Every company is different and has its own unique challenges. These challenges are often determined by factors such as types of services provided, the industry they are involved in or serve, customer needs,and how the company was formed, just to name a few. Despite the diversity of challenges, there are a few challenges that almost every company that grows by acquisition faces that we will look at today.
During my career I have worked for and with different companies that were held by private equity groups. Usually IT teams for these types of companies are quite small in the early days of the companies. I learned a lot about growing businesses quickly and the world of mergers and acquisitions. While different private equity groups operate in different ways, there are some common business practices that are adhered to. For example, there are two main ways to grow a company are by organic growth or by acquisition growth. Most people are familiar with the more traditional way of growing a business which is referred to as organic growth or growing a company through sales. While this has its own challenges, I want to take closer look at the method commonly used by private equity companies which is acquisition growth. For those who are not familiar with the concept, acquisition growth is the growth of a company by buying other companies in your business segment. This allows for the creation of a larger company that they can hopefully find some synergies between and cut some overhead from operating expenses to improve profits.
Just like the way all companies are unique; the purchasing of a company is not all the same, either. Depending on the deal, there may or may not be business systems involved. I have seen where there is simply a database of requested information that is delivered to the new parent company containing historic company data and sometimes it is a full-blown acquisition where the company retains all their business systems and run as if nothing has changed. These business systems can be systems such as a Customer Relationship Management (CRM) system, Enterprise Resource Planning (ERP) systems, financial systems, as well as other software systems that help run the company. Regardless of whether it is just a database or multiple new systems, this poses some common problems that the business needs to solve.
Today we are going to look at a very specific problem: how do we report the data from the newly acquired company and the new parent company without having to go into multiple systems to pull data and aggregate it in Excel or Power BI? To solve this problem, we can take a few different approaches.
The first approach is to consolidate business systems. Ideally, we want the whole company operating out of the same business systems, so that everyone has access to the same data, and we have one place to pull data from. This allows our sales people and customer service people to have the same information when contacting customers. It also allows our plants to be using the same product codes when creating new products as well as see the same stock levels and other information important to producing goods. Finally, it allows business users such as the finance team to have one system to pull financial information out of for reporting purposes.
Realistically, this is usually not a feasible option. Especially with larger companies with tens of thousands of products, customers, orders, and years of historic data to import. We also lose some visibility on what data belonged to the acquired company versus the parent company. This is important data in the case where we want to compare how the company performed before and after it was acquired. Another thing to consider is that we don’t really want people querying our production systems to generate large reports. This can slow down our production systems and cause issues with people trying to perform their day to day tasks in the system. The only reason you should be pulling from a production system is for information that you need in real time and is vital to business operations. For example, determining if there are currently any outstanding production orders, or if an order ready to be shipped out to a customer?
An alternative approach to our historic data problem is utilizing a data warehouse. If you are not familiar with data warehouses, checkout my article at The Power of Data Warehousing for more information on what they are and some benefits of them. In a short and overly simplistic description, a data warehouse is a centralized database that is fed data from disparate sources, is normalized, and often has some data cleanup involved as well. They are great for having a central source of truth for data to use from reporting from.
This approach allows businesses to continue using their current systems without going through the pains of migrating to different systems. There are still things to consider such as data integrity of the systems and whether the data has enough value to bring into the data warehouse. Another thing to consider is company resources. Is that old system sitting out there worth keeping on its own server so we can pull data from it, or can we just pull certain information from it and dump the data into a database residing on a shared database server? Does the company have the necessary server resources and personnel resources to maintain a data warehouse? Is there someone from the business, a person we refer to as a data steward, that can help keep data clean?
While these are sometimes lofty issues, setting up a data warehouse makes future acquisitions less painful from a historic data standpoint. Once the data warehouse is set up, it is just a matter of setting up a new data source with very little change in reporting, if any.
Taking these things into consideration, we can see there is no cookie cutter answer for this business problem which is why business intelligence companies are becoming more and more prevalent in the modern business age. Since businesses are different and have different growth paths, this means that the solutions for each business will be different. If you are in this type of environment and are looking for a solution to a similar problem, Software Design Partners would love to partner with your company to help you find the best solution for your company.
