IT ACQUISITION MANAGEMENT

Organisations of all kinds – large and small, public and private – are increasingly dependent
on information technologies to function effectively. In competitive industries, information
technology is a significant factor in building competitive advantage.
The complex processes of buying, introducing, adopting, adapting and localising
technologies are broken down and guidance is given on development of IT acquisition strategy and
measures needed to evaluate the strategy’s effectiveness. Acquisition management involves an
array of program-related, technical, operational, affordability, and business elements.
What is Technology Transfer?
Technology Transfer is the process by which technology is disseminated. It involves
communication of relevant knowledge by the Transferor to the Recipient. It is in the form of
technology transfer transaction which way or may not be a legally binding contract.
What is Technology Acquisition ?
Two terms, technology transfer and technology, are normally used interchangeably.The
verb “Acquire” means:

 To come into possesion of; get as one’s own

 To gain for oneself through one’s actions or efforts

For most organisations, strategic IT acquisition comes down to a basic, but fundamental
decision: internal development v's external technology acquisition (Lanctot & Swan, 2000).
However, the process is perhaps more complicated than it first appears. The term acquisition
denotes any of the stages from buying, introducing, applying, adopting, adapting, localising and
developing through to diffusing technologies (Rahardjo, 2006).

Technology Acquisition is the process of acquiring a new technology, new product, process
or service ; by efforts of an individual or an enterprise or any other macro entity. This process can
be conducted either internally or externally to the enterprise.
Strategic IT acquisition refers to an investment that requires the expenditure of funds for
information technology, which could address a single acquisition; a logical grouping of hardware,
software, telecommunications and support services that will involve multiple acquisitions; or a
project that will take place either within a particular fiscal year or over a longer life cycle and
involve multiple acquisitions (US Department of Commerce, 2007).
Custom software solutions may be developed either under contract from a provider or
internally by an organization's programming department. There are many reasons to contact for a
software system. A written agreement or contract is used as the basis of acquisition. The developer,
contractor, or provider takes a contract from the acquirer, user, or buyer to deliver the system that
satisfies specified functional and performance requirements for an agreed‐to cost and within an
agreed‐to schedule. [Many terms are used for the acquirer (e.g., user, buyer). For simplicity
purposes, the term acquirer is used throughout the article. Likewise, many terms are used for
the provider (e.g., developer, vendor, contractor).] The process of arranging for and administering
the agreement, whether a contact or other form, and managing the performance of the developer, is
acquisition management.
How are Information Systems Acquired?

 acquired by new contract or new agreement;

 acquired via modification to an existing contract or existing agreement, when such IT has
not already been previously agreed to and negotiated between the parties; and
 purchased on a purchase card that cannot be acquired through an established
Program/Site/Office process.
Scope
Custom software comes in a variety of forms from stand‐alone systems that are totally
composed of software, to systems that have appreciable hardware development. Typically, software
acquisition management deals with the management of solutions where there is extensive software
development. These solutions may range from those developed by the government for military,
space, transportation, and other purposes, to commercial solutions for banks, insurance, and a
variety of other institutions. No matter the nature of the system, the acquisition of custom software
systems follow the same basic acquisition management tenets.
Software acquisition management activities include planning, contracting, budgeting,
evaluating performance, and providing for sustaining support for evolution and growth of the
system.
The typical relationship among the software acquisition management, project management,
and software engineering organizations involved in developing the solution. While the software
engineering organization concentrates on building the software product, the project management
group focuses its attention on managing the engineering development. As shown, there is an
overlap between software acquisition management and project management. There are people in
each activity who participate in both functions. For example, the software project manager also has
acquisition management responsibilities because he or she is held accountable for meeting contract
requirements and must interface with the acquirer's management organization.
Proponents
The three typical organizations that are involved in acquisition management include:
1. the customer or user of the system,
2. the contracting agency or acquirer of the system, and;
3. the provider, sometimes referred to as the “third party.”
Depending on the scope of the effort, there may be many people and contractors involved in
developing the solution.
What Does an IT Acquisitions Manager Do?
An IT Acquisition Manager guides and manages the department’s effective use of
information technology (IT) and IT resources. When acquiring IT solutions, they seek to integrate
project, financial, and acquisition management, and quality oversight methods into a cohesive
process to achieve program goals.
 The IT Acquisition Managers uses a variety of IT acquisition solutions, managed in an
integrated fashion to deliver the most cost effective and efficient use of resources.
As an IT acquisitions manager, you'll negotiate, seek out, finalize, and organize purchasing
deals for your employer. In many cases, acquisitions are grouped with mergers and your main job
function will be acquiring other Information Systems and merging them into your company.
In the business world, an acquisition is the purchase or takeover of one company by another
company. As a manager, you're responsible for ensuring any acquisition made by your employer is
sound and reasonable. This involves projecting how the transaction will affect your company and
determining the financial impact of a takeover. You may also develop and execute the acquisitions
strategy as well as ensure the process goes smoothly.
Part of your job involves seeking out suitable acquisitions. You may review systems to see if
they'll make good additions to your company. Arbitrating an acquisition might also fall to you,
requiring you to maintain close contact with top executives in your company. You may be required
to discuss the terms of the deal and negotiate those terms to suit the needs of both your company
and the company you want to acquire.
Skills of an IT Acquisitions Manager
Employers tend to prefer acquisitions managers who have strong computer, finance, and
analytical skills. Since you'll be required to negotiate and collaborate with executives, you must also
have strong communication and leadership skills. You may do well if you're an independent learner
who can grasp new skills and procedures quickly with minimal direction. Employers also prefer to
hire individuals who are team players who are detail oriented and able to multitask while keeping
their work organized.

IT Acquisition Strategies

1. The first option is to buy the technology from a vendor, which is a time- and cost- effective
method. However, companies will find it hard to stay at the cutting-edge using this strategy
because technologies usually become outdated every two to three years (Rahardjo, 2006).
2. The second strategy is to lease IT, which enables firms to acquire up-to-date technology and
still have capital to fund other business areas. Leasing will always cost more in the long-run
than buying (Nevitt et al., 2000).
3. The third strategy is to develop applications in-house. This should result in software that
meets all organisational requirements and integrates seamlessly with existing applications
(Turban et al., 2006). On one hand, business needs may change by the time it takes to
develop, test and roll-out the solution. On the other, a successful solution could create a
revenue stream from software sales royalties (Rahardjo, 2006).
4. The fourth strategy is to outsource by allowing outside specialists to perform certain
activities – for example, cloud services and managed applications (Rahardjo, 2006).
Although firms may benefit from cost savings, they may weaken their core organisational
competencies.
Types of Technology Transfer
  Scientific Knowledge Transfer, Direct Technology Transfer, Spin-off Technology Transfer
 Informal Technology Transfer & Formal Technology Transfer
 Internal Technology Transfer & External Technology Transfer
Internal Technology Transfer
Internal Technology Transfer refer to such technology transfers/ investments where
control on the ownership & usage of technology resides with the transferor. It is a complex process
involving following decisions:

 Timing : When to introduce new technology / products in the market?

 Location : Where to transfer new technology / products?
 Multi-functional teams: Which staff members should be involved in transfer process?
 Communication methods & procedures: What type of Communication methods &
procedures be adopted to facilitate transfer ?
Barriers to Internal Technology Transfer

 R & D goals are not known to Production Department.

 Difficulties in stopping current production to test new products / processes
 R&D Department does not understand needs & capability of Production Department
 In general, Production Department is resistant to innovation and is bound by routine.
 Non-linkage of new technologies to marketing / customer needs.
Overcoming Barriers to Internal Technology Transfer

 Top management support and participation in the transfer process

 Providing supportive organizational culture
 Use of multi-functional teams in the transfer process
 Ensuring effective communication in the organization
 Bringing R&D closer to production.
 Rotation of few person between R&D and production
 Linking & participation of marketing elements in the transfer process.
Steps in Internal Technology Acquisition by a firm
1. Planning new products / services / processes to be offered – planning must incorporate
voice of the customer & user needs
2. Screening new products, processes or services – only viable / feasible items be offered as
only one out of 4/5 becomes a commercial success.
3. Initiating development process – must be properly designed and carried out so that it
facilitates success. Enterprises should:
a. Consist of temporary system capable of adapting to dymanics of change
b. Organize the systems around problem solving
c. Have flexible management system & replace rigid management system
d. Use multi-functional teams.
e. Proper integration between R&D, Production & Marketing sub-systems
f. Ensure effective communication
4. Carrying out trial production on small scale and test marketing
 5. Improving design & production processes based on experiences / feedback
6. Commercialization i.e. mass production & sales
External Technology Transfer
In these transfers, control on the ownership & usage of technology usually does not remain
with transferor and it passes on to the recipient, like joint venture with local control, licensing
agreement etc.
Successful external technology transfer depends upon following factors:

 Type of the technology being transferred

 Complexity of the technology being transferred
 Transfer mechanism selected
 Relationships between the parties – building of mutual trust
 Core competencies of the parties & compatibilty thereof
 Organizational culture of the parties & mutual understanding thereof
Methods of External Technology Transfer

 Co-operative & collaborative ventures / strategic alliances

 Licensing agreements
 Contracting agreements
 Enterprise acquisition.
Why External Technology Transfer?

 Technology already developed saves time & efforts

 Sometimes Growth objectives or competitive goals cannot be reached through internal
development
 Lack of risk taking ability for innovations
 Lack of internal resources (physical & human) for innovation
 Firm does not have core competencies to deal with complex technological developments.
 Need to keep up with competitors
 Need to cope up with acceleration of technological change
 As a part of firm’ strategy --- let other firms take big risks & it will purchase technology
developed by them.
Barriers to External Technology Transfer

 Associated costs – usually high prices are required to be paid in the form of royalities,
technical & knowhow fees etc over medium to long term period
 Appropriatesness of technology i.e. its suitability to core competencies and market needs is
always a point of discussion and investigation
 Heavy reliances on foreign technology- may make transferee / recipient technologically
dependent on external technology providers / transferors even for small issues
 Lack of mutual trust between two parties may hinder full & timely transfer
 There is risk of loss of control over technology and the transferee / recipient may use
technology in an arbitrary manner
  Transfer may render existing technology & its related products / services / processes
obsolete
 Transferee may turn a potential competitor in future.
 Mismatch in core competencies of the transferor & transferee may create difficulties in
transfer
 Different organisation cultures may create difficulties in transfer
 Lack of effective communication between the parties may also create difficulties in transfer
Overcoming Barriers to External Technology Transfer

 Proper & well defined technology transfer agreement should be signed

 Proper assessment / evaluation of appropriateness of technology
 Proper assessment / evaluation of compatability of core competencies of the parties
 Building pre-agreement relationships so as to develop mutual trust and so as to understand
culture of opposite parties
 Seeking cross cultural training
 Ensuring effective communication
 Anticipating problems and adopting measures for facilitating transfer
Steps in External Technology Acquisition by a firm
1. Identification of Need
2. Developing list of suitable technology providers
3. Short listing / selecting suitable technology providers on the basis of:
a. Cultural compatibility,
b. compatibility of core competences,
c. appropriateness of technology,
d. technical feasibility etc
4. Negotiation
5. Agreement
6. Payments as per agreement
7. Transfer of specifications, blueprints, designs, documents, CDs to purchaser
8. Training of technical personnel of purchaser