When are good times to do tech due diligence:
I understand that you have your eyes on growth and commercial success. Your passion for driving your company forward is admirable. It may be hard to hear that your tech team is going to spend some time reviewing technology in sacrificing some delivery speed or some time that could go into building new features. Technology team shouldn’t develop the “100% perfect” solution, some strategically applied duct tape is good. It’s just knowing when and where it’s been applied so you can deal with it later.
Sadly, failing to address tech risk will come back to haunt you sooner than you might expect.
Simply put, duct tape doesn’t last.
Mitigating risks and ensuring compliance.
There could be potential risks and compliance issues that come with technology investments. If you fail to consider the technical aspects, you may unintentionally invest in technology that doesn’t scale, leading to costly replacements or upgrades down the line. This will put a strain on your resources and become a drag on your ability to achieve your ambitious goals. Your team will inexplicably slow down.
Furthermore, violating data protection regulations (e.g., GDPR, HIPAA) can result in hefty fines and reputational damage that could undermine the trust you’ve worked so hard to build with your customers. Exposure to cyber threats is another significant concern, as it can lead to financial losses, data breaches, and erosion of customer confidence.
By conducting tech due diligence, you can proactively identify and mitigate these risks, ensuring that your technology investments are secure, compliant, and future-proof. This empowers you to focus on your growth objectives with confidence, knowing that your technology foundation is solid and reliable.
Enhancing product development and innovation
As a CEO your drive to develop cutting-edge products and stay ahead of the competition is truly inspiring. However, prioritizing new development without considering the current state of your technology can lead to unforeseen challenges.
Building on top of outdated or unstable technology can result in a subpar product and poor user experience, which can frustrate your customers and erode their loyalty.
Tech due diligence helps you understand the strengths and weaknesses of your current technology, enabling you to make informed decisions about product development and innovation.
By aligning your technology with your business goals, you can create exceptional products that exceed customer expectations and keep you at the forefront of your industry. This strategic approach ensures that your innovation efforts are built on a strong foundation, increasing your chances of success and minimizing the risk of setbacks.
Improving team performance and decision-making
As a CEO, your team’s performance and well-being are undoubtedly among your top priorities. While the connection between technology due diligence and team performance may not be immediately apparent, it can have a profound impact.
Low engineering team morale, often caused by technical debt or unclear objectives, can hinder productivity and job satisfaction. This can lead to high turnover rates and difficulty attracting top talent, which can impede your company’s growth. By conducting tech due diligence, you can identify these root causes and implement solutions to boost your team’s performance and morale.
Additionally, assessing whether your current technological setup can support future growth and seeking an unbiased, outside perspective on your company’s technology empowers you to make informed decisions that position your company for long-term success. Tech due diligence can also offer valuable insights into potential acquisitions, enabling you to make strategic decisions that align with your growth plans and strengthen your market position.
So now you know that technology due diligence is a powerful tool for you to make informed decisions that drive your business forward, protect your hard-earned success, and ensure long-term growth and stability.
But what makes a tech due diligence truly effective?
A Well-Executed Tech Due Diligence Focuses On 3 Key Questions:
Even if you aren’t in an investment cycle or considering acquisitions, doing an internal due diligence as an audit can add value. You can take a structured approach to understanding these risks. A good due diligence should look to broadly answer the following:
- How technically mature is the company? Assessing the company’s technical maturity helps determine its ability to develop, maintain, and scale its digital products and services effectively and deliver innovation.
- Does the company’s technology support its commercial growth ambitions and scalability? Evaluating the alignment between the company’s technology and its business goals is essential. So you can ensure that the technical infrastructure can support future growth and expansion.
- What technical risks exist that could impact the business? Identifying potential technical risks, such as insufficient cybersecurity measures, technical debt, scalability limitations, or risks of cost spiraling out of control enables informed decision-making and mitigation strategies.
Click here to download our 2024 Ultimate Tech Due Diligence e-Book For Non-Tech Founders today!
Key Areas to Focus in Software Technology Due Diligence
Starting from those 3 questions, and applying those to software. The Due Diligence process will look to understand the following
- Compatibility and Integration: You need to assess how well the new tech integrates with your existing systems. If you have disparate systems, it can lead to inefficiencies and data silos, which you definitely want to avoid.
- Scalability: It’s crucial to ensure that the technology can grow with your business. What works for you as a startup may not suffice when you become a thriving SME, so keep that in mind.
- Security and Compliance: With data breaches happening left and right and regulations getting tighter, assessing the technology’s security features and compliance is an absolute must. You can’t afford to skimp on this.
- Technical Debt: Watch out for technologies that may accrue technical debt. These are shortcuts taken in development that may lead to higher costs or necessary rework down the line, and you don’t want to be stuck dealing with that.
- Vendor Stability and Support: The last thing you want is for a key technology vendor to go out of business on you. Make sure to evaluate the stability of the vendor and the support they offer, so you’re not left high and dry.
Click here to download our 2024 Ultimate Tech Due Diligence e-Book For Non-Tech Founders today!
Tech Due Diligence Framework We Follow:
Technical ecosystem:
Understanding the functional and technical architecture of your setup is critical. This encompasses everything from the block diagram, languages, libraries used, integration of 3rd party solutions, hosting and infrastructure choices, to disaster recovery planning. The goal here is to map and review the current state, ensuring decisions are sound and appropriate for the business stage.
Future proof / scalability:
Scalability is more than just a buzzword; it’s a necessity. Reviewing how performance is measured, identifying potential barriers, and understanding operational processes are fundamental. This includes scrutinizing the overlap between tech and non-tech issues and the scalability of operational costs. The objective is to assess capacity and foresee potential future challenges.
Security & Compliance:
With the vast arrays of data regulations and evolving security standards, ensuring compliance and adopting a proactive security stance are paramount. This involves evaluating existing frameworks, policies, data management practices, and any recent security incidents. The goal is a holistic understanding of both policy-based perspectives and practical adherence to security best practices.
Roadmap / Team:
A successful team structure includes a clear org chart, identification of key skills, bottlenecks, and how the team aligns with the broader business goals. An analysis of the development workflow, hiring and onboarding processes, and how quality is integrated into the roadmap is essential. This assessment aims to determine if the team and processes are well-positioned to meet current and future challenges.
Broader business:
Tailored to specific concerns or strategic goals, this area delves into potential areas of conflict or integration challenges when considering technology in the context of strategic investments, mergers, or acquisitions. It aims to highlight and suggest ways forward.
Conducting Due Diligence: Where to Start?
- Internal Audit: Begin with an internal review of your current technological landscape. Understand what technologies you’re using, their purposes, and their pain points.
- Expert Consultation: For areas outside of your expertise, consider consulting with IT professionals or tech consultants who specialize in due diligence.
- Market Research: Stay informed about new and emerging technologies. What are your competitors using? Is there a technology trend you’re overlooking?
- Risk Assessment: Identify potential risks associated with each technology. Prioritize them based on their potential impact on your business.
- Plan for the Future: Technology evolves rapidly. Ensure that any technology you adopt today won’t become a hindrance tomorrow due to obsolescence or inflexibility.
The Payoff Of A Bespoke Tech Audit
By conducting thorough software technology due diligence, SMEs and startups can significantly reduce the risks associated with technology investments. This process not only safeguards your business against technological pitfalls but also ensures that you are making informed decisions that align with your long-term strategic objectives.
Know more about how A&H can help you build a bespoke tech audit plan.
Intelligently navigating the complex landscape of software technology is a craft. By mastering this craft, you position your business not just to survive but to thrive in the digital age.
