Consolidation is happening at every layer of the IT industry but integration seems to be a hotbed in the local market just now. ARN asked a selection of leading lights about what was fuelling this trend (see page 1 of the September 20 edition of ARN Magazine).
Historically, the main reasons have been improving geographic reach and scale of operations. One or both of those ambitions are still very much in the equation most of the time but ComputerCorp, which has been one of the markets biggest shopaholics in recent times, cited skills acquisition as a motivator in recent deals.
There is no doubt many in the services game are struggling to build the internal skill sets they would like. Sales folk that can effectively communicate the business value of a particular implementation, and engineers that deliver their promises, are in short supply. That is to be expected as a growing proportion of channel players position themselves as service providers.
As with the supply and demand of any commodity, a shortfall has led to inflated wages for those at the top of their game. Good news for those people but a real headache for those sitting on the other side of the hiring fence.
So is it a good strategy to fill these holes by whipping out the chequebook? In theory the answer is almost certainly 'yes'. It isn't hard to identify other players in the market that should add value to your current proposition. And every business is up for sale, if the price is right.
But reality is fraught with perils. For a start, the sweetest fruit costs more than it is actually worth once growth projections have been factored into the equation. More importantly, these deals are obviously not about bricks and mortar. None of us has ever seen a building get up and walk away but, short of nailing them to their desks, there is nothing to stop people leaving if they are not as enthused by the buyout as their boss. If they do walk away, the acquisition suddenly becomes about as much use as an ashtray on the back of a motorbike.
In other news, Optima's latest financial results make pretty gloomy reading for anybody in the business of selling unbranded PCs (see page 1 of the September 20 edition of ARN Magazine). When the largest home-grown builder sees its revenues fall by 25 per cent, the market is sending a clear message that a growing majority of users prefer big brands.
A stoical managing director, Cornel Ung, blamed a rapid decline in average selling prices and aggressive competition from the multinationals for his company's poor performance. The bad news for everybody at Optima is that these challenging conditions are unlikely to change this year, next year or any time in the foreseeable future.
Ung pointed to recently signed ACT education and NSW RTA contracts as reasons for optimism but they are silver linings in a sky filled with black clouds. Optima will not necessarily go away any time soon but it is very difficult to see where it can find growth.