Three IT deals that matter

As technology specialists merge, enterprises should benefit from creative new products for collaboration, virtualization and data center automation

Technology mergers and acquisitions have soared since 2002, with buyers worldwide spending $1.2 trillion to acquire nearly 14,000 companies in hardware, software and telecommunications, according to The 451 Group  and its mergers and acquisitions KnowledgeBase, a database of technology deals. Technology and telecom acquisitions in 2006 totaled $409 billion — more than similar deals of 2002, 2003 and 2004 combined. In the first quarter this year, 20 deals exceeded $1 billion, while just 10 did so in last year’s first quarter. But the most significant deals aren’t necessarily the most expensive. Here are three technology mergers whose resulting products promise to have lasting influence in the enterprise.

Who bought what: Cisco nabs WebEx
When: Announced March 15; closed May 25
Value: $3.2 billion

Business plan: Cisco has kept WebEx’s management team, led by CEO Subrah Iyar, intact while making the acquired company the centerpiece of its collaborative software group. The WebEx team reports to Don Proctor, a Cisco senior vice president.

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Technology mergers and acquisitions have soared since 2002, with buyers worldwide spending $1.2 trillion to acquire nearly 14,000 companies in hardware, software and telecommunications, according to The 451 Group  and its mergers and acquisitions KnowledgeBase, a database of technology deals. Technology and telecom acquisitions in 2006 totaled $409 billion — more than similar deals of 2002, 2003 and 2004 combined. In the first quarter this year, 20 deals exceeded $1 billion, while just 10 did so in last year’s first quarter. But the most significant deals aren’t necessarily the most expensive. Here are three technology mergers whose resulting products promise to have lasting influence in the enterprise.

Who bought what: Cisco nabs WebEx
When: Announced March 15; closed May 25
Value: $3.2 billion

Business plan: Cisco has kept WebEx’s management team, led by CEO Subrah Iyar, intact while making the acquired company the centerpiece of its collaborative software group. The WebEx team reports to Don Proctor, a Cisco senior vice president.

Cisco is intent on making WebEx’s hosted collaboration services, including Web conferences and video conferences, integral parts of Cisco’s unified communications strategy. Through the integration of WebEx meetings and IP phones, for example, users now can launch a WebEx meeting on a PC simply by clicking a button their Cisco IP phones. More integration is planned in the coming months, but WebEx users can still access the Web-based services even if they don’t have Cisco devices.

Why this IT deal matters: Cisco is now a hosted applications service provider for the first time. The move shores up Cisco’s competitive position against Microsoft and its Live Meeting product, with WebEx holding 64% of the Web conferencing service market, says Claire Schooley, an analyst with Forrester Research. Cisco gains access to small and midsize businesses through WebEx, while conversely the acquisition gives WebEx inroads into larger markets, she adds.

Behind the scenes, Cisco is integrating WebEx with its unified communications products, from instant messaging and IP phones to the TelePresence video conferencing service. “Cisco is working on making it seamless to go from one kind of collaboration to another,” Schooley says.

Some WebEx customers welcomed the acquisition, saying it would spur more innovation.  But Cisco must be careful not to disrupt WebEx’s large customer base. Too much integration with Cisco products will “start limiting [WebEx] and Microsoft meeting will just jump right in the middle and take over,” says Ken Cooper, president of the Dallas/Fort Worth Cisco Users Group and a WebEx user.