Mergers and acquisitions (M&A) typically result in expanded capabilities and enhanced revenue opportunities for companies, but they also tend to create real challenges for the CIO and the overall IT environment. In fact, mergers and acquisitions often result in a need for companies to revisit and/or optimize their overall IT and data center strategies. This is especially true when the transaction results in the company suddenly possessing multiple data centers, duplicative systems, processes, applications and personnel.
Colocation can be an effective tool for companies on the heels of mergers or acquisitions for a number of reasons. First of all, companies often find themselves needing to integrate multiple systems. They can also find themselves suddenly in possession of multiple data centers (sometimes with too much capacity in certain markets and not enough in others) and duplicative systems and applications, so it’s an opportune time for them to examine their overall IT and data center strategies to ensure they have the best platforms and partners going forward.
Secondly, capital constraints are a common reason companies consider colocation during the M&A process. Since it is common practice to freeze capital expenditures and most sizeable projects, any plans to build new data centers and/or plans to expand/upgrade existing data centers typically fall victim to the freeze due to the amount of capital, time and resources involved. While the newly formed company determines its investment strategies and prioritizes the lengthy list of projects, IT must find alternative ways to accommodate the business’ growing demands for compute, storage and network. Also, colocation allows companies that have historically managed their own data centers to convert the cost of the data center from a capital to an operating expense, which is often preferred by the senior leaders and investors.
Thirdly, there often time comes a need during M&A to rapidly stand up new IT infrastructure to support transition services, launch new products and/or support the post-transaction marketing efforts. There tends to be a lot of new demand and pressure on the IT department surrounding a merger or acquisition, and they may not have the resources or experience to support the new applications and tools that go along with their company’s new market strategy. Colocation providers can discuss a customer’s overall data center strategy with them and ensure the right pieces are in place to optimize their data and IT infrastructure. Additionally, most colocation providers offer short term contract options and capacity can be purchased in small increments, allowing companies to buy only what they need for these time sensitive use cases that require immediate availability, but are typically temporary in duration.
A Smooth IT Transition
A top-tier colocation provider can do a number of things to make the M&A process go as smoothly as possible. At CenturyLink, we start by assembling a team of resources – from technical experts to those on the executive level – and perform an IT assessment. This allows us to thoroughly understand the IT environment so that we can most effectively optimize it in accordance with the company’s goals and objectives. It also allows us to examine their business needs and provide them with a roadmap for their infrastructure.
It’s also important to have a discussion with the newly merged/acquired company about what M&A means for their business and its IT environment and what their short and long-term IT objectives are. We discuss with them how our data center portfolio and product set can help them accomplish their goals and objectives. Next, we put together a reference architecture which helps companies outline and identify each of their key projects over a specific time period such as the next three to five years.
This comprehensive approach allows us to have a thorough and detailed understanding of what M&A means to a specific customer and how we can help the customer meet their IT and data center needs in the near term and into the future. We want to be a valuable partner to our customers, and by taking the time to understand their business and IT goals, we can better help them optimize their resources.
For more information on CenturyLink colocation services, please view our Colocation Portfolio Overview. In addition, our executive brief on Data Center Expansion Options discusses the pros and cons of building onto a current data center versus buying space for your IT infrastructure through colocation.