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IT vendor acquisitions: A blessing and a curse

There have been lots of IT acquisitions lately, with many affecting the virtualization market. When one IT vendor buys another, there are both pros and cons for customers.

Major IT vendor acquisitions have been in the news a lot lately.

Oracle's Sun acquisition made huge waves last year, and the ripples are still being felt today. Over just the past few weeks, Intel acquired McAfee and Hewlett-Packard acquired 3Par after an intense bidding war with Dell.

There have also been several smaller acquisitions, especially in the server virtualization market. During VMworld 2010, Citrix Systems acquired VMlogix and VMware bought both Integrien and TriCipher.

There is often much uncertainty when one IT vendor buys another, and it can take months if not years to accurately assess the fallout from an IT acquisition. Members of our Server Virtualization Advisory Board weighed in on the issue as they answered this question:

Are IT vendor acquisitions good for customers?

CJ Metz, First American

Things tend to run slower and less efficiently the larger an organization becomes. What we generally see when a company gets bought up is most innovation, in terms of risk-taking, dramatically slows.

Due to the current economic market, tech startups are slowly dwindling, and large organizations are buying up the smaller fish in the pond. This decreases innovation, as the larger organizations own all the patents and intellectual property.

Competition and flexibility are key in today's marketplace, and providing an environment that is conducive to that is paramount. While there are some viable reasons for companies to consolidate, it is my opinion that the tradeoffs are ultimately not good for the consumer in the long run.

Rob McShinsky, Dartmouth Hitchcock Medical Center

Acquisitions, like Hewlett-Packard's purchase of 3Par and Intel's of McAfee, can be a good thing. For organizations that prefer working with fewer vendors, these acquisitions provide a more extensive product set.

Acquisitions are a reality of modern technology. It is more of a rarity these days for vendors to spend mass internal time, development and money in new product areas. The server virtualization world is no exception. VMware has taken this path with its acquisitions of Zimbra and SpringSource. The bones of Hyper-V came from Microsoft's acquisition of Connectix. Citrix acquired XenSource.

Whether successful or not, each of these players needed a presence in the market more quickly than they were willing or able to develop it independently. To the customer, the addition of a product to an already familiar vendor portfolio can only speed acceptance and adoption, limiting risk.

Shannon Snowden, New Age Technologies

With the many acquisition announcements recently, it seems like we may end up with a couple of huge companies ruling all of IT. But acquisitions have been around IT long before virtualization went mainstream, and after visiting the vendor showcase at VMworld this year as a Best of VMworld Awards judge, it is clear to me that innovative companies are alive and thriving, and there isn't a big threat to oligopolies happening anytime soon.

From the perspective of the larger companies, they are getting field- and market-proven R&D, which is a lower-risk investment for them. Additionally, with the fierce competition in the virtualization space, acquisition is often necessary to significantly advance your product's capabilities or to prevent new competition from taking market share. VMware, for example, is trying to expand from the hypervisor and reach up into the application space, so instead of developing every component needed, they are buying companies like SpringSource and TriCipher that can help them reach that goal.

From a customer's perspective, the more established products get more features, but if you don't need those features or are trying to solve a specific problem, the smaller companies are still there with great products.

Dave Sobel, Evolve Technologies

Vendor consolidation is the double-edged sword of the IT industry. On the one hand, consolidation means that vendors are able to offer a richer portfolio of solutions, integrate much more deeply across a technology platform and deepen their capabilities. On the other, it risks stifling competition, creating more difficult channel programs to manage and causing customer service to become less personalized.

Ultimately, is this consolidation good for the customer? The unfortunate reality is that it depends. When a vendor can offer a richer suite of solutions, fully integrated at a lower price, this is often very good for customers. Microsoft's acquisition strategy is a great example of this. As they grow, their solution sets extend and integrate much more richly.

When smaller vendors are acquired, we often see a removal of or shift in those personal relationships, and customers are usually less happy with the outcome. Personal touch, customized engagements, and specific price structures are often swept away over time during this kind of acquisition.

The solution, as almost always is the case, comes down to relationships. Maintaining good relationships with the right vendor representatives is key to ensuring that these changes do not hurt customers. Even with large vendor organizations, keeping relationships deep and engaged is critical!

Have a question for the Server Virtualization Advisory Board? Email Colin Steele, Senior Site Editor.

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