strong consulting practice that provides advisory in IT and business transformation. It also has a team of resources in domain-specific practice and related application services, a dedicated domain solutions group and various technology Centers of Excellence (CoEs). With extensive domain expertise and industry partnerships, HCLTech demonstrates competence in various technologies and products. We demonstrate competence in cultural integration by leveraging OCM. The talent or people aspect is one of the most paramount parameters in a separation program and support it with OCM interventions.
In addition, our uncompromising focus on creating customer value, disruptive thinking and employee-focused culture enhances our credentials as a leading technology services provider worldwide.
To learn more, please write to us at HCBU-PMG@hcl.com.
References:
https://inform.tmforum.org/features-and-opinion/how-will-rising-ma-impact-digital-transformation
