Months Later

How did a year and a half go by since my last post? I chalk it up to a slew of developments at work, and to being pretty well out of business school. However, after months of tumult (I would say, tumultuous doldrums, ie hurry up and wait), I figure it's time to re-start this blog to talk about some of he business problems I'm confronted with these days.

First, to set the scene: In 2012, my employer opted to outsource nearly all of its IT engineering and operations. About 90% of my colleagues were given (and took) the option to continue in their roles under the outsource provider; a smaller number of us were retained within the new IT organizations within the companies.

Second, the Education division was going to be divested from the larger company, either on its own or sold to another party. Ultimately, McGraw Hill Education (MHE) was sold to a private equity firm in 2013, and it is with MHE that I now ply my trade.

Most of 2013 and 2014 have been and continue to be filled with divestiture and re-organization: spinning work off to the new provider, and separating our infrastructure from the former parent company. I've led efforts in both tracks for endpoint computing, which is essentially all workstations, mobile devices, and the services to support them. It's plumbing, but vital plumbing.

So what are this year's challenges:

Create an an IT support organization that provides forward guidance on emerging technologies as well as support for existing technologies.

Finish the creation and migration of endpoint services for a global enterprise of 6000+ employees and contractors, without disrupting existing services.

That's it. these are broad buckets, and the details will follow - to list them all now would beggar anyone's attention span. Some details I'll have to be coy about, but the larger processes I expect will be lessons applicable anywhere.

Valuation

So in Corporate Finance, we're talking about valuation - how to value a company or a capital project. I work in IT, so it's interesting to see how the financial end of the decision-making process is managed. So many technology projects are rolled out with no concern as to the initial or ongoing expenses, and no regard as to what processes they are replacing, it's wasteful. 

Our case for last night's class had some interesting nuances to it. It revolved around a pharmaceutical company considering an opportunity to license an unapproved drug from another company. The pharmaceutical company would pay the costs to test and shepherd the drug through the FDA approval process. What was interesting to me was how to factor in the chances of successfully getting through each trial, along with the potential for the drug to have more than one benefit. 

Once the options were laid out in a decision tree, it was just like game theory: start at the end, and work backwards to see which branches were profitable. As it turned out, they all were, though some were more profitable than others.

My own company is engaged in the same process, but in reverse. We are divesting one of our flagship business units. How do you place a value on that? According to class, we'd have to look at the net present value of the company, which, based on their business model to date, would be diminishing (this is my speculation, and not a representation of my company's position, or based on any information not already public). What are the employees worth - thinking back to Strategy II, is this business unit an EVP or AVP proposition? From where I sit, they're on the cusp, and that makes the valuation all the more awkward.