Technology Due Diligence: Best Practices for Chief Information Officers, Venture Capitalists, and Technology Vendors

423 Pages·2008·4.439 MB·English

by  Stephen J. Andriole


Technology Due
Diligence:
Best Practices for
Chief Information Officers,
Venture Capitalists, and
Technology Vendors
Stephen J. Andriole
Villanova University, USA
InformatIon ScIence reference
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Library of Congress Cataloging-in-Publication Data
Andriole, Stephen J.
Technology due diligence : best practices for chief information officers, venture capitalists and technology vendors
/ Stephen J. Andriole.
p. cm.
Includes bibliographical references and index.
Summary: “This book develops a due diligence framework for anyone resolving technology decisions intended to help
their business achieve positive results”--Provided by publisher.
ISBN 978-1-60566-018-9 (hardcover) -- ISBN 978-1-60566-019-6 (ebook)
1. Information technology--Management. 2. Chief information officers. 3. Decision making. I. Title.
HD30.2.A536 2008
658.1’62--dc22
2008009113
British Cataloguing in Publication Data
A Cataloguing in Publication record for this book is available from the British Library.
All work contributed to this encyclopedia set is new, previously-unpublished material. The views expressed in this
encyclopedia set are those of the authors, but not necessarily of the publisher.
If a library purchased a print copy of this publication, please go to http://www.igi-global.com/agreement for
information on activating the library's complimentary electronic access to this publication.
Table of Contents
Preface ................................................................................................................ix
Acknowledgment ............................................................................................xviii
Section I:
Due Diligence Strategies and Tactics
Chapter I
The Due Diligence Process .................................................................................1
Due Diligence Criteria .........................................................................................2
Criterion #1: The “Right” Technology .................................................................4
Criterion #2: Few or No Infrastructure Requirements .........................................9
Criterion #3: Budget Cycle Alignment................................................................10
Criterion #4: Quantitative Impact ......................................................................13
Criterion #5: Changes to Processes and Culture ...............................................14
Criterion #6: Solutions .......................................................................................15
Criterion #7: Multiple Exits ................................................................................16
Criterion #8: Horizontal and Vertical Strength ..................................................17
Criterion #9: Industry Awareness .......................................................................19
Criterion #10: Partners and Allies .....................................................................19
Criterion #11: “Politically Correct” Products and Services ..............................20
Criterion #12: Recruitment and Retention .........................................................22
Criterion #13: Differentiation .............................................................................22
Criterion #14: Experienced Management ..........................................................23
Criterion #15: “Packaging” and Communications ............................................25
Criteria Weighting ...............................................................................................27
Organization and Execution ...............................................................................31
Organizing the Right Team .................................................................................32
Finding and Leveraging Savvy Consultants .......................................................33
Scheduling ...........................................................................................................34
Developing Powerful Business Cases .................................................................35
The Business of Business Technology Cases .......................................................36
The Recommendation ..........................................................................................39
Execution .............................................................................................................40
Outcomes .............................................................................................................40
References ...........................................................................................................45
Endnotes ..............................................................................................................46

Chapter II
Acquisition Targets ...........................................................................................47
Applications Targets ............................................................................................47
Software Applications Investment Guidelines .....................................................56
Communications Targets .....................................................................................58
Communications Technology Investment Guidelines .........................................64
Data Targets ........................................................................................................66
Data Investment Guidelines ................................................................................72
Infrastructure Targets..........................................................................................73
Infrastructure Investment Guidelines ..................................................................76
Security Targets ...................................................................................................79
Security Investment Guidelines ...........................................................................85
Advanced Technology Targets .............................................................................86
Advanced Technology Investment Guidelines .....................................................91
Services Targets...................................................................................................92
Services Investment Guidelines ...........................................................................97
References ...........................................................................................................97
Endnote ...............................................................................................................98
Chapter III
Business Technology Trends Analysis..............................................................99
Business Technology Trends Analysis Methodology .........................................100
Current and Future Business Models and Processes by Vertical Industry .......108
Advanced Technology Trends ............................................................................109
Five Technology Trends That Matter .................................................................111
The Combined Effect .........................................................................................131
Implications .......................................................................................................132
Endnote .............................................................................................................134
Section II:
Due Diligence Case Studies
Chapter IV
Venture Investing in Wireless Communications Technology:
The ThinAirApps Case ...................................................................................136
Introduction to the Case ....................................................................................136
The ThinAirApps Opportunity...........................................................................137
ThinAirApps Solutions ......................................................................................140
Product Line ......................................................................................................141
Pricing ...............................................................................................................141
Sales .................................................................................................................142
Customers .........................................................................................................142
Marketing ..........................................................................................................143
History and Accomplishments ...........................................................................143
Management Team ............................................................................................143
Risks .................................................................................................................145
Financials .........................................................................................................146
Forecast ............................................................................................................146
Additional Funds ...............................................................................................146
Investment Highlights .......................................................................................147
Due Diligence ...................................................................................................148
Conclusion ........................................................................................................156
Endnotes ............................................................................................................156
Chapter V
Enterprise Investing in Remote Access Technology:
The Prudential Fox Roach/Trident Case ......................................................157
Introduction to the Case ....................................................................................157
Description of the Investment Opportunity .......................................................159
Due Diligence ...................................................................................................165
Conclusion ........................................................................................................174
Endnotes ............................................................................................................174
Chapter VI
Venture Investing in Voice-Over-IP (VOIP):
The NexTone Communications Case .............................................................175
Introduction to the Case ....................................................................................175
Background .......................................................................................................177
Prior Financing ................................................................................................178
Management Team ............................................................................................178
Market ...............................................................................................................179
Competition .......................................................................................................179
Technology Drivers ...........................................................................................181
Market Evolution ..............................................................................................182
Intellectual Property (IP) ..................................................................................185
Due Diligence ...................................................................................................185
Conclusion ........................................................................................................188
Endnote .............................................................................................................190
Chapter VII
Enterprise Investing in Radio Frequency Identification (RFID):
The Oracle Case ..............................................................................................191
Introduction to the Case ....................................................................................191
Oracle’s RFID Investment Strategy ..................................................................193
Oracle’s RFID Development Roadmap.............................................................195
RFID Hardware Considerations .......................................................................196
RFID Standards ................................................................................................196
Integration .........................................................................................................197
Manageability, Scalability, Security .................................................................197
Oracle RFID Partners ......................................................................................199
The Horizontal and Vertical Market Strategy ...................................................201
Due Diligence ...................................................................................................202
Conclusion ........................................................................................................208
Endnotes ............................................................................................................209
Chapter VIII
Technology Product and Service Development in an Enterprise
Architecture Service Capability: The LiquidHub Case ..............................210
Introduction to the Case ....................................................................................210
Background .......................................................................................................210
The Challenge ....................................................................................................211
The Approach ....................................................................................................212
The LiquidHub Enterprise Services Transformation Roadmap ........................221
Due Diligence ...................................................................................................222
Conclusion ........................................................................................................228
Endnote .............................................................................................................228
Chapter IX
Venture Investing in E-Mail Trust Solutions: The Postiva Case ................229
Introduction to the Case ....................................................................................229
Background .......................................................................................................229
The Market and the Opportunity .......................................................................231
Productivity .......................................................................................................233
Business-to-Business Integration and Messaging Optimization .......................234
The Postiva Solution .........................................................................................236
Revenue and Business Model ............................................................................238
Competitive Advantages ....................................................................................242
Competition .......................................................................................................243
Technology ........................................................................................................245
Summary of Projected Financial Performance ................................................246
Management: Officers, Directors, and Key Consultants ..................................246
Due Diligence ...................................................................................................251
Conclusion ........................................................................................................256
Endnote .............................................................................................................267
Chapter X
Investing in Knowledge-Based User-Computer Interaction:
The TechVestCo Case ......................................................................................258
Introduction to the Case ....................................................................................258
The Need for Easier to Use Software Applications ...........................................258
The User Interface Workbench .........................................................................259
Components of the Interactive Knowledge-Based Workbench .........................260
Due Diligence ...................................................................................................263
Conclusion ........................................................................................................268
Endnote .............................................................................................................269
Chapter XI
Enterprise Investing in Wireless Technology:
The Villanova University Case .......................................................................270
Introduction to the Case ....................................................................................270
Background .......................................................................................................270
Challenge ..........................................................................................................271
Solution .............................................................................................................271
Results ...............................................................................................................273
Due Diligence ...................................................................................................273
Conclusion ........................................................................................................279
Endnote .............................................................................................................279
Section III:
Due Diligence Tools and Techniques
Chapter XII
Tools of the Trade ............................................................................................281
Technology Trends Analysis Methodology ........................................................281
Off-the-Shelf Tools for the Due Diligence Analysis ..........................................285
Due Diligence Project Management .................................................................285
A Due Diligence Template ................................................................................287
Reference ...........................................................................................................291
Endnote .............................................................................................................291
Section IV:
Appendices
Appendix A
Technology Trends Analysis: Trends in Pervasive Computing ...................293
Pervasive Computing Technology Trends .........................................................298
A Pervasive Computing Action Plan .................................................................324
Appendix B
Technology Trends Analysis: Trends in Intelligent
Systems Technology ........................................................................................327
Intelligent Decision-Making and Transaction Support .....................................330
Intelligent Systems Technology and the Range of Computable Problem ..........337
AI Tools and Techniques ...................................................................................338
Why You Need to Understand It ........................................................................342
The Range of Applications ................................................................................342
Case Study .........................................................................................................344
Appendix C
Technology Trends Analysis: Trends in Business
Technology Integration ...................................................................................349
Do You Think? ...................................................................................................352
Acceptable Addiction ........................................................................................353
Having Fun Yet? ................................................................................................354
Privacy .............................................................................................................356
Who is Technology? ..........................................................................................356
Now What? ........................................................................................................358
The New Compact, or “Alignment” in the 21st Century ...................................360
How to Think .....................................................................................................367
Business Technology Trends .............................................................................377
10 Take-Aways ...................................................................................................379
Where is it All Going? .......................................................................................381
Endnote .............................................................................................................391
About the Author ............................................................................................392
Index .................................................................................................................394
x
Preface
Every day Chief Information Officers, venture capitalists, technology vendors—and
everyone that buys and deploys information technology—confront strategic and
tactical technology investment challenges. Should Starbucks continue to invest in
technology-based initiatives to attract more customers? Should Wal-Mart continue
to invest heavily in radio frequency identification (RFID) technology? Should a
private equity fund spend money on a broadband communications company or a
software development company? Should Rohm and Haas, a global specialty chemi-
cal company, implement a standard financial reporting system? Should Microsoft
build a suite of large scale enterprise applications to challenge those offered by
SAP and Oracle?
How does this all work? Who sets the agenda? How do options get evaluated? How
do we select among competing alternatives? Where are the land mines? How do
we exploit opportunities?

Due diligence is a term used for a number of concepts involving either the
performance of an investigation of a business or person, or the performance of an
act with a certain standard of care. It can be a legal obligation, but the term more
commonly applies to voluntary investigations.1
Technology due diligence refers to the process by which alternative technologies
and technology services are vetted. Some organizations and CIOs are disciplined in
the way they assess alternative technologies and technology services, while others
are not so organized. In a perfect world, every technology investment decision is
made with complete information gathered by a team of experienced due diligence