RESEARCH & RESOURCES

Vendor M&A Considerations

What should your enterprise do once you hear of M&A activity?

IT industry consolidations are an ongoing story as vendors seek to expand their product lines, acquire needed functionality rather than develop it themselves, reach new prospects, or capture revenue that is now going to their partners. Merger activity can also be driven by factors other than "technology synergy." Sometimes it is driven by the desire of the acquired company's investor- or stock option-heavy executives to simply cash out and profit from their investments. Whatever the motive, vendor mergers and acquisitions are a fact of life that IT executives must frequently deal with.

What should your enterprise do once you hear of M&A activity? The first reaction to any acquisition announcement is to seek assurance that the products your company uses will continue to be supported. This is particularly true when these products are licensed from a vendor being acquired and the acquiring vendor markets competing products.

Fortunately, most of the time the vendors involved in the merger will pledge continued support for their product lines. At the very least, they will promise to deliver a road map that will show how or when any discontinued products will be replaced or "upgraded" to their other products and the level of migration support they will provide.

Vendors realize that they need to do this rather quickly because their competitors will often take advantage of a merger announcement to spread fear, uncertainly, and doubt (FUD) about continued product support. Competitors will do this in an attempt to convince the merging vendors' customers to replace their technology with its own products or services. Although most executives view this FUD with a high degree of skepticism, it is often quite effective in delaying or disrupting the sales cycle of the acquired vendor.

That said, we need to look beyond the obvious first-order effects of the merger and dig deeper. We need to see how the merger will affect each vendors' technology partners. If one vendor involved in the merger has a strong alliance with a partner that offers technology that is now available from the other vendor involved in the merger, the partnership will likely be stressed and perhaps not renewed. Strong partner alliances frequently ensure that when one partner released a new version of a product, the partner's products would be compatible with the new release; once the partnership ceases, this may no longer be the case.

As an example, Firstlogic, a premier data quality vendor, had strong partnerships with several other data warehousing vendors. These included an OEM relationship with data integration specialist Informatica and and global technology partnership with business intelligence vendor Cognos. When Business Objects (now a part of SAP) acquired Firstlogic several years ago, these relationships suffered as Business Objects had previously acquired Acta, an Informatica competitor and Cognos (now part of the IBM world) was a direct competitor of Business Objects.

Don't just satisfy yourself that the vendors involved in a merger will continue to support technology your company now relies upon. Dig deep to see how it might affect their current partners and the effect it may have on other technology your company currently deploys.

About the Author

Michael A. Schiff is founder and principal analyst of MAS Strategies, which specializes in formulating effective data warehousing strategies. With more than four decades of industry experience as a developer, user, consultant, vendor, and industry analyst, Mike is an expert in developing, marketing, and implementing solutions that transform operational data into useful decision-enabling information.

His prior experience as an IT director and systems and programming manager provide him with a thorough understanding of the technical, business, and political issues that must be addressed for any successful implementation. With Bachelor and Master of Science degrees from MIT's Sloan School of Management and as a certified financial planner, Mike can address both the technical and financial aspects of data warehousing and business intelligence.


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