The Race to Acquire Innovation: Who Will Come out on Top in the Tech Sector

M&A activity has been on the rise across industries as companies seek advantages that will help them stand out from their competition. With enterprise spending accounting for more than 80% of software industry revenues, companies in that sector have struggled with lower sales in mature markets while emerging markets have helped to sustain them. As companies in emerging markets continue to grow, demand for computers, software and operating systems is increasing.

There is already a high level of outsourcing taking place in this sector – 43% of Software & Services companies currently have outsourcing arrangements, according to the TPI Momentum Market Trends & Insights Vertical Industry Report. The Technology Hardware & Equipment industry, which has been equally squeezed by cost-cutting and deferred investments and is watching as desktop computers lose ground to mobile devices with wireless connectivity, also has a 43% outsourcing rate.

To combat these factors, technology companies are actively pursuing acquisitions as a part of their strategies for growth. News this past week that H-P outbid rival Dell for 3PAR is the most recent example of Silicon Valley’s M&A push. As these companies chase the promise of cloud computing service delivery, beef up virtualization capabilities like SaaS, and take leaps into the mobile device space, there will be an additional need to buy up capabilities to expand their offerings to large enterprises. A recent PriceWaterhouseCoopers report on M&A in the technology sector found that there were more deals in the second quarter of 2010 than the previous quarter and the same period in 2009.

It will be interesting to see what steps software and hardware companies will take to stand out from their competition especially as anticipation of new, more innovative products and services grows and enterprises increasingly incorporate

cloud computing and other innovations into their conversations about IT. But for the sourcing industry, the more important question is what impact all of this M&A will have on the tech sector’s historically strong propensity to outsource its IT operations and business processes.

Want to learn more? You can purchase the Software & Services or Technology Hardware & Equipment chapters of the TPI Momentum Market Trends & Insights Vertical Industries Report individually. Contact Paul Reynolds at paul.reynolds@tpi.net for details.

About the author

Paul Reynolds leads Momentum, a division of ISG that provides research services to help service providers better target, win and retain business. Paul has 25 years of market research experience with specific expertise in methodology development, data analytics and research process design. Having found many service providers’ Advisor Relations functions to lack appropriate analytics, Paul is working to develop innovative new approaches that allow for data-driven programs based on the unique needs of each client. His approach benefits Advisor Relations, go-to-market functions, sales, strategy, marketing, and market/competitive intelligence teams.