The joys of integration

Dell are going to buy Wyse.

If you don’t know anything about the IT industry, think large lumbering corporate giant that does all sorts of things, buying small, nimble, focused company that does one thing very well.

On paper it all looks great – small, nimble company brings cool technology to lumbering giant, lumbering giant able to offer a more complete solution offering under one roof to customers.

So far so good.

In my experience of technology acquisitions, here’s what actually happens. This experience comes from watching how Sun behaved, how Oracle behaved and from observing how other companies have fared.

The best people at many companies work there out of choice. There’s another layer underneath that have some choice in terms of where they work, with a layer below who are lucky to have a job and can’t jump ship easily – or can’t jump ship due to family commitments, obligations to stay in the same location, etc.

Here’s how things unfold.

The majority of people who work at small, nimble, focused companies tend to be there because they don’t want to be part of lumbering corporate giants. They leave.

Once the integration begins, staff who are used to being free to make decisions and go their own way, start to get suffocated as they are forced to use a new set of processes, expense tools, etc, rather than focus on what matters. They leave, or become ineffective.

Staff who are used to following up on projects and deals using their own knowledge and expertise are suddenly overwhelmed with millions of unqualified opportunities coming from all over the place, sucking up time and delivering very little revenue. Nothing they do makes anyone happy. They leave or become ineffective.

Managers who were in senior positions and who could make a difference become irrelevant contributors whose revenue numbers aren’t big enough to feature on anyone’s radar. They leave or become ineffective.

Key ‘informal contributors’ lose their jobs, as no-one needs two finance departments, two sets of receptionists, etc, thus killing the office atmosphere and creating a sense of resentment. By ‘informal contributors’ I mean people who might not be directly responsible for ‘busting the number’ but who keep an office together. Think ladies (and they often are, in my experience) who always remember whose birthday it is and get cake, who help people out during tough times or emotional moments and generally provide human support that can’t be measured in dollars. When they leave, that indefinable something that made the company a nice place to work at disappears. More people leave or become ineffective.

The small, nimble, focused company typically has various alliances with various vendors, resellers and customers. The acquisition means a period of turbulence during which vendors, resellers and customers experience periods of negotiations, uncertainty and so on. Whilst lumbering corporate giant issues statements proclaiming ‘cohesive synergies’ no-one buys anything, and top performing people whose pay is linked to financial results aren’t able to earn money, through no fault of their own, so they feel resentful and look elsewhere. More people leave or become ineffective.

The lumbering corporate giant essentially ends up with with some source code and design documents (think a blue-print for a house but no-one who knows how the house was designed or how to actually build it) as well as a demoralised workforce missing its star performers.

Cue mediocre performance, the death of a great brand and legacy and a less than stellar return on investment. The results are the husk of a company and a bit of human spirit crushed under a mound of press releases.

This all sounds very negative. Perhaps this acquisition will be a successful one. The point I am making is that this sort of thing is incredibly difficult to do in a way that delivers good business related results. It will be very interesting to see how Dell handle things. My experience is that big IT companies need to do this better.

My view, from my position of ignorance here in the corner of the business world, is that the best way to benefit from these sorts of acquisitions is to begin with an ‘arm’s length integration’. Own the company, but leave them independence and let them keep their brand – you might have two sets of receptionists, but the acquired company has investment and capital to give confidence to customers and you have advice to give your newly acquired ‘cousin’. Keep things at an arm’s length so that you can leverage existing agreements and partnerships and don’t scare people off through too close an association with your brand, or by introducing disruption, change and uncertainty. The EMC and VMware model springs to mind.

I know people who work at Wyse and at Dell, covering the same solutions and product set. I wish them all the best and hope that my dire predictions above get proved wrong!

5 Responses to “The joys of integration”

  1. Rony Jreish Says:

    Man of experience

  2. Art Peck Says:

    Wow. You hit that nail squarely on the head! I went through two acquisitions, neither of which was done very well.

    The real scary part of this is if Dell can figure out what how to leverage the Wyse brand they could be a formidable competitor in the thin/zero client space. Time will tell.

  3. Grassblade Says:

    Dell have had a long standing business relationship with Wyse for many years and were even Wyse’ largest reseller in certain territories. The business leaders understand the way each company works very well.

    Nice perspective Chris, but it is up to those employees that are willing to step up at times like this to become a key contributor in a larger organisation.

    I am looking forward to seeing the bigger R&D and Solutions Centre team build some new fantastic client technology. Continuing to drive down the cost of computing šŸ™‚

  4. Dirk Pitt Says:

    Touche’, Chris. Nicely done. Hard not to see this happening though. Dell is the last company @ the TC table. Dell’s efforts over the last 2 years to produce a TC have produced unremarkable results.

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