In a divestiture, it’s after the signing of the separation agreement that the real work for the IT organization begins. Separation, in whatever form it takes – spin off, split off, sell off or carve out – requires a complex set of activities to officially separate services and contracts, replicate systems, transfer and transition application portfolios and stand up new infrastructure environments and teams. All this work needs to be done while both the legacy and the newly separated companies continue to support their businesses and work to achieve other strategic objectives. This requires both sides to recognize the elevated cost of capacity, with both human and physical assets needed to support separation activities.
The newly divested firm will need to build and manage a plan to ensure each team has the people, process, technology and contracts in place before services are fully transitioned. It has to ensure the new company can operate on its own.
The legacy entity will need to build and manage the plan to fully transition the systems and services to the divested firm, ensuring a seamless handover while maintaining business continuity.
5 To Dos When Separating IT in a Divestiture
| New Company | Legacy | |
|---|---|---|
| Primary Goal | Be ready to transition and assume the work to stand alone. | Be ready to support the transition and let go. |
| People | Get the right resources in the right place:
| Plan for transition capacity and downsizing:
|
| Process | Port the processes from the legacy company or develop new:
| Support both legacy and NewCo processes:
|
| Technology | Ensure the right hardware and capacity are in place:
| Plan for reductions in capacity:
|
| Contracts | Ensure the right contracts are in place:
| Plan for contract separation:
|
| Finance | Manage the timing of services and the costs:
| Charge for services during transition:
|
Divestiture Requires Smart Governance
A smooth divestiture starts by establishing strong and effective two-in-a-box governance. Two-in-a-box governance pairs individuals with the same role in each company to ensure the work is transferred appropriately. This will ensure all hand-offs, coordination, financial transfer and approvals occur in lockstep. The creation of two separate entities necessarily requires independent meetings with controlled access, but establishing a joint core team between the two entities can help identify planning dependencies and ensure effective communication and decisioning throughout the separation process.
The essential elements of a successful divesture program include careful planning and consideration of the potential challenges that arise with the separation. ISG helps enterprises build a plan for a separation program, from the strategic approach to the very detailed activities. We have the experience required to manage the interrelated IT projects within a separation program for both firms, provide the right process structure and report and conduct the due diligence necessary to achieve divestiture-ready objectives. ISG understands the market norms for establishing and realigning budgets. ISG’s Contract Lifecycle Management Services (CLMS) and Software Advisory Services can manage and offload the work for renewals and negotiations to achieve optimal savings.About the author
Terri Hart-Sears
Terri is a trusted advisor with deep expertise in strategic asset management and IT global sourcing management. Terri brings a significant understanding of information technology strategy, processes and sourcing-related initiatives to ISG clients. Her roles include Managed Services Director for Technology Business Management (TBM Practice), Asset Management and Consumption Management (CM) within the ISG Managed Services practice, leading designs, solutions and implementations for IT financial and asset management solutions. Terri provides expertise in sourcing methodology, contract administration, financial, performance, relationship management, and transition management. Terri has published several articles on Asset Management, Sourcing Practices and IT Optimization.
