accenture it within divestitures

8/11/2019 Accenture IT Within Divestitures

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IT within Divestitures:Proven Practices for Seamless ExecutionBy Dr. Steffen Wendsche and Thomas Hummel



Effectively collaborate withbusiness

While divestiture is underway, theorganizational structures and theultimate overall business model itselfmay be ambiguous at best. Clarity isdriven over time as the specics ofthe divestiture emerge.

Even so, effective IT and businesscollaboration is imperative during a

carve-out. As much as the future busi-ness model drives the IT set-up postcarve-out, IT separation concept andprogress will drive business continuityand effectiveness during the carve-outphase and beyond. The overall result:improved business performance.

That is why business should be involvedin critical IT decisions. That includeshandling the prioritization of applica-tions and data to be separated, anddetermining IT restrictions and itsimplications on regional and functionalareas.

Regardless of the ultimate shape ofthe business, IT separation needs to becrystal clear. Specic objectives needto be determined at the program start.Those may change, but nevertheless, itis crucial to work on clear and mutualagreed assumptions at all times.

Depending on the level of integrationand the overall separation goals, ITseparation setup may range from doinglittle to creating an optimized stand-alone IT for the to-be-divested entity(see Figure 1).

With the global economicturmoil continuing to hitmost companies’ bottom lines,many are divesting non-coreor low-performing assets

(business lines or businessfunctions) in an effort toachieve higher levels ofbusiness performance. Butwhat may appear to be astraightforward tactic toinvestment bankers andbusiness strategists oftenspells stress for the infor-mation technology (IT)department.

After all, a company’s IT is the back-bone of its business operations.Required IT separation during a carve-out puts business continuity at risk.Systems and platforms are tightlyinterwoven and often centralizedacross business units and geographies,making them difcult to decouplewithin expected divestiture time-frames. The difculty of IT separationis often misunderstood by manage-ment, and can place an IT organizationin a precarious position.

How, then, can the technology organi-zation move from defensive and mis-understood to proactive and valued?From a depth of experience with IT

carve-outs, Accenture has identied anumber of key practices that can helpcompanies navigate through a smooth,cost-effective process—one that con-tributes to high performance.

Key proven practices include:

• Effectively collaborate withbusiness

• Phase the carve-out

realization• Dene clear responsibilities

• Anticipate third-partycollaboration

Figure 1: Types of carve-out projects and IT implications

Types Exemplary implications for IT

1Carve-out only• Carve-out without any divestiture

• Level of carve-out can be determined internally• Corporate IT services could still be provided, i.e.

carve-out of IT infrastructure or frame contractsis not mandatory

2Subsequent: carve-out, divestiture• Carve-out of the business unit rst and

subsequent divestiture• Stand-alone or integration-ready acquisition

target for the buyer

• IT needs to be separated and stand-alone as far asrequired to realize required lead times to closing

• Full IT carve- out until stand-alone might bebenecial to proof operational readiness

3Subsequent: divestiture, carve-out• Start of divestiture transaction rst and

subsequent start of carve-out• Focused carve-out as buyer structure/

capabilities are known

• Level of IT carve-out can be tailored towards futurebuyer; typically parallel carve-out and integrationat buyer

• Will require agreement on target IT with potentialbuyer

4Divestiture only• Execution of a divestiture transaction without

any carve-out activities in case of an indepen-dent entity or a transfer of assets only

• IT, either already stand-alone or identication of ITbelonging to the to-be-divested company, mightbe sufcient

• Right-sizing of residual IT becomes the focus



Also important to note: timing. IT hasto get in early on the decision-makingprocess. Why? Because the founda-tional building blocks of a separationare usually dened before the actualwork starts, within, for example, adivestiture agreement. It is critical,then, that IT gets involved in thoseearly discussions given its central rolewithin the overall carve-out.

Phase the carve-outrealization

The ultimate aim of a parent companyduring a carve-out is the completeseparation of services. From the per-

spective of the to-be-divested entity,the ultimate goal is separation plusoptimization of services for stand-alone.Our experience shows that doing bothseparation and optimization simulta-neously is difcult at best. Time andcapacity limitations are one factor. But,as mentioned, the bigger stumblingblock is the lack of clarity surroundingthe ultimate business model.

For those reasons, it is more manage-able to phase the approach, doing aseparation rst. After that has beencompleted, stakeholders from theto-be-divested entity can plan for anoptimized stand-alone solution tobe delivered in a second phase (seeFigure 2).

Dene clear responsibilities

The level of change as well as thevolume of work involved in an ITcarve-out can quickly overwhelm anorganization’s people and resources—particularly in the case of larger carve-outs. To move rapidly and clearly fromplanning to execution, a clear break-down of the work is essential. At theonset of a program, responsibilitiesneed to be clearly dened. Companiesshould consider the following:

Clear IT work stream structureIn practice separate work streamsshould be created for infrastructureseparation, application separation

(potentially further broken down perbusiness process), contracts (alsodealing with licenses and transitionservice agreements), and organization.It can also be benecial to create aseparate work streams addressing dataand document archives (see Figure 3).

Govern global carve-outs in linewith established IT governance rulesFor global carve-outs, governing thecarve-out in line with established localversus central responsibilities is key.IT services are usually provided fromcentral units, regional hubs, and locally.The split of responsibilities should followthe established global IT governanceprinciples. The central unit should leadand govern the overall carve-out, while

local execution should stay on the plateof local IT resources. Depending on thestrength of local resources, it may be wiseto establish a central team to supportthe overall carve-out also locally.

Distinguish between parent com-pany and to-be-divested entityIn Accenture’s experience, problemsoften arise when the parent companyand the to-be-divested company failto agree on division of responsibilities.To avoid misunderstandings, two pro-gram ofces can be established—oneat the parent company and one at theto-be-divested company to mitigateproblems.

The parent company should focus onsetting the direction for divestitureand assume governance while theto-be-divested company should keepits sites on executing the divestitureaccording to agreed-upon guidelinesand with the ultimate business modelin mind.

Create effective programmanagementThe complexity and mission-criticalnature of IT separation calls for aproperly staffed and experienced ITproject management ofce to setpriorities, track progress, and manageinterdependencies.

Besides managing and synchronizingdimensions within IT, it is crucial toorchestrate the relationship and care-fully coordinate the activities with theoverall program ofce, the deal team,

and other carve-out work streams—particularly nance, HR, real estate,and supply chain.

Effective program management helpsto ensure that clear guidelines for thedivestiture are created, adopted andadapted, as circumstances change.Guidelines set the parameters aroundthe depth of a separation, one-timeand running-cost limits, time limits,and the scope of transitional serviceagreements.

Figure 2: Typical IT carve-out process

Setdirection

Planunbundling

Executeunbundling

Carve-out start Unbundling plan

Typicalcharacteristics

Legal day-one NewCo stand-alone

Planstand-alone

Implementstand-alone

Continuousoptimization

Combination ofmandatory physicalseparation, logicalseparation, andtransitional serviceagreement (TSA),

to minimize risk for“day-one” andminimize spend forIT separation

Physical separationincl. cutting ofinfrastructureTermination of TSAPartially over-sized“parental” applications

to be replaced overtimePartially interimvendors

Right-sized IT, e.g.optimized applicationlandscape andinfrastructure that fitsbusiness needsOptimized sourcing

approach



It is important that all separationconcepts are checked against theseguidelines and a clear approval pro-cess is in place—one that allows fortransparency that clearly establishesaccountability boundaries.

Anticipate third-partycollaboration

Divestiture is not business as usual.The road to separation is often bumpyand ambiguous. To ensure success,additional skills sets and resources areoften a must. Here are best practicesareas to consider for contracting withoutside parties:

Getting outside perspective onfuture IT requirementsInternal resources are often stronglyattached to rules and proceduresthat worked pre-divestiture. To achieveright-sized and right-sourced IT forthe to-be-divested company requiresa different mindset—one that conformsto new business imperatives. At times,ensuring adherence to new ways iseasier through external sourcing.

Strengthen carve-out expertisefor program managementInfusing outside carve-out expertiseespecially into program managementcan help power a quick start. It alsominimizes failures common duringsetup and execution. Accenture depthof experience shows, however, thatsourcing the IT program managerinternally benets buy-in of internalresources and strengthens changemanagement aspects of IT andbusiness alignment.

Separation of vendor-providedapplications and support forstandard applicationsApplications created with external

partners often require their know-howand involvement when it comes toseparation. Another need for externalhelp arises with separation of stan-dard applications. Calling in reinforce-ments can free up key resources thatcan, in turn, focus on more strategicareas.

Figure 3: IT work stream structure and major interfaces

PMO

Countrycoordination

WS Lead IT

Application separation(perhaps split by cluster, e.g. ERP, CRM, ...)

Infrastructure separation (perhaps split by cluster, e.g. DC, WAN/LAN, Comm)

Contract separation and IT TSA

Document and data archives

IT lineorganization

Overall lead ofcarve-out program

Other carve-out work streamse.g. Finance, HR, Contacts

IT decisionboard

Focus areas/sub-work streams

Work stream IT



IT is integral to the opera-tions of any business. Anddecoupling it in the courseof a divestiture can be adaunting task. Following theseguidelines from Accenturecan help IT organizations

drive real value throughoutthe divestiture process, and,in the end, deliver resultsthat contribute to highperformance.

For more information on ourapproach to IT carve-outscontact:

Dr. Steffen [email protected]

Thomas [email protected]

Driving value through IT within divestitures



About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company, with morethan 1 90 ,000 people serving clients inmore than 120 countries. Combiningunparalleled experience, comprehen-sive capabilities across all industriesand business functions, and extensiveresearch on the world’s most success-ful companies, Accenture collaborateswith clients to help them becomehigh-performance businesses andgovernments. The company generatednet revenues of US$21.58 billion forthe scal year ended August 31, 2009.Its home page is www.accenture.com

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