Background

One of the leading Buy-Out companies was engaged in a due diligence effort of a possible target acquisition.  The targeted company provided data clearing and financial settlement services to both the wireline and the wireless communications industry, serving clients globally with operations in the US as well as Europe.

XD3 Engagement

XD3 was asked to audit the software deployed to provide the data clearing and financial settlement services, with particular emphasis on maturity, maintenance costs, and scalability.  The scope of the audit included three separate software solutions operated out of three separate locations.

Methodology

The nature of this due diligence – a 4 week assessment of 3 complex software solutions in three locations on two continents – demanded a broad, leveraged analysis.

 XD3’s software assessment methodology covers all of the important areas of the software, and focused on the key metrics associated with the audit area and audit topic.  We visited each location, observed a demonstration of the software solution, gathered the metrics and discussed those metrics with the local operations teams.

Our methodology provides an integrated perspective of all the areas and topics important to the success of a software solution or product.  Assessing all areas provides a complete picture not just of the internal profile of the software, but also its position with prospects and clients and with its competitors.  However, the methodology also lends itself to specific analyses of “hot spot” topics.  For this assessment, for example, we placed particular emphasis on “Volume Increases” and “Extendibility of Functionality” to determine future growth options.

Among the other topics we covered were an analysis of functional “white spaces” (process steps either not covered or requiring significant manual involvement), time and complexity of implementing a new customer, an analysis of all recent outstanding or fixed reported incidents, and a review of the development and maintenance processes.

Findings

Each of the three different software solutions effectively supported its business processes, with a few areas of identified improvements for each.  Quality of the software was high in all three locations, as were the IT processes.  Each solution had some room for linear growth, and we recommended that scalability tests be conducted to assess the ability for exponential growth, if that kind of volume growth was desired.

However, we also found that all solutions were decidedly custom applications, with a strong bias not to deploy COTS available functionality – even for areas such as reporting or workflow management.  Custom shops do show a high degree of control over their incidences (which was true for all solutions here), but usually at a financial and functional cost.  We recommended that this may be an area for future benefits.

Lastly, we recommended that there be a review of the strategy to maintain three separate code bases in three locations with three separate development and operations teams.

Benefits

We delivered to our client a quick, yet nuanced assessment of three complex software solutions to provide valuable input into their decision whether or not to proceed with their investment into this target acquisition.  Independent of the investment decision, we believe we also identified specific areas for future improvements to these solutions.