IT Service Provider Acquisitions: 3 ways to set new partnerships up for success

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Few business owners I know are pleased to find out that a service provider of theirs has been acquired.

This is especially true in the case of managed IT service providers, who more or less hold your ability to operate in their hands. If this provider has been purchased… what does that mean for your business? Can you trust this new company? What level of risk are you facing?

With the high level of merger and acquisition activity in the IT industry in particular—which is likely to continue given market growth projections—I’m hearing more and more concerns about these purchases and all the uncertainties and disruption they can stir up.

Over my 30 years in technology outsourcing I’ve made several acquisitions of my own, and have also had some of my key vendors acquired multiple times (some of which were handled quite well, some of which, from my perspective, were not). With these experiences in mind, here are three key ways to minimize stress and maximize the likelihood that this new partnership will serve your business well.

 

1 – Prepare yourself for some inevitabilities.

If you receive word that your service provider has been purchased, expect:

  • To be taken by surprise. Your provider will have their hands tied by legal restrictions when it comes to giving you advance notice of the purchase. In many cases their own employees won’t even know until the deal is signed.
  • Turnover. As the two companies come together, there will be functions that become overstaffed, which will result in some folks being let go – and others seizing the opportunity to switch careers. This is by design to extract some efficiencies from the new combined entity.
  • Hiccups in service. While the two companies were compatible enough for the acquisition to make sense, they won’t be carbon copies. As hard as they will try to integrate while also keeping their attention on service delivery, every transition will have unanticipated bumps in the road.
  • Your voice to matter. The company that purchased your provider wants to keep your business, and the owner that sold to them is financially incented to make that happen. Don’t suffer in silence; deliver the feedback and give your provider a chance to course-correct. They’ll likely seize it.

 

2 – Ask questions to establish alignment and minimize surprises.

Next, it’s time for an open conversation with your provider about what the acquisition means for you in both the near and long term. They may initiate this proactively, or you might need to kick-start the process.

In either case, asking these questions should remove a lot of the guesswork from the process and hopefully get you and your provider on the same page going forward:

  • Why would the “new” combined entity still be a great fit to support our business?
  • How do you plan to come up to speed about our business and our goals?
  • How do you ensure that your service will continue to meet and support our business needs?
  • Who is now fully responsible for my firm’s satisfaction?
  • If this merger/acquisition goes as you expect, what should be different for us?
  • When should I expect your integration to be complete?
  • What steps are you taking to minimize disruption to my firm in the meantime?
  • If things aren’t going right, how do I best report that to you given that things are in flux?
  • What else do we have to look forward to as the result of this acquisition?

 

3 – Remove “over-communicating” from your vocabulary.

As with any partnership, communication is key. Your provider is going to be quite busy on the back end as they work through integrating their teams and systems, but this doesn’t mean you should shy away from talking to them and getting your concerns out onto the table as soon as you can.

This goes the other direction, too–if it seems like you’re being pelted with information from your provider, they’re probably trying to allay your fears. This is a good sign that they’ll give thoughtful answers to your questions.

 

Final thought

While providers will absolutely appreciate your understanding and patience during the transition, they are still ultimately responsible to deliver the services you’ve signed up for, and to be an asset to your organization—not a hindrance.

There will be hiccups along the way. How your new partner responds to those hiccups is the real litmus test.

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As originally published in the American City Business Journals.

Topics: outsourcing, selection, vendors