Uncovering Technical Debt For Better Technology Integration

25:05And I'm curious about that in terms of your takes. I feel like we just really ballpark things. I'm curious to get your sense of view of you've been involved with that. Have you ever tried to dial that stuff in or? Oh yeah, on a regular basis. And there's two kind of core components that impact the cost specifically from an IT infrastructure integration perspective. So the first one is the industry has drastically changed with the introduction of cloud and the concepts of cloud. So the concepts of throw a credit card at something and it just bills me monthly. Great concept in theory, not so great for a CFO that's trying to understand a budget and maybe the team doesn't understand how they're spending that money, which is a very dangerous thing.

25:47We have seen over the years that sine wave effect of we're taking everything cloud, we're going everything. We would call it repatriation back to the data center. Now we're going cloud again. The answer is really somewhere in between. The reason I bring that up is the complexity of managing a data center in a traditional sense was entirely CapEx-based budgeting. So we would purchase data center infrastructure, infrastructure, office infrastructure, whatever that may be. We get licensing, the hardware, the support and renewal. And we do that on a three to five year basis. And we did that because we knew in three to five years, we need to replace that equipment for a variety of reasons.

26:25Or if you don't replace that equipment, that's where you end up with technical debt and complexity. As you're going down that path, that's a very structured three to five year strategy. Now you introduce the concept of cloud that is truly an operational spending capability. you're going month to month versus three to five years at a time. The challenge we see with our customers is when you're trying to merge those two budgets, if you say, I want to move everything to the cloud or everything to the data center, you're now essentially double paying for three to five years. As those licensing and renewals roll off, now you have a cost in cloud.

27:01How are we going to handle that as a business? The infrastructure, traditional infrastructure industry has responded with as-a-service consumption models for data center infrastructure. Think of it as I'm buying some compute and storage hours from a traditional data center platform versus buying a three to five-year cycle. That's allowed us to offset that. But understanding the complexity of those two is very hard, particularly in mergers and acquisitions. So concept of FinOps or financial operations, hugely important, very important to the overall strategy of an acquisition. So understanding very early on, what is your current spend in CapEx?

27:41What is your current spend in OpEx? And what is your willingness to vary those as we go through an acquisition? Most organizations will have some office equipment and maybe some cloud environments and a little bit of data center. Assuming you're now merging another company in with the same footprint, now you've just doubled the amount of complexity of the renewals and the capex and opex spend and the operational cost of those that's the first piece is understanding where your current landscape is so we would always start and say let's understand where you're at today and the level of detail we go to is equatable to the level of accuracy you get so if you were to call me today and say tom help me work through this acquisition of a company in denmark i'll give you two hours i'll probably tell you i'll give you a gut check 40 to 50 accurate budget of where I think you are in a couple hours.

28:32Maybe that's not even accurate. Maybe it's 10 % accurate. Then if you say, let's actually do a real engagement to work through the nuts and bolts of this, get into details, I can give you probably an 80 % to 90 % accurate budget, acknowledging that in any merger and acquisition, there's always unknowns that are going to come up, regardless of how well you plan. In Insight Nomenclature, we would say you assume VUCA, which is volatility, uncertainty, complexity, and ambiguity. And we would always assume VUCA in any type of M &A to a certain percentage. So that's the first piece. The second piece of that is now you need to understand what their next goal is strategically.

29:11So is the strategy of Kisan and this acquisition he's going to do to eventually kill that other company's IT footprint and merge it into ours? or are we going to operationally run the two of those together? Long-term data-wise, statistics would show us pretty consistently that if you operate two different tech stacks, we would call those an Azure environment and then a data center. If you're going to maintain those independently in perpetuity, your cost of operations and your cost of licensing will go up over time. Higher than it would if you're going to merge those two environments. Now, the upfront cost of merging those two environments is going to be higher.

29:54No question. So for most companies, that decision is, if I ask any CEO in the world, would your goal be to have a unified, consistent platform that operates efficiently and is cheap? They're going to say, yes. No brainer. But the reality is, is sometimes the cash flow through an acquisition, the ability of a company to move data and get financing during an acquisition is often impacted by the risk of that acquisition. So they may make a strategic decision to say, hey, we're going to take on technical debt of managing two different organizations at higher cost for two years. And at six months from now, we're going to start the formalized planning to modernize that and centralize that in the future.

30:37That is all into what is your budget and what's the team's technical capability to actually do that migration or transfer as well. So in the case of Insight, we would say, we can either do this soup to nuts for you, we can do the whole thing. That's really realistic that a customer would just say, take our destiny and run with it. We don't really want to do that. We want to understand their business and we'll offset the lack in skill sets where they don't have it. And we'll give guidance and oversight as we're seeing project risks. We really want to be running that roadmap of what should we be hitting, maybe not monthly, but every quarter, we need to be at this place.

31:14So maybe in three quarters from now in our new acquisition that we just went through, you want to have an integrated email environment that's running on one platform. That's a, quote, easier move than some custom applications, if you will. And then maybe in six quarters, you want to have half of your applications out of a data center and into a cloud environment. Then we can work backwards on the costs and the effort and labor required to do that. Does that help understand the cost thought process? Yeah, it sounds like there's a whole spectrum. It's tremendously complex. It just ranges. You either do nothing or do everything.

31:50And doing nothing is a terrible decision. Think of it, this iron triangle of project management. That seesaw concept really helps our customers when I use that with them. Like the perfect world doesn't exist. There's always time, there's always effort, and there's always cost. It's the optimization of what's working for your organization to get a strategic advantage to be able to earn more margin and be more profitable. It's how you optimize that in the context of the businesses you're acquiring. And it's fascinating to me, like we talked through this with our customers. I talk about this all the time in the context of Insight.

32:23So I've been at Insight for seven and a half years now. We are constantly merging and acquiring other organizations. And we've tried a different spectrum of integration. We've tried very isolated organizations that run as a business unit for a while to see how profitable that is. But there's downsides to that, that you get less integration with your legacy customers. We've also tried, we acquire a company and we throw everyone into the mix immediately. We kill a brand and we integrate all their systems. But then you actually demoralize teammates in some cases. The truth is always in between, but we live this ourselves on a regular basis.

33:00this. And we just acknowledge as an organization, this is required in today's world and business that you're either acquiring or you're getting acquired. And the thought process of how you work through that technically is tremendously important for my team. I've got a team of 210. And it's really important that they are aware of these challenges for our customers. And we'll even pull teammates from around the country or different regions or teams because they may have more domain-specific knowledge in a certain industry, retail or manufacturing or security and government, etc. I just want to make sure I got this clear.

33:34You actually do acquisitions as a company and you're pulling in those learnings from your own acquisitions and transforming it or enhancing your practice with it. Absolutely. On a regular basis. We've had two decent size acquisitions this year alone. It's really cool, Tom, because you'd be surprised. I talked to a lot of consulting firms that do acquisitions and learnings do not translate over. I'm not kidding. It's really rare. I've been a lot around tables, do a lot of podcast interviews, I've talked to folks, a lot of these big top 20, and even work with someone directly. And you'd be so surprised how much of there's a wall between their corp dev versus their own consulting practice.

34:10Myself and my team, we're in an unfair position, if you will, or a really good position, depending on how you look at it, because we do work with our customers in similar challenges to what we're living through. So particularly in the technology space, we're just in the right place to be able to learn from those lessons learned, either good or bad. And we have a very community-driven team that we are sharing regularly customer stories of. It's from an excited perspective of, Oh man, T-SAN, I just got on with this customer. Man, they're a mess. But look at what we can do here. And we recommended they do this.

34:44And we got this challenge. That's a really good place for our team to be. And Insight does a really good job of merging very intentionally our pre-sales and sales organization with our internal IT function. So a lot of crossover functions that we work with each other and customers and on internal IT initiatives to make sure that we're sharing that knowledge and utilizing that knowledge. Because if we're not doing that internally, how can we tell a customer to do that? That's a big challenge. True. So back to the Denmark deal. I'm pretty interested. You know a lot of stuff I can tell you'd help me.

35:19But in terms of working with you, you said two hours up front. I don't want to pay for that. You're going to help me scope this out initially? My team is a true pre-sales team. So here's how we've always operated in this. We want to make sure what you're trying to do aligns with, we can actually provide you what you're trying to do. So we want to be honest and upfront. If you come to me and say, Tom, I need to build a nuclear reactor, I'm probably going to say, probably not my best place to help out. Keep the relationship out to help you, support you the way you can. But the majority of the time when we're coming in in an IT-focused view and mixing in that business side, my team is working on what we would call the pre-sale side.

35:57So our team is completely free, if you will, to the customer. And our job is to make sure we're solutioning and designing and helping you through to build that roadmap. If we do our jobs well enough, we would like you to buy services, product, etc. from Insight. But that's on us. That's on us to do that job successfully enough to show the value, which is why we share the thought leadership so that our customers will say, Hey, that Keysan guy seems pretty sharp. I should probably get in a discussion with him and see where it leads. Then we would have services. Once we had scoped that, understood it, knew the challenges inherent there, we have billable services, et cetera, if you actually wanted us to do the work itself.

36:38I mean, this Denmark deal, I'm going to pull the trigger on it, getting close to LOI. I give you a buzz. We have a quick talk. You run through me a bunch of stuff. I'm like, all right, my head's spinning. Tom, I'm going to have somebody look at it. You send someone from your team and they start giving me initial assessment. Hey, stuff we just talked about. But what about to that point where it's like, hey, to get towards that 90 % accuracy, there's some real work to be done. What does that engagement look like? We would have a scoping discussion as part of that pre-sales conversation. We're going back and forth.

37:06We're working through, you know, Tom, you seem like you know one or two things. I'll be careful to say I'm smart, but I'm very, very determined. But you seem a couple things. My next step there would usually be, hey, Kisan, where do you live? Let's get face-to-face on a whiteboard. I want to get on a whiteboard and understand that's free, if you will. I'm not charging you for doing that. I want to get on a whiteboard with you and the teammates that are stakeholders and decisions that have to be made through this process. So let's get on a board. Let's draw some designs. Let's call out the risks.

37:38Let's call out the things that we need to dig into more to get further details. And we can use that to... If you say, Tom, great discussions. I like what you're saying. We'd like to actually use you to do these services. We would take that back to a service and scoping team in our service delivery organization. They would help us figure out the cost, the risk, the scope of that engagement, wherever that technology stack may be. There may be some products or some firewalls or devices, whatever that may be you need to purchase as part of it as well. And then we would come back with that total cost to the organization.

38:10And something that we also do as an organization that is why I came to work here, I was actually a customer of Insight for 10 years is our pre-sales architects. So my team today, my team and many others, but my team just focuses on pre-sales architects. My team actually follows through into execution for oversight. So why that's important to you as a customer is you and I will have a lot of discussions up front on a whiteboard, etc. I'm understanding your context, your business challenges, maybe getting some of those statements from you on the side like, Hey, Tom, in this one, we really can't mess up.

38:45Super focus here. Very important to have that context of the customer concern and their stress level. I would also be following through to once a delivery team was engaged to do that full set of work to make sure that the team is doing what we said we were going to do. And they're getting those pieces of context and oversight. And I'm still working with you as they're doing that as well. Sounds like you do free diligence. We understand that the importance of a quality outcome from our customer is getting our long-term business and relationship there. And we will invest very unhealthily at times to make sure that our customers are getting the right outcome because we're not just trying to come in, do one service and disappear.

39:24We want to maintain relationships. Fair enough. All right, Tom, I'm going to ask you for a favor. Put the consulting firm cap off for a second because I'm just like, as a friend, one of the things like biggest hesitation because I've been burnt on some consulting firms and it sucks when you do. The cost is probably the biggest thing I'm always afraid of. Just like anytime you engage, it just ends up being a lot of money to get into it. How do I manage that? You know what I mean? You're in the industry for a long time. I know I'm asking for a weird thing. And obviously, you want to do what's best for the company.

39:53But truly, you actually know better than anyone else. By nature, a lot of services firms sell you more services than you actually need. The whole game, everybody's got to increase their numbers every year. Help me out there. So I'll put on my customer hat of, you know, before. This is the first job I was ever in in an organization that we have a consulting group in our organization, but we would call ourselves a solution integrator, not a consulting organization. Just because most consulting organizations don't take product platforms, resell into account the way that we do. So we're trying to operate in between a traditional VAR and a GSI in the big players very intentionally.

40:33That's a strategy of ours that we want to make sure we're hitting because of our ability to maintain a long-term relationship. So once again, we're not charging all of that cost upfront to a customer for a pre-sales engagement because we may offset that with the sale of product or we'll get services as a piece of that. That's okay as long as it's a two-way relationship, which leads me to answering your actual first question. So when I was a customer, I would just be very transparent with the account manager that I had and the architect that I had. So in the case of my team, that's the architect.

41:06The relationship between the technical teammate and myself was way more important than the selling relationship. I may be a little biased to say that if there's any insight sellers watching this, don't hate me for saying that. It's not that role isn't super important. It's that the technical team should be telling a customer what to buy. The seller should be saying how much. And that's really important. My team is not a commissioned sales team. So we're not there. we are paid well, salaries, etc. to make sure that we are taking care of our customers because that's our strategy as an organization is to really focus on relationships.

41:40So what I say to our customers and the customers that we work best with, it's honestly the customers who are just as transparent with me as I am with them. If I'm going into a situation, I remember when I was a customer of... It was actually a company that Insight acquired, but it was Insight Now. We had a very large data center migration project that we were doing. Most of my team's background was security and software development. We had a couple of infrastructure people, but I needed them to go. We were taking three managed data centers and a couple of cloud environments into two of our own full Colo locations.

42:13The reason we did that was some regulatory issues at the time that we had to address and work through, and they weren't as comfortable with cloud as they are now. Now, when we went through that process, I went to the team that I worked with and I said, look, we're going through a vetting process. We went with three different partners in this case. We asked them their costs. We gave them a solution set we wanted them to come back with. We would negotiate back and forth with them. We'd say, hey, if you can knock this off and give more up over here, it'll level us off. It's that transparent relationship between where were we willing to put technical debt risk in a platform versus a service engagement and having that discussion with them.

42:50Now, some customers are not comfortable sharing any type of detail around strategy, etc. But that to me is actually a good telling sign up front with our customers. If they're being open and honest with me, there's a really good chance that we're going to work really well as a team and be an extension of their team, which is something we want. No customer in the world would come to me and say, hey, Tom, we've got a budget of$45 million. What can you do with that? I also think that would be a really bad strategy from the customer's perspective. but understanding when we're talking through that, how aligned are our organizations?

43:24How aligned are our cultures? I can tell in a couple minutes with a customer if the culture of how they operate is a culture that will mesh well with my team. That's really important. And then the other side that we do very intentionally, if we do have a discussion with a customer and the customer's like, this architect's being too aggressive on this one piece or they're not being aggressive enough, we have geographic teams that support regions. we'll rotate architects in. And that gives us an ability to pull in A, different personalities and B, pull in different technical backgrounds and skill sets.

43:57So some may be in cloud, some may be in network, some may be in storage, etc. Very important for us to have diversity of thought process moving in and out of that customer account. So we're addressing those challenges and really giving them thought leadership. So my biggest answer to that, Kisan, is really be honest with us. Let's say you call Tom today. Here's what I want to do. More importantly, here's what I don't want to do. Because I think oftentimes customers tell us what they want to do. And we start ideating and whiteboarding and coming up with all these awesome ideas that we've seen successful at other customers.

44:32And that's our value is we do see what works and doesn't work at customers. But if the customer doesn't explicitly say, don't do this and focus here, it's really difficult for them to understand why is Tom talking about AI and ML? when I asked them about how do I get a network device in my data center? Very important that trust is two-way and there's open communication there. We're also big proponents. One of the last things for us, we're huge proponents of let us knock one small thing out of the park. I don't need to come in and get a$500 million engagement with a customer. That's not how we look at success as an organization.

45:08We look at success as we started really small on one thing, very explicit, super focused skill sets or expertise in a certain space. And we've got a lot of them. And if we're growing and adding value and we knocked it out of the park, that customer is going to know that, hey, Tom said we would do this successfully and we did it successfully. So now I want to work with them more and continue to build that trust. It's a good point. Hopefully that helps. Be honest. I've been honest with you. I told you I'm cheap. Honest and transparent. No, you did. You did. Think the seesaw. Cheap works. But your implementation time and your complexity goes up.

45:42When I start negotiating the hourly billable rate, it's... Exactly. We do, from a costing perspective, our organization, we do fixed SOWs with higher risk and we do variable hourly engagements. We'll do all sorts of stuff. We can be very creative in that space. But ultimately, at the end of the day, if our team is not being dynamic and adding thought leadership and value truly, we don't just get to go in and say, we're fancy and I'm smart and I add all these things. We have to go in and roll up our sleeves, get in a ditch with a shovel and earn our right to do more business. That sounds cool, Tim.

46:12I definitely keep you in mind on this Denmark deal. Good part of doing vendor diligence is asking for a reference. Do you have like a little quick story you could tell on just iROI that you've kind of what's the big win that you've been most proud about? That is a loaded question. So yes, I do. There's a lot of different examples, but one for me, probably the one that I'm most proud of actually was a security incident we helped respond for on a customer. ROI is a little different in a security context. And I need to be careful not disclosing information we can't. So you could indirectly correlate who it is.

46:46But I will say that from a security perspective, we have done a really good job as an organization adapting to mixing pre-sales resources on my team. So from a customer calls and we've got an issue, get immediate teammates involved that are knowledgeable of that account, of the relationship, of the technologies, very dynamic in where we can go depending on what they have in their environment, cloud or data center. And then the ability to also have an aspect of remediation, virtual CISO, engagement and response, forensic teams, etc. The ROI on that for our team compared to some of our competitors, I will say is extremely impressive.

47:24And I don't want to go into further details on any of these examples because I'm worried I'm going to say something I shouldn't. Fair enough. That's one. The other one is just my personal career since I've been here. I've done some projects and a lot of manufacturing. We've had some amazing manufacturing modernizations with our customers that I've personally been a part of. And the team has done an amazing job supporting around taking a manufacturing organization that was very far behind as far as IT operations were concerned, literally down to spreadsheets and in some cases printed spreadsheets.

48:00for manufacturing optimization. I started some of those projects six, seven years ago. Fast forward six, seven years, they're some of the most modernized, accurate, machine learning-driven manufacturing organizations we work with. Won't give ROI numbers in that case, but I know what the ROI is and it is paid for itself probably 50 times in full what we've received from that. A lot of work in the AI ML space recently, specifically around Azure-based business, a lot of endpoint-based business, co-pilot, et cetera, multiple awards we've gotten there recently. And our data and modernization team continues to do amazing work, which is usually the hardest part.

48:41Data gravity, in the words of our CTO, Juan Orlando Andini, how close an environment is working to the data is so critical. And we have an amazing team between more modern data AIML as well as data management platforms, that the ROI in those cases has taken 70, 80, 90 sources of data sets from our organizations and turn them into one or two usable sets that we can process for machine learning through ERP systems, etc. So a couple of examples there. I didn't go into extreme details just because I want to be careful saying things, but those are three that come to mind immediately. Very cool. Tom, what's the craziest thing you've seen in M &A?

49:20I've seen two crazies from an engagement and operational movement perspective. One is the day that a public company announced a integration, there were devices, platforms and new IT staff shipped out to every office of the acquired company. Little aggressive, but very fast integration times. And I've also seen organizations that continue to operate in pillars on the opposite side of that spectrum for 10 plus years after an acquisition. And when we do the financial analysis of the cost and the tech debt cost, operational cost, staffing cost, it's literally costing them like six or seven times what it should be.

49:59So broad spectrums, no CIO or CEO ever wants to hear we're paying six or seven times as much as we should be right now. nor does any CEO want to hear no one's working because we ripped our entire network environment out the first day of acquisition. So pretty crazy stories. And then if you want to go into other stories not relevant to this, we can talk some insane stories. I think long term, we need to write an anonymized book amongst my team of some of the crazy stuff we've seen between massive issues and fires in data centers, crocodiles in data centers, customer insanity, all sorts of interesting stuff.

50:33Crocodile in data center would probably be the right story for this crazy that's what happens when you get floods in a data center particularly in florida is you get crocodiles in your data center wow i would not want to be the first one going in to pull the plug on the drain now this has been great i learned so much about doing it diligence planning for integration you've helped me become a better m &a scientist i love it thanks for having me case on this is always a blast happy to do follow-up sessions and really appreciate you taking the time to talk through what we do. What does IT nerds get to hide in the corner and not ever have anyone aware of what we're doing?

51:09This is really important for acquisition. So thanks again for having me. Appreciate it. Hey, those of you still tuned in, thank you. You are a true M &A scientist. I always appreciate feedback, topic ideas, speakers, things like that. If you don't like the podcast, hit me up, I'll give your money back. But let me know what this is. We haven't done a lot of IT topics, so I'd be really curious to get a sense. Hopefully there's some IT nerds helping to make happy. Until next time, here's to the deal.

51:47Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up on M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com, or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. that's where you can also subscribe to our newsletter.

52:32Again, that's mascience.com. Here's to the deal.

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