Mergers & acquisitions activity in tech poses risk to business continuity

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mergers-and-acquisitions

Specialist providers continually getting swallowed up by wider service providers poses a risk to UK businesses.

The increase in merger and acquisition activity in the tech sector poses a significant risk to continuity for UK businesses, according to Peter Groucutt, managing director at DatabarracksGroucutt suggests that specialist continuity providers such as his are slowly being consumed by wider service offerings.“The ongoing acquisitions we’re seeing are causing long-term problems for the market,” the MD said. “Specialist disaster recovery and business continuity companies are being swallowed up by larger cloud providers, and their services packaged as part of a wider offering, leaving many customers with a provider who is a jack-of-all-trades but master of none.”Despite the current recieved wisdom suggesting that a one-stop-shop is a cost effective way of doing business, Groucutt warns that it actually poses a significant risk to organisations.“In the event of an outage, you don’t want the provider of your infrastructure to also be managing your disaster recovery function,” he says. “Firstly, if the outage is due to a problem on your provider’s infrastructure, there is a good chance your disaster recovery service will be affected by the same issue. By working with different providers you are spreading that risk. Secondly, and perhaps more importantly, in the event of an outage you may struggle to recover as quickly if your provider’s focus is split across a number of different tasks.”

Research from Databarrack’s annual Data Health Check (DHC) survey revealed that only one third of UK organisations came through the last 12 months unscathed from a cyber-attack.

“Because of this, disaster recovery and business continuity capabilities are becoming increasingly crucial,” Groucutt says. “But despite an increase in DR testing, organisations’ confidence in their ability to recover from an incident is actually decreasing. Having thorough plans and the right tools in place is a solid starting point, and provisioning services from a specialist provider adds an extra layer of reassurance.”

Takeaways for Business Continuity Managers

Concentration Risk (or “having all your eggs in basket”) always needs to be considered in commercial relationships. Although economy of scale may be attractive from a budgetary perspective, spreading risks over two or more specialist suppliers can avoid a disaster. This is an issue that service users need to maintain an awareness of: what may seem sensible to the customer may not fit in with the interests of the service provider. Shareholder value obligations and owner/investor exit strategies will always play a bog part in M & A decisions – and these decisions may not always be in the customers best interests.