Anticipate risks from IT supplier mergers

Corporate IT users will inevitably be concerned when faced with IT supplier consolidation. They need to develop strategies to...

Corporate IT users will inevitably be concerned when faced with IT supplier consolidation. They need to develop strategies to mitigate potential risk, according to Philip Carnelley, research director at analysts Ovum Holway.

"Much depends on the reason for the merger and how it is carried out - this can vary hugely," he said. In cases such as the Oracle/ PeopleSoft merger, Oracle wanted to buy the user base and convert it to its existing products. "That can lead to disruption and cost for the user," said Carnelley.

"However, in the long term it could be better because the new owner may have more money for product development."

Acquisitions can also help users when a large company acquires a product with a limited lifespan and offers a new upgrade path. "This is what happened when Oracle bought RDB from Digital," said Carnelley.

It also occurred when SSA Global bought Baan from Invensys, he added. Baan customers were upset at not knowing what was happening to the product when Invensys was in charge. User confidence returned as the new owner SSA outlined a clear product roadmap, he said.

Carnelley advised users to develop a strategy for mitigating the risks posed by supplier mergers. "Some of our smarter clients have a portfolio-balancing approach to minimise the risk posed by takeovers. You want to be with a big player, but you also do not want to have all your eggs in one basket - you have to balance these factors," he said.

Users should not be deterred from their IT strategies by fear of supplier mergers, said Lee Geishecker, research vice-president at Gartner. "IT departments should anticipate what is going to happen and remember that mergers among suppliers are not always bad. Always have the flexibility within your infrastructure to absorb changes," he said.

With big IT companies striving to consolidate their position with more takeovers, corporate IT departments may be foolhardy to ignore this advice in coming years.

Read more on Business applications

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close