Blackboard on July 7 announced plans to buy Elluminate and Wimba, both of which support online learning.

Blackboard on July 7 announced plans to buy Elluminate and Wimba, both of which support online learning.

The world’s largest technology companies have been on a buying spree, spending billions of dollars to snap up smaller companies. And often the buyers say they’re doing it for their customers—businesses, hospitals, government agencies, and schools.

As tech companies get bigger and bigger, they say, they can offer a broader variety of products and make it easier for their customers to do one-stop shopping.

Yet if you ask the customers, you hear a different story. Often they get new headaches with multibillion-dollar deals by the likes of Oracle, IBM, SAP, Dell, and Hewlett-Packard. When you add the challenges that come with any corporate acquisition, it’s not hard to envision a reverse trend eventually building: a drive to split up tech companies that have grown too large.

In other words, the tech consolidation of the past few years could turn out to have wasted shareholders’ money.

“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.”

Technology companies have spent more than $350 billion buying other companies worldwide over the past three-and-a-half years, according to Capital IQ, a division of Standard & Poor’s.

Hewlett-Packard Co., the world’s biggest information-technology company by revenue, has been one of the most active, in a hunt for more profit in markets other than printer ink. So has Oracle Corp., which wants to sell more types of business software and now makes computer servers after its $7 billion pickup of Sun Microsystems Inc. IBM Corp. plans to drop $20 billion over the next five years on acquisitions to strengthen its services and software divisions.

Even the education-technology field has experienced a number of high-profile mergers and acquisitions, most notably involving learning management system (LMS) provider Blackboard Inc. In the latest of these deals, Blackboard on July 7 announced plans to buy Elluminate, based in Calgary, and Wimba, based in New York, both of which support online learning and collaboration through the use of web and video conferencing software. The deals would be worth a combined $116 million if approved by the boards of both companies.

Blackboard’s announcement marks the latest in a string of acquisitions for the Washington, D.C.-based company. In the last few years, Blackboard also has snatched up rivals WebCT and Angel Learning, among other companies.

In a six-page fact sheet about the deals, Blackboard said it would continue to support the products of both Elluminate and Wimba, including their compatibility with other LMS software. “We’ll honor all existing contracts for Elluminate and Wimba clients,” the company added. Employees from the two companies will be part of a new Blackboard division called Blackboard Collaborate, to be headed by Elluminate’s current president, Maurice Heiblum.

As with other technology companies involved in acquisitions, Blackboard says it wants to give customers more options, better prices, and smarter service. It’s somewhat like buying internet, cable TV, and telephone service from one company instead of three: You’ll save money by buying the bundle, and when you need things fixed you have only “one throat to choke,” in tech-industry parlance.

The flip side is that a customer accustomed to dealing with a specialty maker of software or hardware often gets worse service after that supplier is taken over.

“I’ve been dealing with the effects of these types of acquisitions for almost 30 years,” Jim Hirsch, associate superintendent for technology at the Plano Independent School District in Texas, told eSchool News. “In almost every case, the acquisition has resulted in a more convoluted communication path, translating into poorer service for the end user, and a slower path of feature upgrades for the acquired property. On occasion, the product simply disappears, and the proposed upgrade path to the alternative product leaves little room for other considerations.”

Hirsch continued: “While the idea that greater scale brings greater efficiencies is widely held, the reality is that the products usually see slower development cycles and the service level declines with the acquisition. Companies acquire to eliminate competition or to move into areas of business they don’t currently service—neither of which promises to improve the customer experience.”

He concluded: “Given time, the results do often provide more resources, such as Discovery Education’s purchase of United Streaming, where the library of videos [was] greatly expanded—but the loss of a single point of contact for support, coupled with increasing costs and a lack of competitive choices, may not balance the equation for schools.”

Tech acquisitions aren’t the only ones that often go bad. A seminal study by Harvard Business School professor Michael Porter examined 33 large U.S. corporations over a 36-year period and found that that they sold off many more acquisitions than they kept. Companies with acquisition strategies reduced, instead of created, shareholder value. Porter’s findings were first published in 1987, but recent studies have reinforced the conclusion.

Deals in technology can be even riskier than average, because of the complexity of the industry’s products. Although acquisitions can offer short-term financial boosts for the buyer, technology ages quickly, and acquired companies require substantial investment to keep their edge.

“When technology companies merge, you often have a two-plus-two-equals-three equation,” says Michael Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management.

Undoing the poor results can be costly. VeriSign Inc. spent more than $20 billion bulking up on acquisitions in a spree that started during the dot-com days. The internet technology company got too unwieldy, and it has spent the last three years selling most of what it bought. VeriSign has gotten less than $1 billion selling off such acquisitions.

It can take years for an acquired tech company to be fully integrated with its buyer, which is one reason history is peppered with examples of acquisition flameouts that repelled customers.