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IT provider acquisitions: helping or hurting users?
Best Answer
- Recommended by:
- Gita Kulkarni
Helping users. As more technologies get acquired, more innovators are motivated to spend time and work on new technologies. I think it works in the favor of the tech industry.
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- Michael Dortch
Whether it's the human evolution or business evolution, there is some truth to the Darwinian Theory.
IT Provider acquisitions happen because the acquiree has a weakness that will lead to thier eventual demise unless they "mate" with another company.
If they don't "mate" they will eventually erode and this will sooner or later translate to a negative end user experience.
If they do "mate" they make go through an adolescent dating period in where they are trying to develop a groove. This interim period may translate to temporary negative end user experiences, but eventually that temporary period will end and this will be indicated by an uptick in sales or business prosperity.
If after they try to "mate", there is no eventual groove, the two will "divorce"/divest or the combined one company may in fact seek another mate to survive. In either of these 2 outcomes, all friends, family and customers are still brought to a better medium in the end and market forces/the forces of nature will drive this survival.
Not sure there's a general answer to that one - really depends on WHY the acquiree was acquired.
While acquired companies do often cut back on support (often because they were losing money prior to being acquired), acquisitions also often increase the viability of that same company - because often the acquisition is the only thing keeping the company (and product(s)) alive.
Generally speaking, the customer base is one of the most significant assets that an acquirer values, and it would be foolhardy for them not to treat the customers well - although of course there are exceptions...
In my experience, enterprise management/monitoring software the acquisitions help both users and vendors (both the acquired and one making the acquisition). The reason I say this is enterprise management/monitoring is not and should not be one time purchase but an ongoing goal of an organization to improve the management of its constantly changing environment. Acquisitions in this space lead to better integration of the pieces and provide the users with a roadmap (though sometime constantly changing) to a management and monitoring of the environment.
It gets even better when the users organize into user’s groups around certain products or discipline. This level of feedback to the vendor and communication with the user community ensures and helps the vendor to stay the course or at least explain the direction the vendor plans to take to those most affected. When I used to speak to user groups regarding products I supported, I insisted that they be vocal about their likes and dislikes of the product and product direction.
As for shareholder value, I see some good here as well. The shareholders of the acquired company receive a check whether their company is a rising or falling star. As for those shareholders of the company making the acquisition, I see an opportunity to solidify the company’s position in the market. It seems to me that every time a corporation divests in one area or another, Wall Street seems happy. However, I have no facts and am no expert in this area.
While one would think that increased spending on R&D would uncover new products and technologies which would benefit the end user - too often the end user is locked into a monopoly with limited options and forced to endure whatever service or pricing the vendor wishes to impose.
Being the biggest player in the market space usually causes a company to lose its ability to remain nimble and as such the end user if often forced to jump through more hurdles in their quest for services. Something a smaller company would not impose as the layers of management and structure would not be present in smaller more nimble companies.
In most cases, I believe acquisitions hurt users. The exceptions are when its an issue of viability or when the acquisition has a small range of capability that fits well with the acquirer's products---adding value to the product line and providing a focus for further innovation.
In other cases, what tends to happen is that staffing is cut and innovation dries up. The innovation decreases because much of the initial efforts are focused on addressing gaps to make the product "fit" with other products (including things like supporting more operating systems--whether customers want it or not). Second, the visionaries in the smaller company usually either leave as fast as the can or find that there ideas aren't as well received in the bigger company as there are more voices to cite objections (and lets face it, engineers love to find problems and issues in the plans and ideas of others)to their ideas.
Furthermore, the scale of large companies provides the ability to succeed despite limited innovation and issues around user experience and simplicity of software---things that will destroy a smaller company. This ability to succeed despite not having the best solutions because of the perception of being a "safe choice", may hurt users even more than acquisitions.
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I hate to give a cliché answer, but the reality is it depends. If you have a thriving start up company and you are purchased by a high tech company that understands how to meld a new business (Cisco has done made than 125 acquisitions in its history) into its operation, then it can be a fruitful experience. My impression is those types of purchases are the exception rather than the rule.
On the other hand, there are cases where a lower tier company acquires its competitor simply in order to stay alive. These companies need to build up the mass to compete against larger, better established, better run organizations. In this case, the end result is a larger, poorly run company that sticks around for a few more years but then is eventually cast off.
Regardless of how the vendor fares, customers will feel an impact in regards to service and support. In many cases, the acquirer eventually (could be a few months or maybe a few years) dumps the purchased company’s sales and service teams in favor of its own. The customer is then left scrambling to figure out whom to call when a problem or question arises. It takes a real skill to manage this transition, so the transition is seamless and unfortunately few vendors have it.