IT Carve-Outs: How to Successfully Separate and Integrate Functional IT

Imagine if your business could operate more flexibly, efficiently and sustainably – by adapting to changing market conditions. For many companies, this is when an IT carve-out becomes interesting.

In this article you will learn what an IT carve-out is, why it could be crucial for businesses and how SEEBURGER can help you.

A targeted carve-out of IT systems can unlock new growth potential without the existing IT infrastructure holding back progress. An IT carve-out offers companies the opportunity to restructure their IT infrastructure and create independent, efficient units. However, this process requires not only technical expertise, but also clear strategic planning.

What is an IT-Carve-out?

A carve-out describes splitting off a business unit, subsidiary or functional unit that can then be operated independently or sold. An IT carve-out refers to separating the IT systems, databases and infrastructure that were assigned to a (to-be) carved-out unit. The aim is to set up the IT systems independently of the previous group structure while allowing business processes to continue seamlessly.

Why carve out IT?

There are a number of benefits to be gained from outsourcing IT, especially if your organization is looking to become more agile and cost effective. Here are some key reasons for an IT carve-out:

• Cost savings: Minimizing redundant systems and processes can significantly reduce IT costs.
• Efficiency gains: Aligning IT resources with the needs of the outsourced business unit has a positive effect on operational performance.
• Flexibility: Businesses can adapt more quickly to market changes and evolve their technology infrastructure as needs arise.

An IT carve-out may also be critically important in the following cases:

• Realigning business units: A particular business unit is restructured or outsourced to enable it to operate more effectively.
• Focusing on core competencies: Non-essential IT systems are outsourced to focus on value-adding areas.
• Optimizing an IT landscape: Outdated IT systems or processes are replaced with more modern technologies.

Mergers and acquisitions (M&A) in particular often require IT systems to be carved out of existing structures and integrated into new ones. A well-planned IT carve-out ensures that these transitions are smooth and that business processes can continue without disruption.

What are the challenges of an IT carve-out?

An IT carve-out presents companies with a number of complex challenges that require careful planning and execution. The following list highlights some of the key issues that can arise in this process:

Data migration and integration: Transferring data from existing systems to new, independent systems is one of the biggest technical hurdles to overcome. You need to ensure that the data has been migrated completely and correctly, and that no information has been lost or corrupted. As this may involve converting different data formats or structures, it’s no mean feat!

System compatibility: It’s important that new IT systems are compatible with existing systems to ensure a seamless transition. This often involves managing different technologies, platforms and architectures, which may require some development and customization.  Don’t skimp on the analysis of existing and future infrastructures before you start!

Security risks: During carve-out, new attack vectors emerge as systems are opened or less protected for a short period of time. Cybercriminals are eager to exploit these vulnerabilities. It is therefore important to protect sensitive data throughout the process, using measures such as encryption, access management and regular security checks.

Budget: IT carve-outs are often costly because a company has to fund both technical and organizational changes. To avoid a cost explosion, companies need to set clear budgets and keep a very close eye on these. Any unplanned changes during the process can have a significant, unwelcome impact on costs.

Employee training and acceptance: The success of an IT carve-out also depends on how well it is accepted by the colleagues affected. They need to be trained on how to use the new systems, which not only costs time and money, but can also cause resistance due to feelings of uncertainty, insecurity or scepticism. Transparent communication and a comprehensive training program help facilitate a smooth transition between systems.

Best practices for a successful IT carve-out

A successful IT carve-out begins with significant strategic planning. This phase is crucial to structuring the entire process and identifying any potential challenges at an early stage. During the planning phase, you define the goals for the IT carve-out, set a schedule for implementation and specify milestones. Risk management is also important here, as you anticipate hurdles and plan appropriate measures to overcome them.

Choosing the right technologies, such as a powerful integration platform, is another key factor in the success of an IT carve-out. These technologies not only need to perform well, but also be compatible with the existing systems of the parent company and the outsourced unit. They should also be flexible enough to allow for adjustments during the carve-out process. A company may be best served using cloud and SaaS solutions and other modern technologies such as iPaaS (integration platform as a service) that offer scalability and agility.

Once the IT systems have been successfully separated, the focus is on integrating the spun-off entity into its new structure. This transition must be carefully planned and executed to ensure that business processes continue to run seamlessly. Useful measures include increasing the availability of IT support during this transition phase to be able to react quickly to any problems. A smooth transition also requires close co-operation between the parent company and the divested entity to ensure that all systems are properly integrated and that data integrity is maintained. Ultimately, the aim is for the divested entity to be able to operate quickly under its new structure, with no significant disruption to its day-to-day business.

How can SEEBURGER help in an IT carve-out?

SEEBURGER has been providing software and services for business integration since 1986. With the SEEBURGER BIS platform, users can independently design simple to complex integrations and seamlessly network applications and systems. From planning to implementation, our consultants work closely with the customer in a continuous process to provide expert advice and support for all types of mergers. With our mappings and partner connections, the user has ready-made integration assets available that support various types of data formats and structures depending on the industry, applications and processes. We ensure effortless connectivity, especially for the integration of systems, applications, technologies, interfaces and end devices.

Source: https://blog.seeburger.com/it-carve-outs-how-to-successfully-separate-and-integrate-functional-it/