What to do if your IT supplier gets acquired?

08 March 2018

With all the news around high street stores going wobbly, it’s inevitable that the broader business world will start to see changes in structures and opportunistic mergers, acquisitions or company failures will occur. In the IT space this has been happening for a number of years, with such a fragmented marketplace it is inevitable that companies will struggle, and others will thrive, but this change can mean disruption and pain for the client base.

The fortunate situation is that most IT or Telecoms companies that are acquired have ongoing revenues which, in most cases, are the reason why they are appealing for an acquisition from other players. Even if the business is really struggling, the lure of ongoing revenues and broader customer base is a good reason for a bigger more stable company to buy them. As a client therefore, your bills are the reason why your IT or Telecoms supplier might be acquired - which puts you in a great place to leverage the situation to your advantage.

That said, an acquisition or change of ownership usually bring changes across the organisation that can dilute the quality or capability of the services you are buying. Your favourite account manager who has been on your account for years might end up being made redundant, or moved job, which means the nature of your relationship is likely to change. Elsewhere in the organisation, key resources and skills are also likely to become unsettled, meaning you could be at risk of substantial reduction in service.

If your IT or Telecoms supplier is acquired, I would suggest the following steps to try and retain control over the situation to your advantage.

1. Find and read your contract – likely to be in a dusty drawer somewhere, the contract is the backstop of all services in this situation. You may have a “change of control” clause that allows you to terminate, or re-negotiate, when an acquisition occurs. Having this to hand may give you an advantage when the new supplier comes knocking.

2. Identify key resources on your account and talk to them – despite best practice, a number of services are still delivered with little knowledge transfer around the team and as a result your whole IT estate could be dependent on “Big Pete” in the operations team who has everything in his head. Understanding this dependency, and ensuring you have lodged it with the new supplier is key – they may keep Big Pete on to protect you as a client, or worst case you may have the opportunity to hire him if he’s made redundant.

3. Understand what you buy from the supplier – weirdly, a lot of clients have little to no clue what they actually have bought within their services contract, to the level required. Volumes of users, software and hardware ownership, end dates for different products, will all potentially come up for discussion if an exit is required to be performed. Having an inventory of your services, who owns what, and when everything ceases is key to getting the right deal in any re-negotiation.

4. Prepare to re-tender your services - no matter what happens, at the end of your contract it is worth shopping around for service. Despite the best continuity of service plans, you didn’t buy from this company originally and therefore a review of the market place is sensible. If you choose to stay with the new supplier then great, but at least you have the consciously decided that yourself instead of defaulting to it.

5. Understand the new suppliers capabilities - more often than not, smaller companies are acquired by bigger ones to drive a broader capability and revenue stream. By looking at the new suppliers website, you may have an opportunity to rationalise your other services into a single supplier which will drive an increased mutual interest in working together. They will increase focus on you as a cross-sell opportunity, and you can potentially negotiate lower costs as a result of a bigger spend.

6. Establish a line of communication to someone senior – when an acquisition takes place, the senior management are ridiculously busy trying to understand what they’ve bought and deciding what to do about it. By having access to these guys, you will have both an insight into their likely plans and potentially a voice to influence the outcome. You’ll also be able to make noise and add to their busyness, which is likely to lead to them giving in to your demands to get rid of you.

7. Be sympathetic to the guys on the ground – appreciating there is uncertainty in your own world, a lot of the people you deal with day to day will be facing job insecurity and stress which clearly can increase tensions and change approaches at a very personal level. Things might take longer, accuracy and quality may suffer, whilst staff are worrying whether they can pay their mortgages in a few weeks’ time. By cutting them some slack, you are likely to curry favour where other more vociferous clients will not.

Dealing with the above is a project, that requires resource and focus. As it was not a scenario that you had planned for, nor was it of your making, external assistance can be worthwhile. Embedded have lived through these situations on multiple occasions, both from a client and a supplier’s perspective, and can advise on the best way to ensure continuity of service through a period of significant change. We maintain relationships with hundreds of suppliers who might present a suitable alternative, or can help negotiate a sensible approach to continuing with the new supplier, dependent on your requirements.

If you are in this scenario and would like some help, please reach out.

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