Episode 3: IT Monetization: Disrupting the Way We Do Business

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The Disruptive Enterprise Podcast


Episode 3: IT Monetization: Disrupting the Way We Do Business

While some organizations have been successful in adapting and even causing the disruption themselves, others are new to the building a structure and a culture that enables innovation to cope with the demands of the marketplace. This podcast discusses IT Monetization and how it disrupts the way we do business by helping organizations deal with disruption or help them become disruptors themselves.

How IT Solution Providers Deliver Disruptive Technologies

 Gregory J. Turner: Welcome to The Disruptive Enterprise. In a previous podcast, we defined disruption and how it impacts small and large organizations. While small or startup companies have the agility to disrupt or adapt the disruption, larger companies are more challenged by disruption due to Legacy systems, outdated processes, and inherent resistance to change. While some organizations have been successful adapting and even causing the disruption themselves, others are new to the building a structure and a culture that enables innovation to cope with the demands of the marketplace. And they find it challenging to adapt rapidly to the changing landscape.

How do we see disruption and the providers playing a role in helping organizations cope with disruption or help them become disruptors themselves? To do that, we brought in an expert. I’m pleased to have with us today Marcus Holloway, President and Chief Executive Officer of MTM Technologies to talk about how we disrupt the way we do business through IT monetization.

Marcus Holloway: Hey, thanks a lot Greg. I’m very pleased to be with you as well.

Gregory J. Turner: Marcus, before we begin, can you please tell our listeners a little background about yourself and MTM Technologies?

Marcus Holloway: Sure. I’m the President and Chief Executive Officer of MTM Technologies. I’ve been with MTM for just over three years now. My primary objective is driving the strategic transformation of the business, building on the company’s strong foundation in IT services, and we’ve got great employees, customers, and partners. As you mentioned, Greg, MTM Technologies is a disruption solution and managed services provider, with over 30 years of experience, giving clients, nationwide, the tools to become market disruptors in their field.

Marcus Holloway: Prior to MTM, I learned firsthand the power of monetization at companies like PriceWaterhouse, IBM, Xerox, and most recently, Sony Music. And I can tell you Greg that many millions of dollars of cost savings and cash have been liberated through monetization, as well as perhaps billions of dollars in enterprise value created through monetization. So, it’s a very, very powerful tool, and it’s a tool that I don’t think has been utilized nearly as much as it should be.

Gregory J. Turner: Thank you, Marcus. At MTM, we have had several discussions on using technology as a means to become disruptive. So, it is very intriguing to hear about IT monetization. To put things in context, to monetize, as defined by Miriam Webster, is to utilize something of value as a source of profit. How does this work in your concept of IT monetization?

Marcus Holloway: You picked a very good definition of monetization. And as an Ivy Leaguer, I’m not surprised that you defaulted right to Webster. As a product of a state school, I went and found another definition from a source called Investopedia. And the definition I like – and it’s, I think, more appropriate in our context as we use monetization – is this definition of it’s the process of turning a non-revenue-generating item into cash. And I think, in this context, we can look at all support functions, not just IT, but all G&A functions, support functions across the organization, all as in play for the monetization. So, if you have a strong business that can generate a positive return on cash, every company should consider turning as many of your support assets as possible into cash through monetization. And we at MTM have incredible executive team that can help you out with that.

Gregory J. Turner: That’s excellent. So, maybe just for our listeners, I could say, as an example, company XYZ with a business function can work with MTM Technologies to leverage monetization strategies. And perhaps, in a case, MTM would acquire and operate the business function remaining on site, and resell a much improved and cost-efficient service delivery model back to the company at a much lower cost and more efficient method than when the company was owning and operating it itself.

Marcus Holloway: That’s exactly right, Greg. So, in a pure finance setting, we would call this a simple sale-leaseback of a business function. And in this case, it provides immediate and long-term economic advantages to the seller. In this instance, the customer. In a sense, all the customer is really doing is transferring business function over to MTM, and that transfer would include people, process, technology, underlying real estate assets, really the entire operation. And over a long-term contract, MTM would supply those processes back to the customer at lower cost over time and with higher performance, so the company not only would liberate value in terms of either cost savings or actual cash through this kind of transaction, but they would be able to focus their resources on much more strategic areas as well. So, it really covers a lot of bases, and it provides a tremendous amount of value to companies that are interested in pursuing such an option.

Gregory J. Turner: So, in one regard, it’s allowing our company to focus their resources on maybe more transformational or more strategic exercises, maybe dealing with disruption in their own marketplace.

Marcus Holloway: Yeah, absolutely. As you know, Greg, we haven’t found a single CIO or CTO that isn’t looking for more funds to apply to strategic disruptive technologies that are really going to differentiate them in the marketplace. So, monetization of the support functions, whether they’re IT or back office functions, will enable that. So, imagine a scenario in the uniqueness of this where a CIO comes back to his or her CFO and says, “Listen, if I do a monetization transaction with MTM, I’ll actually be generating cash and cost savings that the company can reinvest into other revenue-generating processes and opportunities.” And we, at MTM, would love to be the CIO’s partner in bringing that to the fore.

Gregory J. Turner: Yeah, that’s awesome, Marcus. And I can see where IT monetization differentiates MTM from players in the marketplace, if there are any today. Just to enumerate a few, say things is immediate, they can really start to see that cash back right away. The resources remain in place but join MTM in a much more harmonized fashion. The companies now have the option of cost savings, or equity participation, or both. And one of the things that we continue to do at MTM is innovate and providing intelligent automation and cognitive solutions are applied throughout the partnership. And, of course, your background and others that MTM, bringing several decades of collective experience, transitioning thousands of resources in these types of models involving billions of dollars. So, we really have a lot of expertise in this area.

Marcus Holloway: Yeah. I’m glad you mentioned that, Greg, because our team, executive team, that we are technology-focused company. We’ve worked in many, many different functional areas using outsourcing, and, in this case, monetization. And that would include finance and accounting, human resources, procurement, even real estate operations. So, it gets really interesting when you start expanding the function set that is included when you look at monetization. So, the more you put in the scope, the more value that’s available, and the more interesting the deals go.

Marcus Holloway: You also mentioned an interesting thing about our approach to monetization, which is, essentially, it’s not outsourcing in the way it’s traditionally viewed where a company and outsourcing would look at a function, and then immediately try to lift and shift it into their operations. Our version of this really leaves people, process, and technology in the exact same location as they are right now with the company, rebadge those employees, and transfer those assets over to MTM, but they would stay in place. And as a result, this approach is much, much less risk to both MTM, as well as the customer because there is not a lot of movement of process and people. So, all that inherent knowledge stays within the organization, and we just apply our assets, and our capital, and our intellectual property at making those process functions even more efficient. And those savings can be shared between MTM and the customer.

Marcus Holloway: It also provides a really interesting option for a company to take processes back in house if they want to. So, without a complicated cumbersome contract, if a function wants to be reabsorbed by a customer, that’s very easily done. And these transactions, if for whatever reason, a merger or something, needs to be undone, it can be readily undone, and the economics are fair to both parties. So, it’s a really flexible tool. We’ve designed it with very low risk, but it also serves to maximize the benefits to the customer, and allows MTM to build and expand our services business

Gregory J. Turner: Marcus, it’s really very interesting and real contrast to the very risky, and challenging, complicated, and costly lift-and-shift offshore outsourcing models. And it sounds like IT monetization really provides a lot of win-win opportunities for both the client, as well as MTM. Is there a road map or a guide that can help our clients engage with MTM to utilize monetization to support their functions?

Marcus Holloway: Yeah. And I’ll go over it really quickly. It’s a product of decades of doing these deals in many, many transactions, equating to perhaps billions of dollars of annual service revenue. But these six steps are pretty straightforward. Number one, you start with an opportunity assessment. And that’s where we work with the client and the prospect to understand what their objectives are in pursuing this and, also, help guide them to what is the right scope of services that should be considered for this transaction. That process does not take very long. We can be very, very efficient in that process, and we can really work—we’re actually working very closely with the client on a mutually beneficial basis to come up with the right opportunity assessment.

Marcus Holloway: The next phase, which can be a little more complicated, just because there are legal consequences to it, is the contracting process. That’s, basically, establishing the baseline for this deal, setting out the expectations, setting out the economics, and setting out the terms and conditions of the relationship, which actually may go 10 years or longer. So, it’s a very important phase of the of the process, but that’s the second phase is contracting.

Marcus Holloway: Once the contract is agreed and executed, we move into the third phase called transition, which, essentially, entails that transitioning out of assets, people, process, technology, perhaps even real estate, from the client to MTM. That process is very, very straightforward. We’ve done it dozens and dozens of time. It’s not a cumbersome process. But it needs to be very detailed because there are people involved, and we want to treat the people very, very fairly in this transition.

Marcus Holloway: Once we’ve transitioned the business, basically, we’re running the place for a while. And very slowly, over the course of a pre-agreed plan, we enter a transformation, an extended transformation plan. And what we do in there is really what we talked about. It’s everything from basic business process re-engineering, putting new technology, process, automation, robotics process automation, even artificial intelligence and machine learning if it’s appropriate to really get the processes that are transitioned over to MTM as efficient and productive as possible.

Marcus Holloway: Then, that becomes the platform for what gets really interesting, which is the next phase, the fifth phase, which is operate and grow. So, if we transform the operations, we really never stop transforming it, but we go through an extended operation period, and we actually use that base business that’s transitioned from the customer over to us, and we try to leverage that out into the marketplace. So, we’ve made an investment in these processes to make them as close to best-in-class as possible. And it’s our premise, and it’s on MTM to be able to go out, and commercialize those processes, and get others to bring their work on to that. So, it would never be a confidential process or a process that provides competitive advantage to the customer. It would only be these support functions, which other customers should be able to enjoy as well, which gets really interesting.

Marcus Holloway: That leads us to the last phase in the process, which is the commercialization and, potentially, the liquidity event. So, if we commercialize this, meaning this becomes a multi-client, multi-customer platform, it gives MTM and the customer, who may be an equity participant in this deal, some options to look at what the best highest use and value of this process is, and we could sell it to an industry group. The customer could decide to take the process back in place, and then have a commercial enterprise of their own, or we look at the equity markets as a way to extract as maximum value out of this.

Marcus Holloway: So, it sounds like a complicated six-step process. We’ve been through it many, many times. And without exception, the results are very, very powerful. And then, results that are really not accessible to a customer any other way, it’s very difficult to squeeze out this value into these processes. Whether shared services organization, data centers, or whatever, it’s very difficult for a company themselves to get the kind of value that MTM can get out of these processes and platforms with the customer. So, that’s kind of a quick overview of the process, Greg.

Gregory J. Turner: Thank you, Marcus. What struck me is how collaborative the process is, how important it is to really provide that full disclosure, and really working together jointly to create this solution. And both MTM and the company must do their homework to make IT monetization work and be successful at implementing the change in the way they do business to save on costs, innovate more, and monetize. Our recommendation is to start the process with an assessment. But health check really provides, or that assessment, a framework to help the organization identify the specific functions or processes that could be transitioned in an IT monetization program. Further, it gives our clients a heads up on what they need to do to prioritize to help them meet the challenges of disruption, and start that innovative transformation, and instead, become the disruptor in their marketplace. Marcus, it has been a very insightful and delightful conversation. Thank you for joining me today.

Marcus Holloway: Thank you, Greg. And it’s great to try to get the message of monetization out there. And trust me, there are millions and millions of dollars just waiting to be unleashed in IT and back office processes. And MTM and our team stands ready to help companies get that.

Gregory J. Turner: I like the way you phrase that, liberate it. At MTM, we help many organizations become strategic, and start to put in place a plan for their digital transformation journey. It is this consulting process that our clients realize how critical it is for them to hedge and take advantage of the convergence of these new technologies to better position themselves. So, it’s not to be taken out of the equation. For us, it is critical that we work with our clients in a collaborative partnership, and I think we found that today with IT monetization, to find the proper solutions to help them establish longevity in the marketplace or even aide them in the transition to a new business model to survive, as well as to sustain growth.

Gregory J. Turner: Thank you for listening. I hope you found this podcast helpful. For any questions, comments, or feedback, please feel free to send me an email at gturner@mtm.com. And for more information about us, visit mtm.com. For The Disruptive Enterprise, this is Greg Turner. Thank you.

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