IT-ODD Assessment vs. Diagnostic Discussion-2

IT-ODD Assessment vs. Diagnostic Discussion

Why is Information Technology Operational Due Diligence (IT-ODD) an Independent Assessment vs. a Consulting Diagnostic?

This distinction is critical for the acquiring entity to understand because it defines the fundamental objective and intent of the IT-ODD services provider’s engagement as well as the IT-ODD services provider’s anticipated ongoing business relationship with both the acquirer and the Target.  Any circumstance in which an IT-ODD services provider anticipates a development of an ongoing business relationship with the Target is not in the best interests of the acquirer, as well as compromises the independence of the IT-ODD services provider regarding the transaction.

An IT-ODD effort is an “independent assessment” that seeks to provide an objective, unbiased evaluation of the IT capabilities which exist, including any budgeted, planned enhancements, and a determination if those existing IT capabilities will be an “asset” or “liability” to the Target and the acquirer’s interests post-close.  The findings of an independent assessment are statements of fact based upon specific evidence.

Where weaknesses are identified requiring remedy — if properly explained, Target personnel and/or any competent services provider generally available in the market should be able to understand and implement the recommendations as described.

By definition, an independent assessment is a standalone activity that cannot be conducted with any expectation of follow-on services or revenue without compromising “independence”.

A “consulting diagnostic” evaluates the deployment of IT capability components with the intent to identify tactical weaknesses within the existing configuration and operational practices in order to define specific remedies and a plan to assist in the implementation of those defined remedies.  By definition, the consulting diagnostic is subjective since it anticipates a multi-phase services engagement and is usually biased by the specific capabilities and resource availability of the services provider, especially those personnel conducting the diagnostic, thereby resulting with a continuity concern (i.e., facilitating the one-stop-shop services delivery model).

In our opinion, a tactically focused consulting diagnostic” can be a valuable exercise, especially when specific IT capability component weaknesses have been identified.  However, the “consulting diagnostic” approach does not appropriately diligence the Target’s IT capabilities as is required in a pre-close transactional setting.  Often, acquirers engage a “consulting diagnostic” approach for IT-ODD seeking the convenience of the “one-stop-shop” and “familiarity continuity” embedded within the approach.  However, it has been our experience that, with the deployment of open-architecture technologies and commercial application software packages or development tools, the need for such convenience is not necessary with these IT deployment practices.

Aqualis Advisors’ strategically focused IT-ODD advisory services leverages experience to provide a judgment-based, independent assessment of the Target’s IT capabilities. 

While all IT-ODD and IT Assessment advisory services engagements have resulted with suggestions for improvement and/or remedies for correction of itemized deficiencies, these recommendations are not designed to require our ongoing, fee-based participation in order for the acquirer or Target to achieve successful implementation post-close, except as may be specifically requested by our Private Equity Clients. 

The key Questions addressed by an effective IT-ODD Platform Acquisition Assessment — Are the Target’s IT capabilities sufficient?  If No — then…

    • Is the potential investment exposure which must be factored into the transaction economics materially significant?
    • What is the anticipated remedy timeframe relative to the anticipated holding period of the investment?
    • Does the Target have sufficient internal capacity and capability to remedy?
    • Will the Target’s IT capabilities create any materially significant post-close operational risks?  IF Yes — then what is the potential remedy and impact?

In an independent assessment, remedy should always be clearly understood and implementable by either the Target or any sufficiently qualified external 3rd party entity.


As an IT-ODD advisory services provider not actively seeking the generation of follow-on revenue from our engagements, our practice is to define our suggestions and remedies with the intent that additional assistance is optional, but not necessarily required by Aqualis Advisors.