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Technology: Enterprise Software Consolidation Likely to Continue in 2008
2007 proved to be another year of consolidation. SAP acquired Business Objects. IBM got Cognos. Oracle got Hyperion. Cisco got WebEx. And this activity follows up large numbers of acquisitions that occurred in 2006 and 2005. It is shaping up to be a decade of consolidation.
What’s driving the consolidation? When organic growth is elusive or doesn’t occur at a quick enough pace, corporate acquisitions are often sought out to cure the problem. Cisco has purchased more than 100 companies over the last 20 years. Oracle has spent tens of billions of dollars on acquisitions over the last three years. Both are great examples, when done correctly, of how mergers can add fantastic value to the bottom line.
Unfortunately, Cisco and Oracle are more of an exception than the rule. Studies have actually shown that more than 70% of acquisitions fail to create any real value for the purchasing company, and half of the acquisitions are found to actually destroy value — buyer beware.
Neverthe less, the trend continues. The 451 group tracks mergers and acquisitions in the enterprise software space and sees the trend towards consolidation to continue in 2008. Nearly 85 percent of companies that have made acquisitions in 2007 said that they plan to continue in 2008 at the same or quicker pace. Half of those companies report bigger budgets for acquisitions in 2008. The total sum of all acquisitions from the companies in the survey totaled $150 billion dollars over five years with 500 companies being acquired.
2008 should be an interesting year.
