Does Europe need a new IT champion?

The UK and Europe has for a long time beaten itself up about the dominance of US IT suppliers in the global market.

It’s true that if you look at the top 10 lists in most sectors of the industry, they are dominated by the big players from across the pond. With a few notable exceptions – SAP, BT, perhaps Sage – few European firms have achieved a seat at the very top tables in global IT. Meanwhile, Indian and Far East companies are catching up and even overtaking their “old world” counterparts.

So when the CEO of Germany’s leading IT services provider, T-Systems, calls for an increase in European mergers and acquisitions (M&A) to better compete with the US, it’s a sign that all is not as well as it should be.

Certainly the top US firms have been busy buying up emerging or stuttering rivals over the past few years – HP and EDS, Oracle and Sun Microsystems; IBM and Cognos – plus many smaller firms you would barely have heard about.

M&A is increasingly seen as an alternative to research and development – let someone else do the work, and buy them up when the product is ready. But there’s little doubt it is also a land grab and each of those three frequent buyers all have sizeable war chests for further purchases – see here, for example, for a view on some of Oracle’s options.

The future shape of the IT industry will be a small number of enormous global players, plus a wide range of smaller, specialist, niche firms, with little in between.

So what is Europe’s role in all this? There has to be a danger that it is seen as acquisition fodder. UK firms in all sectors, not just technology, are disappearing into the wealthy arms of US and Asian giants. We have the people, the skills and the innovation, but lack the influence that comes from a champion to represent us on a global stage.

A merged European IT giant would be a positive step, but it is hard to see how it will happen.

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