Merger mania

This hasn’t gone unnoticed by IT managers, who, although they’ve come to expect that mergers and acquisitions are a fact of life, have to plan for higher costs after a vendor gets acquired.

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“In our experience, the acquired vendor gets more expensive after the acquisition,” says Emery, at Horizon Blue Cross Blue Shield. “It’s really supply and demand. If there are fewer suppliers, the remaining vendor can raise prices until a new vendor enters the market. The vendor’s excuse is usually that they are supporting multiple legacy systems from the acquired vendor, and maybe that’s true and raises their cost, but ultimately, they acquired another vendor for synergies. It’s tough to have both.”

On the other hand, when a large vendor that’s flush with cash absorbs a small technology provider, it can refresh a product’s allocation of R&D expenditures and alleviate the pressure to keep its revenue in the black, says Cooper, at The American National Red Cross.

“In some cases, I really don’t care if one of my vendors gets acquired. The acquiring company will often sustain financial stability because they can take their focus off Wall Street and earnings report pressures. We’re better off as a customer when the company focuses on sustaining its relationship with us,” Cooper says.

Not all bad
Despite the potential downside, in some cases an acquisition may have the opposite effect -- and improve both support and pricing. At CareGroup Healthcare System, users had to weather a series of acquisitions, most recently the merger between Veritas and Symantec. This occurred after Veritas had already acquired Precise Software Solutions for its i3 application performance management product, as well as e-mail archiving firm Kvault Software (KVS) -- moves that left users of those products dissatisfied, says Robert Messier, director of technology management at CareGroup.

“The Veritas/i3/KVS/Symantec saga has been interesting. The i3 folks and KVS folks were not happy with the Veritas acquisition of their companies. Nonetheless, we have found those acquisitions to work in our favor. We have been better able to leverage our Veritas relationship for more favorable pricing and more specific attention to support special, critical projects,” says Messier. “Symantec’s acquisition of Veritas, so far, seems positive. I sense that Symantec senior management is more focused on growth and quality versus Veritas’s recent focus on cost reduction.”

Elsewhere, shrinking vendor relationships simplify IT planning. With $30 million worth of Oracle software, including databases and applications, and another $10 million invested in Siebel products for 3,500 users, Barry Libenson, chief information officer at Ingersoll-Rand, says there are some upsides to the acquisition.

“There’s a whole benefit for us in that Oracle will take on some work that I had to do. The smaller I can keep my vendor list, the better. This is one less vendor that I have to deal with. The more that gets consolidated down, contracts for everything from procurement to maintenance are easier,” Libenson says.

It might pay to hang on to that glass-half-full view. Consolidation, particularly in enterprise software, seems sure to continue. And in most cases, enterprise customers are just going to have to roll with it.