The Ebb & Flow Of Mergers - InformationWeek

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Infrastructure // PC & Servers
Commentary
11/12/2009
09:58 AM
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The Ebb & Flow Of Mergers

HP announced its takeover of 3Com Corp this week, and the media covered it as 1) a battle in the war with Cisco Systems, and 2) further evidence that tech giants are consolidating to provide "one stop shops" for corporate clients. Are you buying it?

HP announced its takeover of 3Com Corp this week, and the media covered it as 1) a battle in the war with Cisco Systems, and 2) further evidence that tech giants are consolidating to provide "one stop shops" for corporate clients. Are you buying it?Dell buys Perot Systems. Lenovo buys IBM's Thinkpad. Oracle buys Sun. Google buys everything, and Motorola contemplates selling everything. There's been more musical chairs-like activity in the technology space over the past few years, whether hardware or software, than in any other industry vertical I could name, and all of it seemingly focused on the premise that bigger companies are better, most successful companies.

The concept seems reasonable enough, only it's not true, at least not anywhere else in business.

Quick, can you name a giant merger or acquisition that ever paid off for anybody except the financiers and company leadership? There's a common storyline to these things irrespective of industry, an ebb and flow narrative that goes something like this:

It starts with all the declarations of "synergies" and competitive advantage. Then come the staff layoffs and "rationalizations" of business units, followed by a string of quarterly reports that reveal underwhelming financial results. Critics start to question the wisdom of the consolidation strategy. Sooner or later, some of the pieces of the business are sold off, or the entire merger unwound...also to the benefit of the financiers and their chosen company execs.

I know the technology space is different. Interoperability and service are key drivers of purchase and happy customer relationships. The IT world is as immense as it's immensely confusing, so there should be a benefit to hiring a provider who understands and takes sole responsibility for delivering a solution.

But is it that different than, say, the automotive, airline, or pharma sectors? We have ample proof that bigger/more is not better, at least for consumers and employees involved in said mergers. What should work on a financier's spreadsheet rarely if ever happens in the real world: workers don't like seeing their comrades getting axed, or being pushed into different jobs; vendors don't like changed rules; internal processes don't necessarily fit with one another; and customers are usually left looking for proof of the promises of scale and efficiency.

Bigger doesn't give us better cars, airline experiences, or useful drugs. It just enriches the people who orchestrate such maneuvers, and then dissolve them.

You don't need me to tell you that there's a ton of upheaval in the IT world, and the promise of vendors who can do more, and do it better, is really attractive. I just wonder why the media and analysts who cover the latest mergers in the tech space aren't a bit more critical of that promise. Is there a Great Unwinding of mergers coming down the pike, just like it does for every other vertical?

Shouldn't critics be well aware of the ebb and flow of mergers in general, and questioning why the expectations should be any different for technology in particular?

Jonathan Salem Baskin is a global brand strategist, writes the Dim Bulb blog, and is the author of Bright Lights & Dim Bulbs.

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