Venture Integration: How MSIT Manages Mergers and Acquisitions
Published: June 2012
The following content may no longer reflect Microsoft’s current position or infrastructure. This content should be viewed as reference documentation only, to inform IT business decisions within your own company or organization.
Mergers and acquisitions (M&A) can introduce complexities at Microsoft in the areas of infrastructure, people and identity, shared resources, collaboration tools, applications, and hardware. To address these complexities, the Venture Integration team within Microsoft Information Technology (MSIT) created a set of repeatable processes, technologies, and a strategic playbook. The Venture Integration team works to reduce integration time, deliver high user productivity, and ensure intended business results.
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CIOs, IT directors, M&A; business leaders, technical decision makers, infrastructure leads, client management leads, messaging leads, application leads, and IT support personnel.
History and Context
As a major player in the M&A space, Microsoft has ensured organizational readiness through the Venture Integration team. This organization oversees due diligence, integration planning, initial execution, and performance tracking for Microsoft mergers, acquisitions, joint ventures, and divestures. Critical Venture Integration functions include integration management, technology assessment and integration, human resources (HR), and finance. The Venture Integration team coordinates these functions with the broader integration community across Microsoft, including Real Estate and Facilities (RE&F), Legal, Tax, and MSIT.
Having an organization focused on integration allows Microsoft to retain and improve M&A best practices. It also ensures that all teams are brought in early during the planning process to appropriately staff, resource, and act on a core innovation strategy in Microsoft.
There are two guiding principles for decision making in Venture Integration. First, the experience of acquired employees is critical to the consideration of all decisions throughout the integration in order to attract and retain the critical people assets of the company. Second, Venture Integration operates as a set of integrated businesses, as opposed to a portfolio of stand-alone units. Integrating all business-operation functions can provide long-terms cost savings.
A key underlying integration policy for MSIT is the partnership with an acquired company's IT staff and leadership. MSIT respects and values the information that the current IT staff can offer during the integration. MSIT also understands that in addition to the integration, the acquired company's IT staff continues to have current responsibilities. MSIT factors that in to resource planning. MSIT partners very closely with the Venture Integration team while creating and carrying out plans for the integration.
In summary, the Venture Integration team, in partnership with the larger MSIT organization, can create solid plans, effectively prioritize, plan, resource, and align to the value proposition of the business deal.
Employing a standard resourcing model within M&A is often a challenge because the deal volume is not constant. MSIT wants to retain the knowledge gained through each deal, but it also must optimize its resources to run a business. Microsoft uses two resource models to address these issues: dedicated resources and shared resources.
MSIT has allocated 10 dedicated employees to the Venture Integration function. These resources focus solely on the deal value proposition, maintain integration knowledge, improve the integration process, and execute on the end-to-end deliverables. These roles include:
- MSIT integration manager. The integration manager owns the overall scope of the deal while managing the business relationship with the Venture Integration director; dependencies between other functional areas such as RE&F;, HR, and finance; and escalations within the entire IT landscape. This role is also responsible for the IT integration budget and the acquired company's IT post-acquisition staffing model.
- Infrastructure lead. This role ensures that standard Microsoft wired and wireless networks are delivered at specified sites. The infrastructure lead also integrates all of the acquired company's physical sites and buildings to comply with Microsoft standards, including lab and source code environments. This lead owns all messaging (email) and collaboration (Microsoft Lync, telecom, and Microsoft SharePoint) migration strategies. Finally, this role partners closely with the RE&F; function to ensure consistency.
- User Experience IT (UXIT) lead. The UXIT lead owns the end-to-end acquired-employee experience. This role is responsible for executive and employee on-boarding across the globe. Other responsibilities include the procurement, provisioning, imaging, and customization of new computers, along with desk-side, phone, and site support models. This role partners closely with the HR function to ensure that the employee experience is in aligned with the deal strategies.
- Application lead. This role partners closely with the business leads to deliver an Application Plan of Record (APoR). This deliverable indicates the plan of each application, from migration to the MSIT stack to retirement or ongoing support. This role also owns the privacy and security assessment of migrated applications.
It is important to note that resourcing in the dedicated roles is subject to deal size and complexity. In smaller deals, one resource may cover all the roles. In larger deals, the roles may require individual resources.
Integrating a company into Microsoft touches nearly every function in IT. As such, the Venture Integration team employs other IT functions throughout the integration process. These resources apply a portion of their time and core skills during their workday, but return to their regular job functions after their integration tasks are complete. These roles include a security engineer, a networking design and implementation engineer, application developers, telecommunication engineers, domain administrators, Exchange and messaging engineers, hardware technicians, a circuit carrier's contacts, an IT project manager, and regional IT staff.
Venture Integration provides a strategic perspective throughout deal processes to ensure that acquisitions deliver their intended results. MSIT has created a strategic playbook to help carry out that mission. In the playbook, each acquisition (or deal) consists of five phases: concept, engagement, initial integration, standardization, and close. Figure 1 illustrates these phases.
Figure 1. Phases of an acquisition
Concept. A key to success includes early involvement and planning. A small group of IT leadership members collaborate to discuss potential deals. Potential deals are strictly confidential, and their ebb and flow are unpredictable, but these IT representatives help ensure that staffing remains a high priority.
Engagement. When Approval to Negotiate is completed, the IT integration manager is assigned to the deal to begin building a small team that will execute against the deal framework. After the deal is signed, public information can be exchanged between Microsoft and the acquired company's IT teams. A kick-off meeting and the initial on-site visit occur. The output is a 20-page questionnaire that assesses the acquired company's infrastructure, security, network, and organizational layout. The first baseline budget is created, along with pre-baseline plans. Until close, Microsoft does not have any influencing power; this is strictly an assessment period. During this time, logistics begin for activities such as scoping the purchase of circuits, network equipment, and computers, in conjunction with the procurement team. After the deal has closed, the engagement phase concludes.
Initial integration and standardization. A large share of the work and deliverables are started and completed in these phases. All migration work streams (described in the next section) begin, and baseline plans are enacted.
Close. A guiding principle of the Venture Integration team is to integrate all of the acquired company's IT functions into MSIT. Venture Integration ensures that all services reach a steady state and are acceptable for MSIT support teams.
Key Work Streams
In the Microsoft Venture Integration IT playbook, MSIT has created work streams within the overall process described previously. It is important to note that Microsoft generally purchases companies that are third or fourth in the chosen market. The general profiles of these companies reside between 20 and 2,000 employees with 1 to 12 physical locations. With MSIT supporting an organization in more than 110 countries, more than 600 sites, 1.3 million devices, and 190,000 employees, vendors, and partners, the economy of scale favors assimilation of standard infrastructure.
As such, acquired networks, directory services, and other collaboration services are migrated into the Microsoft stack or retired. Reducing these redundancies is a means to reduce overall cost of the integration and future operations in connection with the acquisition. As services move up the value chain into applications, deal requirements and/or local laws may require them to remain for a longer period. With this strategy in mind, MSIT has applied the following work streams to the acquisition process.
Accounts and Badges
All target employees, vendors, and contractors receive a new badge and account to access Microsoft tools and systems. There is a strong partnership between HR and MSIT to on-board employees into Microsoft.
Based on the objectives of the deal, MSIT has a service level agreement (SLA) to provide Microsoft corporate-network connectivity within 10 days of deal close. Due to the lead times of installing a circuit and procuring standard network equipment, MSIT has both preliminary and permanent connectivity strategies to meet this requirement.
- Preliminary connectivity can include virtual private network (VPN) access or Go Kits. A Go Kit includes all network devices needed to meet MSIT standards for Microsoft corporate-network delivery. All these devices are configured, racked, and stored in an industrial, medevac-shipped, locked crate. MSIT uses the current Internet egress, creates a VPN tunnel to Microsoft from the router in the Go Kit, and cables that from the switch to the patch panel for user access. Microsoft has a series of geographic regions across the world to quickly install the corporate network at physical target locations.
- Permanent connectivity includes wired and wireless access to the corporate network. For sites that will be converted to Microsoft standards, supported network devices and permanent circuit installations will retire the primary Go Kits.
These two strategies enable Microsoft to give quick user access while delivering a standard and supported MSIT solution in the long term.
With a guiding principle to deliver the best possible employee experience, MSIT recommends purchasing new laptop and desktop devices for all acquired staff. This not only creates a positive experience, but it is also much faster than integrating existing solutions and is more cost-effective over time for support and manageability. MSIT works closely with regional procurement and IT representatives to procure, provision, image, and deliver new computers for IT on-boarding.
IT on-boarding is the first technical touch that all acquired employees have with Microsoft. It involves the onsite distribution of accounts, badges, computers, and peripheral devices with preliminary corporate-network connectivity. Peripheral devices include a wired or wireless headset, a flash drive for data migration, power converters if needed, mice, a docking station with laptops, and a keyboard and monitor with desktop computers.
There are two 4-hour Acquired Employee Orientation sessions that follow HR employee standards, policies, and procedures for employee inductions. These sessions include information about password policies, information about MSIT security policies, remote connectivity training, information about support avenues, collaboration training (including Lync, SharePoint, and Microsoft Outlook), information about the mail strategy, helpful links, and useful internal tools. These sessions are evaluated based on surveys that measure productivity gains in hours and a speaker feedback rating on a scale of 1 to 9 points.
File and Share Migration
With the introduction of Hyper-V in Windows Server 2008, Microsoft can extend virtualization outside the data center to the acquired company's physical site. If an acquired site meets the right criteria, a new Virtual Branch Office Server (VBOS) is installed with up to eight core services, including a local file share and Microsoft IntelliMirror virtualization. Over a predetermined period, this installation allows users to migrate data from the existing environment to a Microsoft standard location that is backed up and monitored. Team and personal sites are also available via SharePoint, which allows users to migrate from existing intranet and collaboration sites to MSIT support infrastructure standards.
The MSIT standard for real-time communication and collaboration is Microsoft Lync 2010, which is available to all employees, vendors, and contractors. It enables users to keep track of their contacts' availability; send an instant message; and start or join a peer-to-peer audio, video, or web conference. Lync enables users to work with the same set of features from within the company's network and from the Internet, providing a seamless user experience regardless of how users are connected.
MSIT deploys Lync Enterprise Voice, the solution within Lync 2010 that enables a user to place and receive phone calls from a public switched telephone network (PSTN). For consistency, where Enterprise Voice is deployed to showcase the technology, all common-area and meeting-room phones are also migrated to Lync devices.
Lync Mobile enables end users to stay connected via chat and allows users to connect to online meetings with a single click from a mobile device. Lync enables users to work anywhere, which helps reduce the need for travel and provide a rich user experience that connect people together in real time.
After acquired employees receive accounts, they are migrated to either the on-premises Exchange or Microsoft Office 365 cloud environment. In all cases, MSIT ensures that there are no further dependencies on the acquired email system. This includes applications, system accounts, distribution groups, security groups, and non-user accounts.
After Microsoft owns the domain, a forward is enabled from the acquired system to the Microsoft Exchange–based server for each individual user, system, and externally facing mail address. Microsoft allows any number of secondary Simple Mail Transfer Protocol (SMTP) addresses to be available from the email account, but only one single outbound address is available. This strategy allows the mail migration to be seamless to the user, while giving IT systems time to migrate and shut down existing email systems.
One of MSIT's guiding principles is to ensure that all of the acquired company's IT support functions are migrated into MSIT. MSIT must ensure that all support functions are properly staffed, aware, and engaged during the integration to accept the acquired company into sustained support models. This includes desk-side and service-desk support functions for new users, applications, and infrastructure. Acquired employees can access assistance through MSIT's web, phone, and dispatch functions.
The overall objective is to transition the acquired company's site to the Microsoft standard, which includes policies, infrastructure, equipment, and both physical security and information security. This work stream works closely with RE&F to ensure that physical security requirements are met. Like IT on-boarding, many of the other work streams must be finished before this activity reaches completion. These include telecom, connectivity, and file-share migrations. Other work deliverables in this space include video/teleconference room setup, printers, cables, and lab/server/computer room setup.
The longest work stream is typically the application migrations. Some applications within sales and HR functions are easily retired, and users can be migrated to the Microsoft functions within the first few months. However, others, such as financial or location-specific applications, can take longer to partner with the business on migration plans.
In certain cases, some international acquisitions become wholly owned subsidiaries of Microsoft and require the acquired company to operate, manage, and conduct financial and tax functions for one to two years after close. MSIT therefore works with all business functions to create the APoR that ensures that cross-functional plans address all of the acquired company's application functions.
Because some of the acquired company's applications must remain for an extended period on the Microsoft network, and because a guiding principle of the Venture Integration team is to minimize company risk and exposure in network and application security, MSIT has created privacy and security assessments. The assessments indicate security or privacy violations in applications for remediation purposes.
A key set of Microsoft technologies provide value to the deal.
Active Directory Domain Services
Active Directory Domain Services (AD DS) plays a critical role for Microsoft account/identity management, and it is one of the most widely deployed Windows Server roles. Deep platform and application integration with AD DS enables a seamless experience for Microsoft end users in regard to single sign-on for Microsoft corporate-network resources. Each new user receives a new Microsoft account in one of the Microsoft regional Active Directory domains. During the migration, a one-way trust from the Microsoft network is created, allowing access back to the acquired company's network resources.
MSIT Standard Client Devices and Images
Any Windows-based computer can access the Microsoft network as long as the device is a domain member, is running Microsoft System Center 2012 Endpoint Protection, has the latest security updates, and uses a valid Microsoft alias account. However, not all devices have hardware support in the MSIT support environment. Venture Integration has found that purchasing MSIT standard equipment gives a higher level of productivity and support. A new, MSIT-imaged computer is domain joined, managed, and supported end to end from MSIT. Users appreciate a new computer, and support organizations can provide desk-side and dispatch support for standard equipment.
Microsoft Lync 2010
Lync provides a single interface that unites voice communication, instant messaging, audio, video, and web conferencing. It is one of the highest-rated services provided to acquired employees through the desktop, web, or mobile devices. In the 2008 Ciao acquisition, MSIT migrated the Munich headquarters to Lync Enterprise Voice. This allowed MSIT to remove the existing private branch exchange (PBX) phone solution, saving Ciao over $29,000 US annually in lease and support costs.
Go Kits and DirectAccess
As stated earlier, to meet the demand of the Microsoft corporate network at an acquired company's offices within a 10-day SLA of close, MSIT has used Go Kits stationed strategically around the world. Although this solution allows MSIT to meet the need of primary network connectivity, it is not cost-effective.
Recently, however, MSIT created DirectAccess, a feature in Windows 7 and Windows Server 2008 R2 that enables MSIT to seamlessly connect to the corporate network from any Internet-equipped remote location without having to establish a VPN connection. It uses two-factor authentication, while automatically establishing a bidirectional connection from the computer to the corporate network through Internet Protocol security (IPsec) and Internet Protocol version 6 (IPv6).
Each Go Kit costs, on average, $45,000 per site. With the recent Skype acquisition, Microsoft had eight sites that took advantage of DirectAccess, saving around $400,000 in initial and depreciation costs.
Virtual Branch Office Servers
Microsoft has a centralized infrastructure model where regional data centers deliver core services, such as Lync, SharePoint, and Exchange. The VBOS servers supply the branch offices with the local services that are required to run the business effectively. VBOS is an internal MSIT specification that details the configuration of a physical server that hosts multiple services. In general, having a VBOS server at a remote field office lessens the site's server load and its dependence on an expensive wide area network (WAN) link. The Microsoft implementation uses Windows Server 2008 R2 with Hyper-V for both the host and guest virtual machines. A standard VBOS server supplies the following services to an acquired company's sites:
- File share services
- Print server
- Data Distribution Services (DDS)
- Windows Deployment Services
- Microsoft System Center Configuration Manager 2007
- IntelliMirror management technologies
- Hosted BranchCache technology
- Read-only domain controllers (dependent on Active Directory topology)
By deploying these in the acquired company's sites, the Venture Integration team ensures that the newly acquired employees have the best possible infrastructure experience from day one.
Microsoft has created an industry best practice within M&A through the Venture Integration team. All major business operations work together to plan and execute deal strategies. MSIT plays a critical role: It is proactive with the deal approach, staffs appropriately for the sporadic deal volume, and maintains critical intellectual property and knowledge gained from past deals.
By participating in more than 60 deals from 2007 to 2012, MSIT has provided a corporate-network solution within a 10-day SLA from close, deliver a positive employee experience, and provide countless hours of productivity gains immediately for acquired employees. For the Skype acquisition, 1,300 computers were imaged, packaged, and shipped in one week for preparation for the on-boarding activities. In two and a half weeks, 1,200 employees were on-boarded across 11 sites. MSIT produced 13,500 of recorded productivity hours with a user feedback rating of 8.5 on a 9-point scale from Skype employees.
The MSIT Venture Integration tools and processes reduce the amount of time that business groups are invested with integration and increasingly focus on product innovation. Through Microsoft technologies such as Windows Server 2008 R2, Lync 2010, SharePoint 2010, and AD DS, MSIT has reduced cost and provided exceptional employee services.
For More Information
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This document is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY. Microsoft, Active Directory, BranchCache, Hyper-V, IntelliMirror, Lync, Office 365, Outlook, SharePoint, Windows, and Windows Server are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.