The Tech Leader's Guide to M&A in the AI Era with Derick Schaefer, SVP at Mod Op

(Intro Narrator at 00:00:00) Today, we're talking to Derek Schaefer, Senior Vice President of Technology at Mod Op, about his take on mastering M&A in the age of AI. You're listening to Joel Beasley, Modern CTO.

(Joel Beasley at 00:00:18) Derek, it's been a while, man. It's been like four years, five years?

(Derek Schaefer at 00:00:21) It has, since episode 148.

(Joel Beasley at 00:00:24) We're coming up on a thousand.

(Derek Schaefer at 00:00:25) Yeah, I know. You're on the doorstep of it. And congratulations with everything you've done with the book, the podcast, and the overall platform. It's great.

(Joel Beasley at 00:00:33) No, it's great. When you emailed, I looked up the book that you had written, right? And I thought, wow. This is a great topic of conversation. Tell me a little bit about the book that you've recently published.

(Derek Schaefer at 00:00:46) Yeah, so it publishes this month. It's in preorder status right now. The title of the book is "Integrating SaaS Acquisitions: A Technical Leader's M&A Playbook," and it literally is the art of integration when it comes to acquisitions and combinations of SaaS software companies through three lenses. One lens is that playbook, right? And so every leader, whether you're a seasoned CTO or even a new CTO, you've got some spreadsheets, some project plans, some starting points, some guidance on what is the work that needs to be done during integration and how you're going to handle it. And this book combines decades of experience, including one really influential project that we could talk about, which was a carve-out of Intuit that had a lot of influence on this book. So that's the one lens, right? It's the playbook. And whether you're a seasoned CTO or you're new to the role or even a manager or a non-CTO, it'll give you some good things to think about in a very playbook fashion. The second lens is that M&A is on the rise again. It has been. And, you know, every year, depending on the economy and interest rates, that can fluctuate. But the common theme is that private equity is driving a ton of business combination work. And if you break down PWC's kind of buckets for the type of acquisitions that take place, the two most complicated from a CTO's perspective are what we call transformational. So taking two businesses that might have some adjacency, but they're not alike and creating a new market, right? Creating a new offering, being disruptive through that combination. And then the second one is called an absorption where you take two like businesses and make them one. And private equity has a way of going about their investment thesis, how they make the investments, and what their expectations are. And so the second lens of this book is a financial lens. Part one of the book actually has some details into some accounting standards that can get a CTO quickly up to speed on what I would call PE lingo from a financing perspective and really shape the overall approach that a leader takes with their plan. And when you think about accounting lingo, it sounds boring, it can be boring. But one of the big aspects of it is there's a concept called goodwill, and that is when you pay a premium for an acquisition, you've established some goodwill in that, and that goodwill literally has to be tested. And if it's impaired, there's immediate financial impact in that fiscal year, which is a bad thing. And goodwill impairment can come from things such as customer loss due to dissatisfaction, losing key talent, eroding market—your market share, et cetera. And don't we all know that those can fall square on the shoulders of a Chief Product Officer, a Chief Technology Officer if they don't execute, right? And then the third lens of the book is where does AI play in this? And AI is an incredible tool in all aspects, both technical, functional, non-functional in integration. And throughout the book, really try to place an emphasis on where leaders should test the waters, leveraging AI as their copilot, as their tool, and do more with less.

The inspiration of the book came to me from a couple of different things. One was an experience I had with this great team that was part of Intuit that we did a carve-out, and we can talk about that because it was a fascinating project. But the other, Joel, I'm going to net it out: as a CTO, I am just allergic to tech debt. I can't stand it. And I think you as a former CTO as well are not a fan of it either. And if you think on the surface, there's no quicker way to introduce tech debt into a company than to combine two companies together. They could have the most perfect, composable, modern stack, but from a customer perspective, customer experience, logins change, UIs change, the experience changes. And the old tricks of let's SSO and iframe some things together that we would pull off in the early 2000s, you can't do that today. And so this book really gets into how do you strategically look at, plan for, and execute in a financially responsible manner, leveraging AI as your counterpart to make for a great combination of two businesses that operate in the SaaS software space and create value and benefit for your customers.

(Joel Beasley at 00:05:33) Did you integrate any prompts into the book?

(Derek Schaefer at 00:05:37) So do get into some prompting tips most definitely, and then some things to consider and actually, you know, opine in a few places. But it's, you know, the day the book publishes, which is coming up here in a few days, as we know—yeah—those prompts could be invalid. So try to keep it to a level that will scale for a leader, but definitely turn the wheels. And the fifth—it's a five-part book—the fifth part of the book actually goes through a hypothetical scenario from end to end, including integration budget and how to calculate what AI could do to multiply engineering hours from an integration perspective.

(Joel Beasley at 00:06:22) So it's just like the best tech M&A book ever written?

(Derek Schaefer at 00:06:27) I don't know about that. I would—

(Intro Narrator at 00:06:28) I don't know.

(Joel Beasley at 00:06:29) I don't know about that either, but it sounds like it because I've read a lot in the area, and I've also been a part of transactions. And there's not—I mean, there's some good long-form posts and stuff that you can kind of gather together. But as far as just a book to be the book, I think as your book gets out there and starts getting reviews and picked up, you're going to become like the defining book for, hey, if you're going through this, go over here, especially if you're explaining it all, going through the different lenses. And because as you're talking, I'm just leveraging my experience of going from knowing nothing to working with PE and going through all of that. And it was hard. Learning the lingo was probably the hardest thing. They're like, you know, GAAP. And I'm like, yeah, I know what that is. You know, learning the accounting and all of that good stuff. But, yeah.

(Derek Schaefer at 00:07:23) Well, and so to give credit where credit is due, you know, if you take the—I'll roundabout make the quote of author Toni Morrison: you know, if there's a book that you want to read that hasn't been written, then you need to write it. This book has been written. It hasn't been published, right? M&A has been taking place for hundreds of years. From a SaaS software perspective, the business models begin to change in the early 2000s, right, as you saw companies delivering a service in the form of software. And as it became more feasible for middle market and lower middle market companies to do that, right, with the platforms that have been introduced into the technological ecosystem that make it cost-effective to build ground-up SaaS systems. You're seeing those become more attractive to private equity, and they become more in the kind of eye of the storm of acquisition targets and growth targets, et cetera. Where I really learned a ton—so I've been a part of organizational transformation since my days at Microsoft and even today and still involved in it. But I was brought in as a leader in a team that was a former—well, it was a former standalone company and then was acquired by Intuit, was divested by Intuit into private equity, and then three months later was acquired by NCR, right, the publicly traded software and hardware fintech technology company, and was brought into that team during that whole kind of set of transactions and joined an effort that we had that was named "Out of Intuit." And the goal of Out of Intuit—the solution, by the way, was a banking, online banking system and payments and mobile banking system. So 850, roughly, financial institutions in the United States in a highly regulated environment, both consumer and business banking for over 10 million end users. And we had approximately 14 months to carve out of Intuit's data centers into our own with shared services not being acquired, so they had to be rewritten, and all of the perils of IT, HR, finance, and all the things that you would do to become a standalone business underneath the watch and leadership and planning of NCR who became an acquirer during that process. And as I put on the website for this book, you know, I was—you need an A team to pull that off. And when I came into my role, the A team was there, some really incredible employees that came out of Intuit. And the plan was one that when I wrote the book, I went through my experience as a leader, and I purposely did not look at my notes of that experience because I wanted to use that as the "does this book hold water" to match up to what was accomplished during that project. And so that project had 20 cutovers. There were over 35 applications and services, new services that had to be online. Over 200 employees were involved in it, and it had a stated goal to be plus 50, right? So world-class from an NPS perspective. And we delivered it. We delivered it with a plus 70 NPS, and there was just some great things that came out of it. And once I got the majority of the scheme of the book written and the first two parts of the book written, I pulled out my notes and I looked at the simpleton three parts of the strategy of that carve-out. The first was customer-centric. The second was operational rigidity, you know, just being very operationally focused. And the third was a one-team culture. And the last bullet that I took on the one-team culture was "have fun, comma, damn it," meaning that let's make this something that we're all proud of. And that's when I knew that by combining my other experiences, my private equity experiences, and some of the work that I've had the just fortune to be a part of, including all of the learnings that I achieved during being a part of that team, I knew that the book had some merit, and it was something that needed to be published.

(Joel Beasley at 00:11:51) And what year did you do the carve-out in?

(Derek Schaefer at 00:11:53) So it was in 2014. So we're just going over a decade since that happened. Yeah. It was a fast—and what a great team still in touch with so many of them. And several have, you know, been a part of the process of taking a peek into the book and the strategy. One of the things—and, you know, Joel, you're an author, you've published a book—one of the things that scared me about this book is I really want to give credit where credit is due. And the acknowledgments section of this book, there's no way to pull it off without missing somebody. Yeah. So we made the choice to put up a website, QR code it, and put a link to the website. And upon launch, we'll unveil that and have to do a little bit of crowdsourcing, but I want to capture of the 200 employees that were part of Out of Intuit, plus all of the other acquisitions and integrations that I've done in my career, really recognize those teams because every one of these is different. And you learn from the people around you, you learn from your customers, and you learn from the highly engaged employees that you have on your team. And Out of Intuit was certainly one of those. It was a high watermark.

(Joel Beasley at 00:12:58) Yeah, I could add a couple pages for sure.

(Derek Schaefer at 00:13:01) Yeah. And obviously, the risk of missing somebody, which I would hate to do.

(Joel Beasley at 00:13:05) It'll happen. I think anybody that gets upset about it, they've got other stuff going on in their lives anyways.

(Derek Schaefer at 00:13:11) Well, that's—I mean, that's why we linked it to the website, right? Just add them. So they dynamically say, hey, so sorry about that. Hit refresh on your browser now.

(Joel Beasley at 00:13:20) Yeah, there you go. It's getting long. We're doing a lot of projects together. Every time Photoshop loads, I feel like it's getting longer and longer and longer, like the number of names that show. Yeah. Yeah. Yeah. Soon, it'll all just be like Grok and ChatGPT. They're the authors, and that's it.

(Derek Schaefer at 00:13:36) Well, it's funny. You can use ChatGPT to do things such as give it a list of names that's 40 names long and say, the following three are CFO, CEO, and somebody else. So with the exception of them, put the rest of them in alphabetical order, right?

(Joel Beasley at 00:13:52) Yeah.

(Derek Schaefer at 00:13:52) And it's pretty cool to watch it do that.

(Joel Beasley at 00:13:56) I was surprised to learn how Microsoft Unified Support works. Apparently, Microsoft decides your support fee based on the amount of software that you buy instead of billing you for the actual support hours that you use. This means that you pay for support that you might never use. The pay-as-you-go model is a much better model, but Microsoft doesn't offer that. I did find a company that does offer this, and they're called US Cloud. And 50 of the Fortune 500 use them. Not only is it better, faster support with all US-based engineers, it's also cheaper. 94% of US Cloud clients report saving a third or more when switching from Microsoft Unified Support to US Cloud. Now you'll just have to figure out what to do with all of that extra money. If it were me, I'm responsible, so I'd reallocate that money to improve my team.

(Derek Schaefer at 00:14:41) What would you do, Josh?

(Intro Narrator at 00:14:43) I think I'd just try and buy a ticket to space.

(Joel Beasley at 00:14:46) All right, Astronaut Josh. For out-of-this-world savings, visit uscloud.com to book a call and find out how much your team can save. One little quick aside here: Seth Godin is a marketing author, like 20-time, but you're aware of him. Yeah. He just wrote a book called "This Is Strategy," and we did an interview with him for that. And in his book, he wrote it as like a companion to use it with a large language model. Fascinating format, I had never seen it before.

(Derek Schaefer at 00:15:21) And that is spot-on. You really—you know, when it comes to the knowledge that you have—the capability, I should say, of these LLMs, it is about how you prompt it, how you go about it, and how you think about it. So if you think about developing code, I could easily go to an LLM right now during this interview and say, hey, let's pick a language—PHP, C, Python, Go—can you write me a program that does X? And it'll say in a very polite manner, most certainly, and it'll do it. If you prompt it saying, hey, I believe in the principles of test-driven development, and I would like to write a program beginning with test-driven development around the same topic, you're going to get a different set of code, right? If you then do that and say, hey, from a secure coding perspective, I'm really concerned about one of the inputs on this code being an email address. Can you do some escaping and some sanitization and really make this program immune to some of the shenanigans that could take place as we ingest the email address?

(Derek Schaefer at 00:16:31) That's a totally different set of code. And you have to kind of come from a background as your listeners will, from a diverse set of technology experiences to say, what is the overall set of possibilities that we could start with, and what are some of the principles that we really adhere to as an engineering organization, as a company, and begin your journey with the LLM with that? And in the book, the first part of the book is called House in Order. And it literally guides a CTO to say, okay, every company is a work in progress.

(Derek Schaefer at 00:17:09) And there's a difference between you've got a ton of things you want to do with no plan, or you got a ton of things you want to do and you know you need to do and you've got a plan. That makes a big difference in integration. And one of those things that I think every organization should have is not a set of rules, not a set of "this is the way we do it" and that's just the way it is, but a set of principles. And when you get into engineering principles, you will see things such as adherence to test-driven development, or you will see statements and principles around innovation, around data, around code quality, around composability. And if you start at that level with your interaction with an LLM, you'll get a better result, and it is a different result.

(Derek Schaefer at 00:17:55) And I don't know if that resonates with you, Joel, in your history, some of the experience you've had prior to AI and then some of the research you're doing with AI.

(Joel Beasley at 00:18:05) Yeah. I mean, I think I'm at the level of unconscious competence with the LLMs. I watch a lot of people use them. I use them very effectively, and I don't really think about being good at it until I watch a person who hasn't been a software engineer for 20 years use it.

(Joel Beasley at 00:18:25) It's interesting to see how your skills can translate from software engineering to searching for information online to now prompting the LLM. So I think product managers are probably going to be the ones that receive some of the biggest benefit because they're close to the customer too. So those requirements—coming up with requirements, organizing requirements to business outcomes—those are becoming, well, I'll just say I believe that those are the most important things. Now all of a sudden, it's like the code is becoming more of like plumbing. It's like, oh, just get it done.

(Joel Beasley at 00:19:01) Just send it off to that team or send it off to that model. Just get it done. And I think really soon, Derek, we're going to be at a position where we kind of have a custom-trained LLM for our companies. I'm not exactly sure how it's going to look. And that thing kind of manages the code base as a whole so that we, I think we'll abstract out of dealing with the code and eventually just get so comfortable where we just tell it what we want and have it visualize the rule sets and then modify the rule sets accordingly.

(Derek Schaefer at 00:19:34) Joel, I think you're spot on. And I think that in the end of the day, being customer-centric is the most important thing for all software companies, including all leaders on the leadership team. And as we take away some of the headaches that we've seen in traditional engineering—APIs that aren't working exactly the way we want them to and file formats and other stuff—I'll use unit testing for example. You know, why is it that unit tests don't get done?

(Derek Schaefer at 00:20:05) Well, doing good ones actually takes some work and you generally don't have the time in your sprints to get them done the way you truly want to, nor do you have the true knowledge, right, the historical knowledge to really push the edge case limit for a unit test. And these LLMs, as they're trained today, can be super helpful with that. And that gets you higher quality code, better anticipation of use cases, gets you closer to satisfied customers, and that's what's important. One of the parts of the acknowledgments section of the book gets into just some concepts and who influenced them. There's a guy from my past, his name is Jake Poore.

(Derek Schaefer at 00:20:46) He came out of Disney University. He operates in the customer loyalty space and runs a company that primarily focuses in healthcare today. But he, this is probably 15 years ago, left me with a phrase that I've never forgotten, which is you do not build a loyal customer by simply meeting expectations. You build customer loyalty by exceeding expectations.

(Joel Beasley at 00:21:08) That's why I love Tesla. Yeah. I'm a fan. Forget the political stuff. The product, oh my goodness.

(Joel Beasley at 00:21:16) They exceed the expectations.

(Derek Schaefer at 00:21:16) And so when you think about M&A integration, there's a ton of weight on the shoulders of a chief product officer, a chief financial officer, a chief technology officer. Your customers don't care. They don't care what your data center problems are and how you've got to remediate this tech debt and make these systems work. They don't care.

(Derek Schaefer at 00:21:35) They are looking for an outcome. They don't buy your product for a seat, a licensing fee, or a login screen. They're looking for a business outcome. And if you just want to become NPS neutral, get it done and don't get in their way. If you truly want them to join in and say the combination of these two businesses is great, it creates more value than I had before, you're going to have to exceed their expectations.

(Derek Schaefer at 00:21:59) And I think that in today's overall workloads and the amount of pressure that is on engineering staffs dealing with what they have to deal with, it's not a question of whether you use an LLM or consider using an LLM. And it's not a question of whether you're going to go from a 50 or 60 hour week to a 20 hour week and take up golf as a hobby. It becomes an enabler to really meet that endgame, which is to exceed those customers' expectations, like we did out of Intuit delivering a plus 70 NPS on those cutovers and on their new world.

(Joel Beasley at 00:22:34) I could see a future where, let's say I use HubSpot. I was in it today. So I wanted to do something that it couldn't do what I wanted it to do. I was like, all right, fine. But I could see a future where I click the little AI chat button and I'm like, hey, I need to do this. And it's like, okay. And through whatever means—I don't want to get too technical—but through whatever means, it just enables me to do that thing.

(Joel Beasley at 00:22:58) Whether in the background it's writing code and creating some new instance that's unique to my account or like features specific to my account that it just booted up and did. But I think we'll get there. I think that's, actually, Josh, we can make a note. I want to look up after the show, is anyone doing that?

(Joel Beasley at 00:23:15) Because customization is one of the things that crushes SaaS, right? Because you get your first customer and they're paying like 50K a month or whatever it is, but then they need this little feature, and then they need this. Now you're managing all these versions. I think AI is going to just take that to a whole other level.

(Derek Schaefer at 00:23:31) Well, if you think about the implementation, so I always use the example of you've got a screen and a customer comes to you. I've come out of a background of primarily operating in highly regulated environments, the FFIEC, FINRA, in the financial close space. There were a number of regulatory bodies that we had responsibilities towards. And I look at something as simple as a phone number.

(Derek Schaefer at 00:23:59) It takes one customer to come in and say, hey, I can't have that phone number on that screen. Can you mask everything but the last four digits? Well, in a tactical world, a developer will write a sanitization routine to do that. But proper SaaS software should be thinking in terms of configurations, and that configuration for that customer is four digits.

(Derek Schaefer at 00:24:23) Another customer might need six, another might want two. Another might want it depending on your role. Full visibility for security and a compliance officer, HR with four digits of remaining non-obfuscated text for a normal employee. And if we're not thinking in that grand, multitenant kind of SaaS mentality, we're not doing the right thing in terms of future-proofing the feature, if you would. And in today's SaaS environments, it takes, A, a product management team that has the wherewithal to translate that customer need into a true SaaS feature, not just a feature. And it takes a software engineer who can understand that and deliver it, even with an LLM.

(Derek Schaefer at 00:25:14) And this is where I'll come back to some of the private equity practices that had been popular in the past in smaller SaaS software companies, and one is the boot camp program. There were several very successful PE firms that had advanced the practice and proven that they could staff the majority of an engineering organization with boot camp engineers and have them learn on the job. There's still a place for that. But if you truly want to have a proper and an expansive, an enterprise dialogue with an LLM on generating the kind of code that's future-proofed and that is high quality and that'll exceed customer expectations, it takes a little more senior and a little more experienced of a role. And I think the leaders are really going to have to think about how they balance their teams now, knowing that their cost arbitrage mechanism is the LLM, not the boot camp engineer, if you would.

(Joel Beasley at 00:26:14) You know, I fully agree. How long do you think until it's abstracted out to the point where we're not even using product teams? There's like one person that's managing a swarm of LLMs?

(Derek Schaefer at 00:26:29) Well, so I think if you put it in telco terms, right, the copper in the last mile in this is going to be the data. What you are grounded on and what access your LLM has to data and learning will dictate everything. And, you know, we've been in the data business in the software game since the fifties and sixties, and the majority of innovation since those times has been around, how do we deal with the fact that we've got poorly organized data? Right? We've got operational data in silos that doesn't necessarily match.

(Derek Schaefer at 00:27:05) We lack master data. And we've been able to get away with that with a number of technological advances to be able to get various groups the numbers they need, the reporting, enable systems what they need to conduct their transactions. But now when we get into this world of agent to agent and agent to source and program AI possibilities, you've got to get that data right. And so I would say that that is going to be really important on what you advance, which is what does it do for the product manager, but it's also going to be hyper important on the actual delivering of code. An LLM is trained, as Matt Mullenweg put in a recent interview.

(Derek Schaefer at 00:27:49) An LLM is, you know, the ChatGPT is trained on all of WordPress. It's open source. Every theme, every plugin, every iteration of the software ever published on GitHub, it's been trained on. You get into the internals of business logic with a customized business, right? Something that is a true innovator. There is no training. And that training is an engineering organization. One of the things you're going to have to think about in the midterm is how do you provide the grounding to ensure that these LLMs are doing what you want them to do when it comes to requirements, refinements, code generation, unit testing, quality, and overall delivery. And that's going to be, in my view, the copper at the end of the mile for LLMs and software engineering.

(Joel Beasley at 00:28:41) That's interesting. I wonder if anyone, I saw some prompt, it was basically a GitHub for prompts, right, where you can like run it through different models and then watch it as it changes and roll it forward and roll it back with the prompts. But I'm wondering if anyone's building software like that where you're entering in all the requirements and then an interface specific for generating prompts that will then generate software.

(Derek Schaefer at 00:29:10) Well, let me, I'm going to geek out for a second. I will tell you where my litmus test for LLMs and software engineering, and this is well over a year and a half ago, where I got the aha and said, okay, this is actually, this is doable. The LLMs, they're grounded, they're trained, and that was the way that they were released and published and I said, okay, if I want to write some software code, let's give this thing a chance. Let's go tackle something hard but it's been well documented and let's use it in a language that's been well documented.

(Derek Schaefer at 00:29:45) So the problem I chose to solve was taking, and I'm not a mathematician, this was actually inspired from something way back in my past, but I said, let's take a couple of the known modern formulas for calculating pi out to trillions of digits. And let's take the C programming language since it was published in 1972 and is well documented through ANSI standards. And let's go write that code. And in about an hour, through two modern formulas, it did it and actually ran it on a Raspberry Pi and got it to go to 10 million digits of precision until the Raspberry Pi just crapped out.

(Derek Schaefer at 00:30:24) So I then said, okay, let's put that aside. Let's go do something. Let's go create some tech debt. Let's go do something stupid, right? And the stupid thing that I chose to go do was rewrite software that is already out there because I thought that was cool. And so I gave it an aloof set of requirements of saying, I am going to create a server, an API server for calculating pi digits, and I need to do so. And I'm going to throw out some big words. I need to have it asynchronous multithreading.

(Derek Schaefer at 00:30:54) It needs to have an event-driven model. It's kind of need to have a queuing mechanism for when it becomes overloaded and all these different things. And I said, can you tell me what you understood? And it came back and said, you want a server for calculating pi? And it used these exact words, Joel.

(Derek Schaefer at 00:31:12) You want it NGINX style. It knew. And that's where I took all that from. It was the architecture for NGINX that makes it such a scalable web server. So I had it write it and it was a couple hours of prompting and it got something working, loaded with memory leaks. Got out Valgrind, gave it some feedback, got it all kind of fixed up and said, okay, this thing will run. Now here comes the test and this is why I did the whole thing. I took that code base and went to a completely different computer, completely new LLM, and said, can you tell me, uncommented C code, it was about 1,500 lines.

(Derek Schaefer at 00:31:49) Can you tell me what this is? And it came in and commented every part of the algorithms, where they came from, Gauss-Legendre, all of this stuff, the event-driven model, the threading, the protection, the mutexes, et cetera. Then I asked it the naive question. So I said, C was published in 1972, and one of the guys who had a hand in that, Ken Thompson, was hired by Google to write a language called Go. If we were to port this to Go, what goes away and what does this look like?

(Derek Schaefer at 00:32:20) And it immediately started to tick off all of the parts of that code that the engineer, right, the stupid part of writing this had written and put it into Go routines, put it into channels, use the asynchronous event-driven models that Go has built into it. And the precision math libraries, which are from the eighties, it said those don't exist in Go, but, and it line for line explains how it's going to take it to Google's big math library. That's when I got the epiphany to say, if it knows what you're talking about and these are things that are, you know, 40, 50, 60 years old, it was definitely trained in them. It has a high probability of being able to be successful with it. And so, you know, we're not in the business of writing SaaS software today that calculates pi.

(Derek Schaefer at 00:33:10) We're doing much more meaningful things for society, for the business world, for individual consumers. And the CTOs that master the models to ground their particular use cases in are going to be the ones who win the race, in my opinion.

(Joel Beasley at 00:33:27)
I think you're right. I think you're right. Now I want to make sure we jump back to M&A stuff too. For the people that are listening specifically for the M&A conversation, I hate to do this to you, but I am, Derek, what's the one thing that they need to think about when doing a merger and acquisition?

(Derek Schafer at 00:33:48)
So the one thing is going to be customer centricity, and that is going to drive out the experience in what I would call the tactical lifting and shifting and the experience that the customer has during this transition that you're making as a business. But again, coming back to really good planning, really good diligence and leveraging AI during diligence, and real thoughtfulness in terms of what you're going to accomplish during integration, using your integration budget as wisely as possible, you will be able to eliminate some tech debt during integration, but you're going to also create a map and an understanding of existing tech debt and more efficiently be able to tuck it into your product road map if you do your job right. And that's going to lead back to a customer that not only sees value on the other side, but they're going to be part of a road map with higher velocity and something that is more in tune to their needs so that you deliver on value. And Joel, if you look at the history of M&A, the age-old saying is, "Oh, well, those two companies just merged. They're going to disappear for three years, and then they're going to come out and say, 'Oh, by the way, Mr. and Mrs. Customer, we're ready to talk to you again. Right? What do we need to do?'" You can't get away with that today. And the book really focuses on how you look at it from a framework: planning, execution, using your financials, and leveraging AI to its fullest to really execute on customer centricity.

(Joel Beasley at 00:35:24)
So this book will be good for people who are just curious about what the process is like, good for people who are about to go through it, and good for people who are actually going through it?

(Derek Schafer at 00:35:34)
Yes. And I would say that the diligence part of it, the way that we do diligence or have done diligence in the past of saying, "Hey, there's a bunch of tech debt. Let's give it a yellow light. Let's give it a red light," and just kind of taking it as that, we need to be thinking a lot differently about what that tech debt is and how applicable AI is to it today. So for example, if you acquire a system that its interfaces are heavy and let's throw out some legacy stuff—you know, EDI and SOAP calls, right? There's some terms from the past. Well, people are acquiring companies today that have that in their systems. An LLM's ability to understand those data files and those formats is highly accurate, which gives you the ability then to say, "Hey, we can, whether it be a part of transitioning into our modern stack and our API infrastructure or in our near-term road map, we've got a high degree of confidence that we can get after that and eliminate that tech debt." And then obviously, through the more modern approaches, you know, leverage better customer outcomes and better customer experiences.

(Joel Beasley at 00:36:48)
And when is the exact release date for the book?

(Derek Schafer at 00:36:51)
April 28th. The ebook will be live on Apple soon thereafter, Amazon, and Barnes & Noble and a number of other platforms. And then the print version is literally 15 to 30 days behind it. Doing a paperback as of now, might consider a hardcover. It's 190 pages and five parts. And yes, I would say if you're a CEO, a CFO, a chief product officer, chief technology officer, a manager, it's worthwhile to, even if it's just online and not buying it, but through a sample preview, look at the table of contents. In fact, we published that on the website, which is sasintegrationbook.com. Be aware of it and know when you're going to want to pull it off the shelf, borrow a copy, get a copy from the library, or be honored if somebody purchased one.

(Joel Beasley at 00:37:42)
Nice. Was the Intuit one, was that your first M&A situation?

(Derek Schafer at 00:37:48)
So in that degree, yes. But being a part of Microsoft, I was a part of three different organizations. And one of them, which was the tail end of my four years there, which was a global accounts division, we did a number of transformations globally with customers and our subsidiaries, including technology business systems, resourcing models, revenue models, et cetera. That's what really opened my eyes to it. And ironically, come full circle, one of the references on the acknowledgments page of the book around principles and frameworks is an individual by the name of Jonathan Murray, former chief technology officer at the New York Times, Warner Music, was in senior leadership roles at Microsoft where I reported to him, and he's actually my boss today at Mod Op Strategic Consulting. So it's kind of cool to see that come full circle.

(Joel Beasley at 00:38:48)
Yeah. What are you doing today? Are you helping people with these M&A things or advertising? Where are you at?

(Derek Schafer at 00:38:53)
Yeah. So I took a logical break after Trintech and was considering getting back into a CTO role and actually was pretty deep into an interview process when I got a call from Jonathan. And he and some peers of his had formed a strategic consulting company that focused on digital transformations and kind of all things digital. And they had a big project that my skill set was applicable to. And I just thoroughly loved the years that I reported to Jonathan. And when I met his partners in the business, it was just, it was a no-brainer. They were all based out of the New York area. Joined the company, and I've been there for almost three years. But about two years ago, we were acquired. And we were acquired by a private equity-driven, digital, let's call it, well, a full-service advertising agency called Mod Op. They operate in the B2C and B2B space, but have a huge footprint in B2B. So there's a lot of overlap in our customers, their customers. And they've got a footprint that covers Canada, the United States. Actually, I have an office here in Dallas that I go into a couple of times a week.

(Joel Beasley at 00:40:11)
Oh, nice. You're in Dallas?

(Derek Schafer at 00:40:13)
In Dallas. Yeah. So it has been, it's been a great experience and, yeah, so I'm, that's what I'm doing full-time today is consulting.

(Joel Beasley at 00:40:22)
Oh, nice. We do diligence work. We do integration work, but we also do a ton of data and AI work, and helping customers prepare for the conversation that you and I are having here today.

(Joel Beasley at 00:40:35)
Nice. We do marketing work too. I saw a bunch of ads on the website, like a bunch of creative.

(Derek Schafer at 00:40:41)
Yeah. So in terms of which website? Our website?

(Joel Beasley at 00:40:45)
Mod website. Yeah.

(Derek Schafer at 00:40:45)
The Mod Op website? Yeah. They have got everything from digital to creative, video, you name it. It's full service. And some of the acquisitions that they have made have brought talent, process, and customers who drive those kinds of outcomes that it's just incredible. And that's far from my world, right? I will go to company meetings and sit in awe at some of the things that our talent employees have done and that the leadership has kind of driven out of these acquisitions.

(Joel Beasley at 00:41:16)
That is so cool. That is really neat. It's fun. Yeah. We work with a couple companies like that at the podcast. So some of the media agencies that are representing the large tech brands, they'll work with us when they get clients that need to reach this audience, right? Need to reach the tech leader audience. So I didn't know if that's your world or if you're just doing consulting there for the other stuff.

(Derek Schafer at 00:41:43)
Well, so, you know, we do consult across combined clients because a lot of transformation is taking place in the marketing space that will transcend into other areas of the business. So we were an add to the company that provided a capability of strategic consulting. And all of our employees, we're a small group in strategic consulting, we're all former operators. So former CTOs.

(Joel Beasley at 00:42:07)
Like a little PDO situation. Yeah.

(Derek Schafer at 00:42:09)
Yeah. Former chief data officers, and it's been, you know, former business unit managers and GMs. And it is, it's been a lot of fun because our, you know, if you think about a really healthy customer base that pushes our boundaries on, you know, what they're trying to achieve is part of the equation. And then as you enter in just the technology revolution that we're going through, both AI and non-AI, it makes for real fun work. So I'm having a blast with it. And I can honestly say that every day that I come to work is a new set of challenges. And we're learning something new every day, which is great.

(Joel Beasley at 00:42:47)
Nice. You're enjoying your time.

(Derek Schafer at 00:42:51)
I am. I am.

(Joel Beasley at 00:42:51)
Nice. Kids out of the house?

(Derek Schafer at 00:42:52)
Yes. So we're empty nesters. My wife, now she's a marketer. She is a chief marketing officer. She is currently the chief marketing officer for Smoothie King, which is a brand I think your listeners will know. She did that role at Jamba Juice, at Cheddar's Scratch Kitchen, came out of the Brinker ecosystem. And so there's no shortage of marketing talk that hits my ears from a passive perspective, but I've got to give a huge shout out to her in the book. My wife was raised in three languages: English, Spanish, and German, and went to school for the first ten years in German, in a very, very disciplined academic environment. And if there is a comma out of place, regardless of the language, she'll catch it. And she did some incredible editing work and just overall thought leadership work on the end outcome of the book. And she's admitted, as a chief marketing officer, there's some good nuggets in there for managing complex projects. So it's not just limited to good takeaways for chief technology officers.

(Joel Beasley at 00:44:03)
So she proofread the book for you?

(Derek Schafer at 00:44:05)
Like, three times. Right? Part four is the chapter on execution, and it's the bear, right? It's the one that your listeners are going to want to, you know, divvy that one out to various functional leaders they have because it covers the whole gamut. But it's the bear. And she made it through that three times and said, "Man, that's a, it's an intense chapter, right? There's a lot in there." That's the playbook part of the chapter. But yeah, huge shout out to her for all the help and just encouragement.

(Joel Beasley at 00:44:35)
All right. You think she'll listen to this?

(Derek Schafer at 00:44:37)
Oh, she will.

(Joel Beasley at 00:44:38)
Oh, she will?

(Derek Schafer at 00:44:38)
She will.

(Joel Beasley at 00:44:39)
Oh, nice.

(Derek Schafer at 00:44:39)
She will.

(Joel Beasley at 00:44:40)
Yeah. Well, my wife also was the editor, like, the last proofreader editor of my book, because me and the other editor were in it together, like, the whole time. And then we said, "Okay, now we either need to hire another one or have a final person do it." So we had my wife do it. And so that's a, it's a project. It's not a quick thing. It's not like a ten-minute, "Hey, you know," it went on for a couple, like, maybe two or three weeks doing a chapter here and there, but it's a big project.

(Derek Schafer at 00:45:12)
Well, and it's interesting. It's a lot like a software project in that there's multiple areas of quality that you're trying to bring together. So we went through a process of creating what I would call kind of knowledge domain packets. So CFOs and auditors and people from, you know, my world that are in the financial space to say, "Hey, need a gut check here." And, you know, part five of the book gets a little, it is the part of the book that's about innovating in integrations. Just going to push the envelope a little bit, right? To get those opinions in and there would be some catches and some feedback, and then just people from your past and some of the different engineering and product technical domains. So to pull all of that together, the feedback, the catches, and then going into print, there's obviously going to be a miss here or there. And we were able to land the plane.

(Joel Beasley at 00:46:09)
Yeah. In a way, it's a ton of work. Well, the quickest way to find that one typo is just to get the first one printed.

(Derek Schafer at 00:46:14)
Exactly. Exactly. Like, "What is that doing on that page?" And, yeah, how did... So a little, there's a few AI accolades in the book. One, as I said in the acknowledgments section, was really concerned about missing people, so we decided to take it online. So the acknowledgment page is nothing more than a link to that URL on the website and a QR code. And when I got into the QR ecosystem, I kind of quickly realized that if you wanted ugly, they were free. If you wanted it pretty, you're going to have to sign up for $10 a month. And I was like, "This doesn't make good business sense to sign up for an annuity revenue stream for a QR code." So I actually went to an LLM. I chose, I'm a huge fan of Go as a programming language. And I chose Go as the language, and it took about three hours on a Saturday morning with, I had to experiment with a couple of different libraries, but wrote a command line interface that generates pretty contemporary QR codes that support halftones and logo embeds, et cetera, and does it in a multitude of formats.

(Joel Beasley at 00:47:24)
That's the future. That's the future. I think software will change. I really do. I think it's going to be more of an on-demand individualized situation where I just go talk to it and say, "I need a software that just does A, B, and C for me," and it just does that. And then what developers will say when they hear me say this, it's like, "Oh, well, what about all the other stuff? And then you'll need it to do this." It's like, "Yeah. And then you'll need it to do more stuff." And then as you need it to do more stuff, you ask it to do more stuff, and it will be able to do more stuff. And then it just slowly builds over time.

(Derek Schafer at 00:47:54)
Well, and I think you have to make a decision there, right? As to whether you want to sign up for, you know, that's where the business outcome of spending money with a company that creates an ongoing set of value for you, that's where you're glad people sign up and pay. For me, I needed two QR codes, and I said, "You know what? I am..." It was an excuse to get out the compiler and tinker around with AI, but I did it in three other places on the website. So huge fan of WordPress. Actually had a startup that was sold to multiple companies, is now part of WP Engine. Still have several employees that are over there. And through that journey, got to kind of learn the ins and outs of that. And one of the things that I am adamant about when it comes to static websites and performance is that if you hand NGINX, the web server, a static file, an image, an HTML file, it will deliver it out the door at scale. Drop the mic, you're done. Caching plugin stuff is super, super, super, you know, complicated these days in the WordPress ecosystem. So I went to ChatGPT's O1 model when it first came out. That's the advanced reasoning model.

(Derek Schaefer at 00:49:10) That's the one that you get some limited tries at, and I asked it to walk me through the stream inside of WordPress core that creates the HTML output and how to capture that and then dealt with all the cookies and the other things. And it was about—once again, these are my Saturday morning projects—it was about four hours and had a must-use plugin, so there's no interface that actually creates that in the Nginx rewrite rules that pick them up if they exist. And the website today has that plugin running on it. That's how it caches HTML.

(Derek Schaefer at 00:49:44) Did some super easy stuff in a similar light with creating schema.org metadata around the book, including the Library of Congress number and ISBNs, et cetera, so that Google could pick those up. But I just looked at it and said, you know, I've got the background to it. I know what I want. Nothing's out there that really satisfies that. The worst thing that can happen, right, that I can do, is fail with this venture, and I'll go sign up for something that delivers what I need. But let's give it a try.

(Joel Beasley at 00:50:12) Have you used Replit at all?

(Derek Schaefer at 00:50:15) No. No. Tell me about it.

(Joel Beasley at 00:50:17) Okay. It does every—like, it will fully deploy from one prompt. It can fully deploy the application.

(Derek Schaefer at 00:50:26) Wow.

(Joel Beasley at 00:50:26) Yeah. Yeah. So, I mean, it's like GPT mixed with basic infrastructure mixed with—so if you want to just play around and generate one, they call it one-shotting, the people on X, Twitter. If you just want to do a bunch of one-shots—and it does a lot more than that, people are cringing that hear me talk about it in this way. I'm like misusing, like I'm using it as a toy that it's a very powerful thing. But it's so cool. You can go on there, write two or three lines of a prompt, and then it will fully deploy with URL a completed application.

(Derek Schaefer at 00:51:02) That's crazy. I will have to go check it out. And I think that that is where, you know, as a leader—and I'll come back to kind of principles and culture inside of an organization—there are things to go play with. There are things to push the envelope on. When it comes back to the topic of the book, mergers and acquisitions, I make a very pointed page in the tail end of the book that says when a merger and acquisition goes well, customers are happy. When it's strained or stressed, some employees have to work some late nights, some customers have some missed deadlines. Not good. When things get really bad, you can wreck a business, right? That means people are getting laid off. Visas are getting revoked. Health insurance is getting canceled. It's a serious responsibility that a CTO has to take. The entire leadership team does. And I'll come back to the book really tries to emphasize the need to have a framework, to have a plan, to have principles, and to have a strategy well before you pull the trigger on execution. And that way everybody knows what's in balance and what's not, because we are just one innovation away, like what you talked about, to where an employee could pull the trigger on creating some AI-driven code or a solution, and we don't know what's happened. And if it's not fully baked, you know, you can have a problem on your hands. And that's definitely something you want to avoid as a leader.

(Joel Beasley at 00:52:43) There's the home—you're exactly right. There's the home page. I don't know if you can see on the screen. You just say app.

(Derek Schaefer at 00:52:50) Yep. That's cool. That is cool. So I love this, though, for fast fails, for prototyping, to go explore the realm of possibilities. And I think it will change the cadence. If you think about hackathons, right?

(Joel Beasley at 00:53:08) Oh, yeah.

(Derek Schaefer at 00:53:09) Great exercise to go through. It does take, you know, 48 hours, 72 hours, people staying up all night. You know, if you can replace that with some prototypeathons or things using this kind of technology, you know, that means you could do more of them in a given year, right? Instead of one, you do three, or instead of quarterly, you know, you're doing them at the end of every sprint.

(Joel Beasley at 00:53:31) Well, it also means more people. So, I mean, the fact that, let's say, you're working at Chili's as a server, and one day you're scrolling through and you see this Replit thing, and you're like, I can prompt into an app. And then you just start getting—and that's your intro into it. You're like, oh, wow, I can do this. This is easy. And then you get a little deeper and a little deeper. And what that'll do on an economic scale was it'll get more people into this world, and then we get better products.

(Derek Schaefer at 00:53:59) With business domain knowledge.

(Joel Beasley at 00:54:01) Yep. Yeah. That's true.

(Derek Schaefer at 00:54:02) Gets us closer to satisfied customers. I like that.

(Joel Beasley at 00:54:06) You don't have to go bug friends and family for 50K to get an MVP because you don't know code, but you know the problem. And, you know, you can just go do it.

(Derek Schaefer at 00:54:14) Well, I think it's also—if you think about the role, in many cases, the bind that an individual contributor developer can get into—they are asked to do something, and they might be really good at React and doing UI work. They might be really good at API work and some back-end full-stack type stuff. But in many cases, the full solve will go beyond what they know, and now you've got teams of people together. And, you know, they're trying to translate loose requirements into actual working code. If we can get first starts that use this loose prompt to MVP and then use that MVP to have engineers in their own specific domain pick it apart and add some of the things that we started talking about at the beginning of this, and create a better set of prompts, a better set of examples, and go to a more powerful model or a different approach, I think we can see a change in the way that we work. And it's a change that will be, you know, great for these engaged employees who want to see their customers satisfied. They want to see innovative features and things that change their customers' world, and it'll be a quicker time to value for customers. And that's where it's at, right? How do you take a customer's needs and deliver upon it in a time frame that allows them to turn the needle in their own business versus just being another request on a roadmap portal or an innovation portal and having to wait two or three years to see it come to light?

(Joel Beasley at 00:55:54) Nothing frustrates me more than searching if the app can do it and then finding it two or three years old in some queue, or like a thousand people have liked it, but they still haven't made it.

(Derek Schaefer at 00:56:05) Yeah. Yeah. So it will impact things. Anyway, excited about the book. Excited to share the knowledge of it. It does cover nonfunctional topics as well. You know, in any acquisition, you're going to have a talented HR business partner that's going to be working alongside you, and they're going to own their work stream. But I always have looked at my leaders in my past and said, you know, at the end of the day, your employees, their engagement, their satisfaction is going to be on you. And so we get into how the CTO should interoperate with their counterparts and how to have kind of a full ecosystem, end-to-end accountability type view of integration and, you know, how it all comes together. And I'm excited to be able to finally land the plane on it and, you know, get it to where we're a couple weeks here from it being out the door.

(Joel Beasley at 00:57:01) Yes. I'm super excited for you. Josh is going to make sure to put a link in the show notes and all of that. And, Derek, we made a podcast again. How do you feel?

(Derek Schaefer at 00:57:11) We did. It was a lot of fun. Yeah. It's an honor to be back on here. And, once again, just going from number 148 to what will be in the 800s or 900s in this podcast. It's—we need to do this again and not wait five years.

(Joel Beasley at 00:57:28) Yes. Thank you so much for listening. And if you found this episode useful, please share it with a friend or colleague who you think would get value from it. And if you have topics that you'd like to hear discussed on the podcast, either add me on LinkedIn or send me an email, [email protected]. Every time I get an email or LinkedIn message, it absolutely makes my day and inspires me to keep going.