IT Due Diligence for VCs

The client was a major VC company that was considering investing tens of millions of pounds in a national vending machine operator to support the business through its next phase of growth and expansion - doubling turnover within 3 years. Whilst this sector is not normally associated with cutting-edge IT, and indeed few employees used it directly, there were good reasons to believe it could simultaneously be a major enabler of, constraint and, at worst, risk to achieving against the business plan.

First, the management control, operational efficiency and hence profitability of the business was underpinned by the Company's core customer service application. Would this scale? Second a major aspect of their Unique Selling Proposition was being the most responsive in terms of customer service. This was supported by small local call centres; again linked to the main service application. Features supporting mobility and converged voice & data were becoming increasingly important. Staff throughout the country, ranging from management through warehousing staff to call centre agents accessed these systems over a VPN.

In addition to conducting conventional commercial, legal and operational due diligence the VC required an independent appraisal of the scalability and risks associated with IT, networks and telecoms. The fact that the Company's HQ was within sight of the scene of the Canary Wharf bomb suggested that disaster recovery and business continuity processes were also worthy of investigation. As usual with investment decisions, time was of the essence.

As always, MorganDoyle's preliminary task was understand the significance of IT to the Business, what services it provided and what infrastructure it relied upon. One to one interviews with senior managers in accounts, logistics, stock control and customer service gave valuable input on the strengths, weaknesses and ultimately the value of IT to the business. This was fleshed out by "walking the floor" to get more insight, particularly to understand the end user perspective. Input on the technical infrastructure was gleaned from the IT department, the major software supplier and a study of the network, telecoms and hosting service provider contracts.

MorganDoyle's main deliverable was an in-depth report covering IT strategy, organization & management; business support functions; major risks; scalability; supplier management; vision and detailed recommendations for improvement. It was presented jointly to both the investment panel and to the investee company to give everyone the opportunity to validate its findings and achieve consensus on the best way forward.