What is IT Due Diligence and Why Does it Matter?

due diligence

IT due diligence is the process designed to find a clear and comprehensive picture of the Total Cost of Ownership (TCO) of a company’s IT infrastructure as well as the risk associated with any future mergers or acquisitions.

There are four steps to the IT due diligence process:

  1. Assessment of the company’s standards, inventory, and systems
  2. Assessment of all databases and applications in use
  3. Assessment of current IT support services and vendor operations
  4. Analysis of the IT company’s structure and how it enhances their core business activities.

Importance of IT Due Diligence?

The system of “Due Diligence” really hit the mainstream when the U.S. Securities Act of 1933 was passed. And since this Act was passed the phrase “due diligence” has become somewhat synonymous with the orderly investigation of many different facets of business, one of such is the sub section of “IT Due Diligence”. This Act essentially passed on the responsibility to disclose all information about the materials being sold onto dealers and brokers who would then release that information to potential investors. If they did not pass on this information, they could be criminally prosecuted. But those who passed the act knew that it would be unfair to prosecute the brokers disclosing this information if they could not gather a piece of the required data. Thus, the Act included a section labeled “Due Diligence” to cover this possibility.

 

Instead of discovering the failures of a company after a big contracted merger, many companies choose to avoid the frustration and have a professional IT due diligence assessment done beforehand.

 

With the various different ways to conduct an IT Due Diligence evaluation, this guide is generally regarded as the most trustworthy method consisting of modern practices. Many professionals follow this guide, and after you’ve had a professional take a look at your company we usually also recommend you take IT due diligence a step further and have a comprehensive security analysis performed.

Instead of only getting a look at how the company operates and their level of material investment, doing the security analysis will give you insight into any potential security threats. Doing this security assessment lets you see all the sensitive date that may need to be protected, where the data is currently being held, and what level of protection the company is currently employing to cover that data.

Having a professional to handle the IT due diligence assessment of a company is generally simple, as specialists build their experience to fully explore and analyze the IT portion of businesses over many years.

IT due diligence for Mergers and Acquisitions

IT Due diligence is an imperative activity companies must engage in that is a sub section of conducting a due diligence assessment, which could take up to several months to complete if the company is on the global scale. The team assigned to IT due diligence is sent to discover how much the company they are assessing is worth in tangibles and intangibles along with the risk associated with that company.

Conducting a mergers and acquisitions IT due diligence assessment requires considerable skill and expertise from the professionals assigned to the assessment.

Find out more about what were capable of at ERGOS here.

 

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