Global CIO: Are Tech Takeovers Creating Nightmares For Customers?

CIOs don't have to like mergers among IT suppliers, but they sure better be able to manage and optimize them.
"I sit here and I think: What mergers have really benefited everybody, both the companies and the customers? And there aren't a whole lot. There are a lot more that go bad than are successful," says Rosen, a former president of Share Inc., an organization of IBM customers. "I have never seen a merger that saves the customer money." (That's from Robert Rosen, whom the article identifies as CIO for the National Institute of Arthritis and Musculoskeletal and Skin Diseases.)

Well, if a CIO's only responsibility were to save money, today's active M&A market would indeed be a disastrous circumstance. But CIOs today need to be much more than just the CFO's junior assistant, with every strategy and tactic predicated on saving money—competitive advantage, customer intimacy, security, and market-centered innovation sometimes require CIOs to spend money, not just try to squirrel it away.

And the only way for mid-size or big tech companies to deliver the latest and greatest capabilities for all of those customer needs is to acquire companies that have developed specialized skills and breakthrough technologies, two things that CIOs today are valuing more highly than ever before.

Yet one CIO quoted in the AP article seems to feel that acquisitions are stripping the industry of the very types of innovation that made it great. Speaking of the motivation behind tech-industry deals, that CIO offers this perspective:

"The demand is not coming from the customers," says Gopal Khanna, who oversees a $600 million technology budget as chief information officer for the state of Minnesota. "On the contrary, I'm best served when there's a phenomenal amount of innovation happening. . . . Sometimes creating behemoths slows down that innovation engine."

Do big companies stifle innovation when they acquire smaller companies?

--Is IBM slowing down or accelerating the pace of adoption of advanced analytics as it continues to buy niche vendors in BI and analytics?

--Will SAP's acquisition of Sybase slow down or accelerate the use of enterprise apps on smartphones?

--Has Hewlett-Packard's acquisition of EDS made HP more or less valuable to, and valued by, its customers?

--Will Cisco's acquisition of Tandberg accelerate Cisco's development of enterprise video technologies and solutions?

--Oracle's Exadata system, employing Sun hardware, could rack up revenue of $1 billion this year, and CEO Larry Ellison has said unconditionally that the acquisition of Sun has been a major factor in that surge.

--Dell was facing an increasingly dead-end future in the hardware-only business, but its acquisition of Perot Systems has made it, among other things, one of the leading providers of IT products and services in one of the world's hottest markets: health care.

Without question, there've been some terrible acquisitions in this industry, and the AP article touches on a couple. But to come up with one of those, the article had to reach back 15 years, for crying out loud: Compaq buying Digital.

CIOs don't have to like acquisitions among their suppliers, but they sure as heck have to be able to live with them, leverage them, and innovate based upon them. Otherwise, those same CIOs are just giving their CEOs and boards of directors one more good reason to believe that the entire IT operation is just a tactical cost center, and that some outsourcing company can manage the status quo for less money and will create fewer distractions while doing so.

On that point, caveat emptor, indeed.


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GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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