* Management industry mergers often don’t provide promised gains
By almost all forms of reckoning, the vast majority of mergers and acquisitions fail to reach their desired ends. Today I’d like to spend a little time looking at what’s likely to make sense and what’s not likely to make sense in terms of mergers and acquisitions for the network and systems management market.
The first and most obvious question to ask is, what constitutes success in M&A for network and systems management (NSM)? The presumed answer is something better than basic addition – in which there is a modest additive value and that’s it. Embarking on any M&A for minimal gains is just not worth it when the risks involved in integrating cultures, technologies, and customers too often result in an equation where even minimal additive value fails to materialize, and in more than a few cases, the entirety begins to shrink and sometimes crumble. Failures in NSM products abound – ranging from asset management to root-cause analysis to attempts to embrace service provider markets for enterprise products, to service-provider-centric products trying to build towards the enterprise. Most NSM failures result from one or more of the following:
* Traditional M&A problems across all markets – in which the two companies remain fundamentally incompatible. The result is that talent leaves, and customers jump ship. The acquiring company is left with dueling brands and a lot of overhead.
* Classic problems in network and systems management:
– A company with simple, easy-to-use software and minimal sales and services capabilities acquires a highly complex technology that cannot mature without strong growth in either in-company “feet on the street,” or an enlightened and improbably lucky channels strategy, or both.
– A company acquires another company primarily to expand its market footprint and customer base with minimal functional synergy and a less-than-zero plan for product integration. In some cases the synergy is actually there, but the company leadership fails to see it. For instance an asset management company focused on larger enterprises acquired a performance and root-cause company focused on mid-tier. There was long-term potential there, but it would have required visionary architectural and market leadership. The result was a lot of wheel spinning and ultimately implosion.
– A less drastic type of failure occurs when large companies acquire smaller companies with powerful enabling technologies, but then corporate politics and the “not-invented-here” syndrome intervenes, and the new technologies become isolated among a set of feuding kingdoms. The result is that, for instance, stunning new capabilities for problem resolution, or auto-discovery, or service visualization and business alignment, become siloed, marginalized offerings. Customers are then faced with costly accessories rather than next-generation innovation.
What’s exciting about the M&A activities in today’s NSM market is that these and other bad habits, once the norm, are gradually becoming superseded by a new focus on truly building more innovative, integrated, and well-designed systems. This is, of course, no guarantee of success. It’s the beginning of a long uphill climb, as disparate development, sales and marketing teams have to come together to learn to work together to face new and even more demanding challenges than they would have faced separately. But the upside – both for the NSM provider, and for the customer – is better performing, richer, and more adaptable management products.
