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Technology Due Diligence Checklists

June 6, 2018  |  Posted By: Greg Fennewald

Technology Due Diligence Checklists

What should one examine during a technical due diligence or during a technology due diligence?  Are there industry best practices that should be used as a guide?  Are here any particular items to request in advance?  The answers to these questions are both simple and complex.  Yes, there are industry best practices that can be used as a guide.  Where to find them and their inherent quality is a more complex question.

AKF partners has conducted countless diligence sessions spanning greater than a decade and we’ve developed lists for information to request in advance and items to evaluate during the due diligence session.  These engagements range from very small pre-product seed-round companies to very large investments in companies with revenue greater than $2Bn ARR.  We share those lists with you below with a note of caution.  A technical due diligence is far more than a list of “yes” or “no” answers, evaluating the responses into a comprehensive measure of technical merit and risk is the secret sauce.  The following presents a high level list of technology due diligence questions and requests that can be used as a technology due diligence checklist or template.

10 Things to Request in Advance

1. Architectural overview of the platform and software.
2. Organizational chart of the technology team, including headcount, responsibilities, and any outsourced development or support.
3. Technology team budget and actuals for the previous 3 years.  Ideally these should be separated by Gross Margin activities and Operating Margin activities.
4. 3d party audit reports – vulnerability scans, penetrations tests, PCI, HIPAA, ISO certification reports.
5. 3d party software in use including open source software.
6. Current product and technology roadmaps, previous 2 years of major enhancements and releases.
7. Hosting plan – data centers, colocation, and cloud plus disaster recovery and business continuity plans.
8. Previous 3 years of material technology failures.
9. Previous 5 years of security breaches/incidents/investigations.
10. Description of the software development and delivery process.


Areas to Cover During the Due Diligence

The below represent a necessary, but often insufficient, set of technical due diligence questions.  These questions are intended to jump start a conversation leading to deeper levels of understanding of a service offering and the maintenance/operations of that service offering.  Feel free to use them to start your own diligence program or to augment your existing program.  But be careful – having a checklist, does not make one a successful pilot.

Scalability

Are incoming requests load balanced?  If so, how?  Is any presistance required for the purposes of session affinity?  If so, why?
Are the sessions being stored? If yes, where?  How?  Why?
Are services separated across different servers?  For what purpose? 
Are services sized appropriately?  What are the bounds and constraints?
Are databases dedicated to a subset of services/data?
Are users segmented into independent pods?

Fault Tolerance

Do services communicate asynchronously?
Do services have dedicated databases? Is any database shared between services?
Are single points of failure eliminated?
Is infrastructure designed for graceful failure?  Is software designed for graceful failure?  What is the evidence of both?
Is N+1 an architectural requirement at all levels?
Are active-active or multiple AZs utilized?  Tested?
Are data centers located in low risk areas?
To what does the company design in terms of both RPO and RTO?

Session and State

Are the solutions completely stateless?
Where, if any place is session stored and why?
Is session required to be replicated between services? 
Is session stored in browsers?
Is session stored in databases?

Cost Effectiveness

Is auto-scaling enabled?
Is reliance on costly 3rd party software mitigated?
Are stored procedures eliminated in the architecture?
Are servers distributed across different physical or virtual tiers?
Can cloud providers be easily switched?
Is the amount of technical debt quantified?
Is only necessary traffic routed through the firewall?
Are data centers located in low cost areas?

Processes

Can the product management team make decisions to alter features?
Are business goals owned by those who enact them?
Are success metrics used to determine when a goal is reached?
Is velocity measured?
Are coding standards documented and applied?
Are unit tests required?
Are feature flags standard?
Is continuous integration used?
Is continuous deployment utilized?
Are payloads smaller and frequent vs larger and seldom?
Can the product be rolled back if issues arise?
Is automated testing coverage greater than 75%?
Are changes being logged and made readily available to engineers?
Is load and performance testing being conducted prior to release?

Operations

Are incidents logged with enough detail to ascertain potential problems?
Are alerts sent real time?
Are systems designed for monitoring?
Are user behaviors (logins, downloads, checkouts) used to create business metric monitors?
Is remaining infrastructure headroom known?
Are post mortems conducted and fed back into the system?

Organization

Are teams seeded, fed and weeded?
Are teams aligned to the services or products they create?
Are teams cross-functional?
Do team goals aligned to top level business goals?
Do teams sit together?

Security

Are there approved and published security policies?
Are security responsibilities clearly defined?
Does the organization adhere to legal/regulatory requirements as necessary (PCI, HIPAA, SOX, etc)?
Has an inventory of all data assets been conducted and maintained?
Is multi-factor authentication in place?
Are vulnerability scans conducted?
Is a security risk matrix maintained?
Is production system access role based and logged?

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AKF has conducted countless due diligence engagements over the last decade.  We can take a checklist and add to it context and real world experience to create a finished product that captures the technical risks and merits of a company, improving the quality of your diligence process.

 

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