Big IT vendors turning to mergers to help take on cloud

More large acquisitions expected; users say they prefer fewer vendors but fear lock-in

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Sam Palmisano, IBM's CEO and chairman, told investors at a May briefing is that what seems like industry consolidation now is catch-up by vendors trying to move away from offering commodity products and instead provide high-value services. The new focus, he said, will be on solving business problems, rather than simply on integrating products.

Palmisano did stress that buying companies to gain access to new technologies doesn't eliminate the need for R&D spending. "You can't do this by assembling commodities, spray-painting them a different color and saying that's going to give you differentiation in the marketplace," he said.

The acquisition push is also showing signs of widening geographically. Israeli companies, for instance, may get a lot of attention because of their relatively high amount of R&D spending.

"Chances are, I'm going to buy a lot of technology where somebody spent a lot of [research] money already," said Rafi Musher, CEO and founder of Stax Inc., a management consulting firm in New York that specializes in mergers and acquisitions.

Rob Fisher, a PwC partner for technology transactions services, sees a "consolidation-oriented" push because of a convergence of technology. But acquiring R&D has also been a primary goal in many mergers and remains core reasons for many acquisitions.

Fisher also noted that as merger numbers grow, technology companies gain experience in the ways of acquisition. "Technology companies have become very sophisticated acquirers," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

Copyright © 2010 IDG Communications, Inc.

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