MRUTYUNJAY (JAY) MOHAPATRA | Senior Vice President | Performance and technology Alix partners.
IT Financial Management (ITFM) is becoming increasingly important in mergers and acquisitions, where Deal -LevensCycli for months to more than a year can overstrain and often fluctuate the costs. This is where vertical software in ITFM can offer considerable value.
“Vertical software” refers to specialized platforms and tools that are designed for a specific industry or business function. Building on my last article, this article investigates how ITFM value creation in the Private Equity sector (PE) can accelerate.
Define ITFM and its strategic benefits
ITFM is a modern discipline aimed at planning, following and optimizing IT portfolio expenditure to ensure coordination with business goals. It offers transparency about where and how the dollars are issued ACROSS sources, suppliers, personnel and more-value organizations can make smarter, value-driven decisions.
Modern ITFM shifts the focus away from pure cost control to the delivery of value. It connects expenses with strategic business results, with the help of tools such as automated data intake, real-time dashboards, scenario modeling and accountability frameworks. These functions support dynamic, continuous decision -making and help emphasize too much expenses or risk in real time.
By making strategic considerations possible-such as reducing operational costs and re-assigning budget for growth initiatives ITFM flexibility and resilience. Automated benchmarking, financial reporting and prediction replacing manual, error -sensitive processes, creating a more adaptive and insight -driven financial approach.
Then control legacy it costs models
Legacy approaches of IT cost management are usually quiet, opaque and IT-centric. Expenditure is grouped in broad, non -informationative categories with little visibility for stakeholders of companies. Processes are static and often outdated by the time that insights become available.
Manual budgeting and lack of real -time monitoring obstruct agility. Investment decisions are often taken isolated, disconnected from broader business goals. These rigid methods are especially not suitable for the dynamic needs of mergers and acquisitions, carve-outs, divestments or cloud-based operations.
Modern ITFM treats these problems frontally and offers visibility, flexibility and strategic coordination.
ITFM embedded during the deal -living cycle
In PE a typical deal flows as follows:
• Deal generation
• due diligence
• Day planning (also known as the 100-day plan)
• Integration after the merger or cut -out
• Implementation of business plan
• Exit
ITFM offers clear benefits in every phase.
While generating deal, companies explore goals that are tailored to their investment thesis. With ITFM, PE’s early visibility in IT can get expenditure, benchmark against industrial standards and assess performance statistics.
In the necessary diligence, ITFM makes a detailed evaluation of IT outputs possible, causing efficiency opportunities to pop up in platforms, activities, governance and delivery. For example, one target in the midst of the transition to a Saas model was confronted with major shifts in shared costs and rent. ITFM made it easy to model scenarios and evaluate the developing cost structure.
In the day of a day, ITFM supports creating an IT operational model that is tailored to the broader business strategy. It also facilitates financial reporting, transitional services agreements and interim -GOVERNANCE. If a single source of truth acts, PES can follow from day one and further evolving editions and priorities.
During post-merger integration or carve-outs helps ITFM helps to manage rapid transitions, identifying cost factors, discovering duplication and synergy opportunities and improving the negotiations of suppliers. In a recent rejection of space travel, for example, I was involved, outdated manual reporting made financial visibility difficult. ITFM could have made a seamless shift from the Legacy Entity to the newly carved business unit possible.
ITFM supports strategic technical decisions, fast cost reductions and program salary in implementing the business plan. By linking it to the expenses for business results, it can help to increase the coordination and realize value. In one case, a reinsurance transformation initiative on which I worked repeatedly was requested by unclear goals and shifting milestones. With ITFM, transformation costs can be linked to defined business results from the start.
In the exit phase, ITFM helps to document and validate the IT component of the commercial prospectus. It maintains a traceable record of IT -Opzaves from Deal -Oorsprong to closing and then.
Let ITFM work: practical considerations
Just like DevOps in Development or Finops in Cloud -cost control, ITFM introduces an agile mindset of IT financing. This requires both cultural and operational shifts.
Companies often start with a proof or concept or evidence of value to tackle urgent pain points, such as cost-visibility, allocation or IT costs-to-serve statistics. For a complete implementation, specialized consultancy firms can guide the setup, whereby internal teams take over once fundamental practices have been established.
That said, ITFM is not a one-size-fits-all solution. It is especially valuable for fast-moving organizations with large, complex IT estates. On the other hand, it can be excessive for companies with fixed budgets, the fully outsourced or minimal IT expenditure in general.
Last thoughts
In private equity – where speed, value creation and decisive performance are everything – ITFM can be a crucial possibility of transparency and performance. From scouting deals to the implementation of outputs, it offers the structure, insight and adaptability that is needed to manage it as a strategically active.
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