The document discusses key considerations for integrating companies that provide software and services using the "anything as a service" (XaaS) business model. It summarizes the results of a roundtable discussion with industry experts on this topic. The main points are: - Acquisitions of XaaS companies are driven primarily by the goal of diversifying products/services to expand revenue opportunities. - Integrating sales functions across companies is one of the biggest challenges as business models differ. - Risks include customers switching to alternatives or competing demands on resources during integration. Successful integration requires addressing cultural differences, aligning incentives, and managing customer and brand impacts. - Executives must balance focusing integration efforts while avoiding rushing

1. EXPERTS WITH IMPACT
Technology Insights
Integrating Xaas Companies | FTI Consulting, Inc. 1
Integrating XaaS Companies
Anything-as-a-Service (“XaaS”) platforms continue to dominate cloud-based product solutions as
processing and memory costs steadily decline and connectivity capabilities accelerate. The lower costs
and higher efficiency associated with these services make them attractive to both the solution provider
and the customer.
For solution providers, XaaS offerings generate recurring and more predictable revenue streams than
on-premises alternatives, and typically enhance customer lifetime value. For customers, cloud-based
solutions reduce upfront capital expenditure requirements, make cash outflows more predictable and
can be tailored to specific use cases. It should be no surprise that worldwide spending on public cloud
services will grow at a 19.4 percent compounded annual growth rate (“CAGR”) from nearly $70 billion
in 2015 to more than $141 billion in 2019.1
XaaS offerings are wide-ranging in breadth and the sector
remains highly fragmented. This makes it ripe for opportunistic
consolidation across the large number of startups and
established players to accelerate transition of their business
models. Consequently, XaaS companies have been at the
forefront of merger and acquisition (“M&A”) activity in the past
few years. There was $50 billion of public company cloud-
related acquisitions occurring in 2015 — a 60 percent jump
from $30 billion of related deals in 2014 — and deal activity is
expected to remain strong through 2017.
Unlike traditional M&A that typically relies primarily on cost
saving synergies, transactions involving cloud-based service
providers are mostly revenue-driven deals. They offer buyers
the potential to scale up, close gaps in product portfolios and
become more deeply embedded with clients by offering a wider
array of customizable and/or integrated business solutions.
On-premises solutions require extensive engineering, support
and professional services costs to maintain multiple legacy
versions, and these costs are exacerbated by the complexity of
acquisition integrations. That said, XaaS integration comes with
its own unique considerations around deal execution, its impact
on functional areas (e.g., marketing, sales, products, pricing and
customer service) and other related risks and opportunities.
1.
Forbes, “Roundup Of Cloud Computing Forecasts And Market Estimates, 2016”, March 2016

2. EXPERTS WITH IMPACT Integrating Xaas Companies | FTI Consulting, Inc. 2
Technology Insights
What the Experts Say
FTI Consulting recently conducted an interactive M&A
Integration Roundtable discussion involving a few industry
experts on our panel and in our audience who are actively
involved in leading XaaS transactions and integrations. We
evaluated polling responses of several audience participants,
which we herein present along with key perspectives shared by
the experts serving on our roundtable panel.
Key Deal Objectives When
Acquiring XaaS Companies
What Our Polling Results Show
M&A deal objectives involving XaaS companies are driven
primarily by revenue opportunities. A whopping 69 percent
of audience respondents indicated that diversifying products
and services was a key objective of such acquisitions. In
addition, 15 percent said that acquiring technology was a key
deal objective, with another 15 percent citing the opportunity to
expand their customer base in existing geographies.
Integration objectives are tough to fully achieve. Only 14
percent said XaaS integration objectives were three-quarters to
fully achieved, 29 percent said that one-half to three-quarters
of integration objectives were achieved and 57 percent of
respondents said that less than one-half were achieved.
M&A appetites vary considerably. Fifty three percent of
respondents said their companies would make one to two
XaaS acquisitions over the next two years, 27 percent said they
would be acquiring three to five XaaS businesses and seven
percent said they are eyeing six or more XaaS acquisitions. Only
13 percent of respondents said they would not be making any
acquisitions.
FTI Consulting’s Point of View
Achieving deal objectives
▶ Companies need to assess the product and market fit
of the combined new portfolio based on product and
customer dimensions.
▶ Companies must assess the brand impact of the
acquisition on the product portfolio and market
segments to align with marketing to communicate
change.
▶ The right pricing model needs to be defined for the
stand-alone entity, as well as the integrated business
model in order to avoid cannibalization of both business
models.
Execution guidance
▶ Invest the time and effort needed to identify the right
target – one that aligns to the corporate strategy,
complements (or diversifies) the product portfolio and
brand, with the ability to transition to a subscription
model and provide a clear path to meet deal objectives.
▶ Be cognizant about the difference in procuring and
monetizing offerings when acquiring diverse products
and business models.
▶ Have a direct-to-customer sales channel to help
integrate the XaaS business into the buyer’s portfolio.
Functional Areas Impacted
by the XaaS Model
What Our Polling Results Show
The sales function has the greatest impact on meeting
deal objectives. Fifty percent of respondents identified sales
as the highest impact function, while 25 percent said product
development capabilities and 13 percent identified customer
relationship engagement (“CRM”).
The sales function also is the most challenging area for
XaaS integrations. Sixty three percent of respondents cited
sales as the greatest challenge to achieving deal objectives,
followed distantly by product development capabilities and
customer engagement at 13 percent each and marketing at six
percent.
FTI Consulting’s Point of View
Deal impact on functional areas
▶ Sales and marketing are at the forefront of new revenue
generation, as focus shifts to optimizing recurring
revenue growth through customer acquisition,
up-selling, cross-selling and retention.
▶ Sales forces are at the risk of competing against each
other for customer acquisition if incentives are not
aligned and integrated.
▶ Customer service plays a more proactive role, working
with product development to define feature and
functionality requirements based on customer feedback.
69%
of audience respondents indicated that diversifying
products and services was a key objective of such
acquisitions.

3. TECHNOLOGY INSIGHTS
EXPERTS WITH IMPACT Integrating Xaas Companies | FTI Consulting, Inc. 3
Technology Insights
Execution guidance
▶ Incentivize sales teams to transition from on-premises
model to XaaS solution.
▶ Educate sales teams on new pricing models and key
differences between the XaaS and on-premises models.
▶ Ensure to find the right timing and scope for the quote-
to-cash integration, as the process varies for XaaS
compared to an on-premises environment.
Key Risks during Integration
of XaaS Acquisitions and
Mitigation Plans
What Our Polling Results Show
Customers matter most on the revenue side of XaaS
deals. Fifty percent of respondents said customers required
the most comprehensive risk management activities following
acquisition of a XaaS solution, followed by channels (38
percent) and products (13 percent).
Respondents were more divided on the issues that
challenged culture integration, with 33 percent citing
misaligned incentives, 33 percent citing burdensome policies
and procedures, 20 percent citing leadership norms and 13
percent identifying issues of entrepreneurial spirit.
What Our Panelists Said
Integration Challenges
▶ When transitioning from a traditional on-premises
business to a XaaS model, it’s critical to educate sales
team on the new pricing model and how it differs from
the on-premises model.
• Incentivize sales team to transition to a XaaS model.
• Develop the appropriate pricing model that meets
the needs of your customers without creating
internal conflict.
▶ The acquired company needs to leverage the in-place
capabilities of the buyer — and they may need coaching
on existing processes and infrastructure.
▶ Never underestimate the importance of integrating
corporate cultures.
• Culture differences and clashes can impede the
integration.
• Culture integration planning should begin very early
in the deal process.
• Address culture issues top-down and bottom-up, as
junior-level employees are critical to the success of
the integration.
▶ The integration of finance and operations should pose
fewer challenges than other functions, such as sales
and marketing, and that integration should begin early
on.
▶ Sales cycles and quote-to-cash processes may differ
among existing and acquired services, which leads to
challenges for sales and finance teams.
▶ Customers should be able to try the XaaS product
easily in order to make a decision on how the XaaS
offering fits into the product suite and which version
they prefer to use.
▶ Channel coordination (direct vs. indirect) of the XaaS
offering is vital to its success.
▶ Having multiple acquisitions spaced closely together
makes integration efforts even more difficult.
Managing Integration
▶ Leverage integration teams with representation from
various business units and functional areas.
▶ Create a “buddy system” with buyer and target sales
teams to help salespeople learn and sell new offerings.
▶ Implement pilot programs with select customers.
▶ Consider delaying integration efforts in areas where
there is no immediate solution to integration challenges.
FTI Consulting’s Point of View
Integration Risks and Mitigation Plans
▶ Competing demands for internal resources (e.g.,
R&D, sales, customer support) during and after the
integration process needs to be carefully managed.
▶ New XaaS business could cannibalize existing
on-premises business, so expectations need to be set
with internal and external stakeholders.
▶ Managing operations for XaaS companies related to
back-office functions, performance metrics and revenue
recognition are different and needs to be defined
and managed appropriately. For example, customer
acquisition costs (“CAC”) and committed monthly
recurring revenue (“CMRR”) need to be front and center.

4. About FTI Consulting
FTI Consulting is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and
resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. FTI Consulting professionals, located
in all major business centers throughout the world, work closely with clients to anticipate, illuminate and overcome complex business
challenges and opportunities.
www.fticonsulting.com ©2017 FTI Consulting LLP. All rights reserved.
The views expressed are those of the authors alone and do not express the views of FTI Consulting, Inc. or any of its employees.
FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.
EXPERTS WITH IMPACT
Technology Insights
Nitin Kumar
Senior Managing Director
+1 408 915 8627
nitin.kumar@fticonsulting.com
Brian Hoard
Managing Director
+1 415 283 4296
brian.hoard@fticonsulting.com
Aidan Searwar
Managing Director
+1 415 283 4202
aidan.searwar@fticonsulting.com
Execution guidance
▶ Mitigate risk by clearly differentiating between XaaS
and on-premises offerings; having two types of
offerings sold across both direct and indirect channels
while targeting the same customers increases risks
during integration.
▶ Treat XaaS customers and on-premises customers as
different propositions; they will have different buying
preferences.
▶ Maintain morale by keeping both models separate
initially before integrating — then be transparent about
changes. Personnel from the on-premises product
group might be demoralized about changes, which
could result in attrition.
The Last Word from our
Panelists on the XaaS
Business Model and
Integration
Following are additional execution considerations identified
by the roundtable panelists and audience members as leading
practice considerations for a successful XaaS acquisition
integration:
▶ Get buy-in from executive and senior management teams of
the buyer and the target — forcing integration on the target
rarely works out well.
▶ Avoid long lists of items to focus on; instead, identify three
to five time-critical items the target should deliver before
closing a deal.
▶ Understand the differences inherent in cross-functional
teams as members will often have mismatched expectations.
Differences in processes will also exist. Try to anticipate these
differences upfront, identify critical areas where mismatched
processes or expectations exist and give them some time,
typically several months, and then figure out a plan.
▶ Ensure integration teams have representation across
business units and operations teams.
▶ Bring all internal stakeholders to the table as early as
possible. Sales and other functional areas should be part
of the process. Engage the sales team and understand
how they intend to go to market. Learn from new product
introduction practices.
Conclusion
Identifying the right business that can complement or diversify
a company’s existing portfolio and drive revenue expansion is
a major objective behind XaaS acquisition considerations. To
fully capitalize on an acquisition, integration must be diligently
planned and executed.
Too often, companies rush into integration and destroy value in
the transition process by addressing financial considerations
before completely understanding the new product portfolio
and determining what sales teams need to do to successfully
migrate customers. Branding, messaging and operating models
are also often afterthoughts. Such a poorly executed strategy
results in confused messaging, lack of organizational focus and
a likely loss of customers and synergy realization.
Depending on the degree of business model differences and
the readiness for XaaS integration, it may make sense to leave
the acquired entity separate for some time post-closing. While
waiting for an opportune time for the integration, determine
how product portfolios will be integrated and then build your
business model through marketing and brand integration. This
will enable you to deliver integrated and cohesive messaging to
both the XaaS and on-premises sides of the organization, your
channel partners and end customers. Once this is done, you
should transition sales teams, operating systems and business
processes — only then will you have laid the foundation to
successfully migrate customers, achieve synergy targets and
realize deal objectives.
Contributing Experts: Sumit Shukla, Neustar; Steve Burke, Intel; Kevin Lobdell, ex- Oracle; Cuneyt Buyukbezci, Aerospike; Jithin Bhasker, Adobe