Customers question tech industry’s takeover spree

One of the most famous was Compaq Computer’s 1998 takeover of computing pioneer Digital Equipment Corp., known as DEC. Like many frustrated DEC customers, Robert Rosen, who at the time was director of information management for the Army Research Laboratory, bailed on DEC because the company’s performance deteriorated under Compaq. The lab replaced its DEC servers with machines from IBM and Sun Microsystems.

Rosen, now chief information officer of the National Institute of Arthritis and Musculoskeletal and Skin Diseases of the National Institutes of Health, told the Associated Press (AP) he learned to try to pick computing suppliers that aren’t likely to be acquired.

“I sit here and I think: What mergers have really benefited everybody, both the companies and the customers? And there aren’t a whole lot. There are a lot more that go bad than are successful,” said Rosen, a former president of Share Inc., an organization of IBM customers. “I have never seen a merger that saves the customer money.”

IBM and several other large, acquiring companies declined to comment or connect an AP reporter with customers who are happy about the industry’s consolidation.

Hewlett-Packard, which also declined to comment, referred the AP to one customer, Christopher Rence, chief information officer of Fair Isaac Corp. That is the company behind the “FICO” consumer credit scores, and it often relies on tech suppliers for custom software that can help Fair Isaac accomplish specific tasks.

Rence says most acquisitions among his suppliers have worked out for his company. Still, he worries that consolidation leaves him with less negotiating leverage. He also says he and other tech buyers he knows worry about “getting hit out of left field” by an acquiring company eliminating product lines.

“When they consolidate, you’re always going to lose something—that’s just reality,” he told the AP. “But I guess I look at it as: When a big company acquires something, they’ve got the pockets to go invest in some of those areas and whatever they invest in, it’s definitely going to benefit me.”

Resigned to the idea that the industry is consolidating, many tech buyers try to plan accordingly.

Leo Collins, chief information officer of Lions Gate Entertainment, told the AP that smart tech buyers look for suppliers that are the likeliest to stick around over the long haul. If a supplier starts to struggle, he tries to move away from it before it is bought, which reduces the risk of being stuck with outdated or unsupported technologies.

Failure to do that, he says, could leave a customer “isolated in technology backwaters.”

What are your thoughts on technology industry mergers and acquisitions? Do they help, or hurt, customers in the long run? What has been your experience with tech companies that have merged? Share your thoughts in the comments section below.

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