Fission Consulting, the industry-leading IT consultancy company that helps private equity and enterprise-level clients navigate the complexity of an IT carve-out, has shed light on the high-level activities that take place in an IT carve-out with a recent FAQ-style article.
An IT carve-out includes the activities critical to de-integrate the IT assets of the carve-out object from the parent company.
According to Fission, permanently divesting business units is a standard strategy among multi-divisional companies looking to adjust their business portfolios.
Unlike system implementation, in IT carve-out, the NewCo includes no modification and is a near-exact copy of the Parent IT environment unless any new system installation is involved.
With that said, IT carve-out is an intricate transformational project that often poses operational challenges for the involved parties–the current IT infrastructure needs to address NewCo’s business requirements while still being under a division.
Again, as a cross-functional process requiring both entities to work independently, the split-off should happen on an HR, legal, financial, and technical level, followed by building a new IT environment, explains Fission.
According to the company, NewCo has multiple options based on the project when it comes to setting up its IT environment.
To put all systems and applications of the Parent in place for NewCo, the Parent IT environment should be exactly copied. However, in this approach, no Parent data will populate these systems.
The second option is to make a selective copy of the Parent IT environment where only the systems essential to maintain optimal business operation get migrated and installed in the NewCo IT environment.
Again, instead of installing some existing systems from the Parent IT environment, NewCo can deploy completely new ones while making a selective copy. This approach of disregarding Parent systems leads to cost savings and helps efficiently optimize the NewCo applications for scale, adds Fission.
According to Fission Consulting, due to IT carve-out transactions involving a slew of lengthy and complex actions, ensuring an effort in coordination is critical for the effective navigation of the process.
Fission stresses the importance of ensuring hands-on involvement among resources from Parent, NewCo, and involved third parties (if applicable) in driving long-term business value.
According to Fission, the targeted splitting of IT elements of an organization, e.g., data, applications, processes, or infrastructure, can drive measurable returns if carried out by experts.
For example, leveraging its tried-and-tested carve-out methodology, Fission helps streamline highly complex IT carve-out activities to speed up the separation timeline–limiting business disruption and ensuring data accuracy–along the way.
Its end-to-end IT separation process is a six-phase approach that includes kickoff, NewCo IT environment design, infrastructure build, migration execution, cutover, and running the new business.
In the kickoff phase, Fission identifies all project team resources, maintains thorough communication, plans the infrastructure build, and requests documentation for custom data objects, which is essential to develop test scripts.
Even though the Parent and NewCo resources vital to executing a successful carve-out may vary from case to case, typical resource requirements include Project Management Office (PMO), IT business analysts, Functional Testers (NewCo), and technical and infrastructure teams.
Besides thoroughly reviewing the supplied documentation to develop test scripts, the design phase involves devising carve-out rules to pinpoint in-scope data to be migrated to the new IT environment.
Starting in parallel with the design phase, the infrastructure build phase involves developing the project landscape, setting up the NewCo-hosted IT infrastructure, and connecting necessary interfaces to ensure the NewCo can function properly as a standalone system post-separation.
Later comes migrating all NewCo-specific data and applications from Parent’s IT system to NewCo’s IT infrastructure.
Fission says the role of rigorous validation checks is to make sure the NewCo IT environment is free of Parent data.
By executing the developed test scripts and adopting a “test and refine” approach, Fission ensures quick tracking of any functionality issues. The company explains that the result is a fully functioning IT landscape for NewCo upon exiting the transition services agreement (TSA).
The final system cutover plan is executed to enable the acquired company to operate optimally in the standalone IT environment.
Built to support private equity firms as they encounter post-separation challenges, Fission offers prompt on-call support during the initial weeks following cutover, says the company.
Founded in 2017, Fission Consulting is a class-leading IT service and IT consulting company. It provides private equity firms with IT carve-out strategizing and execution services to help minimize project costs, improve project timelines, and remediate common issues.
More information about Fission’s FAQ-style guide to IT carve-outs is at https://www.fissionconsulting.com.
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