By 2022, the total number of tech deals will exceed the high water mark set by merger and acquisition (M&A) activity in 2018, according to a Gartner forecast released Monday. Despite a slowdown in the first half of 2020, total transaction value grew 28% year over year.
Service provider consolidation is one trend driving up M&A activity, according to Max Azaham, senior research director at Gartner. And in services and software markets where high degrees of overlap exist, consolidation rose by 65% and 40%, respectively, in the second half of 2020.
As providers further consolidate, executives are "going to have fewer providers to choose from," said Azaham. "Unfortunately, as a CIO, that's one trend to probably be prepared for."
When technology vendors merge or are acquired, customers want a clean hand-off and minimal disruption. Communication and customer service are two key points of contention.
Communication can help vendors and CIOs see eye to eye as the merger or acquisition unfolds. Azaham recommends companies involved in M&A take the time to explain:
The merger timeline
What's going to happen in terms of product capabilities.
Assurances the vendors will not neglect or overlook customers during the transaction.
As vendors consolidate, executive customers are concerned about whether or not service level agreements (SLAs) are carried forward after the transaction, said Heath Thompson, president and GM of the Information Systems Management business at Quest Software.
"In other words, if there was a strong GDPR policy in place for the acquired company, you would want to make sure that was at least as good on the acquiring company," Thompson said.
For some areas of technology, consolidation means companies are forced to accept the pricing and packaging offered by the players in the field. But "you'll only see that in very few markets, where the market concentration is very high," such as the cloud provider market, said Azaham.
Ensuring customer experience isn't impacted by the deal will help vendors with retention, Azaham said.
"That means having to plan ahead of time, not just after the deal is done," Azaham said. "Just merging with another provider and adding capabilities is not sufficient if customer experience isn't positive.