Tech Divestitures: 2013 Trend May Be Multiplying By Dividing
A report by PricewaterhouseCoopers (PwC) suggest that tech divestitures could be a major industry trend in 2013. This trend may be driven by a variety of factors, some incidental to the tech industry ecosystem, others integral to it.
The divestiture trend promises to be good news for IT at midsize firms. Technology solutions and services will be offered by a larger number of vendors. (Many new vendors will themselves be midsize firms). IT managers could face some challenging choices, as formerly bundled options become available on an a la carte basis.
As Chris Kanaracus reports at Computerworld, a recent PwC report found that about 75 percent of Fortune 1000 tech companies are thinking about spinning off parts of their operations. According to the report, "PwC has witnessed an increase in client discussions related to divestiture planning."
Several underlying factors are prompting interest in tech divestitures. Financial and regulatory factors are among them, and are unrelated to technology as such. Other factors, however, are tied to the tech industry ecosystem and the dynamics of technology progress.
One idiopathic reason is that the tech industry has seen a long period of consolidation. As a result, says the PwC report, "This period of inorganic growth and expansion has masked the need for systematic reassessment of products and services of acquired companies."
The Limits of Integration
Putting it another way, creative executives are always looking for potential synergies and opportunities to build an integrated basket of offerings. In practice, however, broad synergies and complete under-one-roof ecosystems are difficult to achieve. Thus, many large vendors are again looking to focus on core competencies. This means unloading operations that have turned out not to mesh well with those core competencies.
The dynamic of integration versus ecological variety has played itself out many times in the tech world. ("Walled gardens" versus the open web is another expression of this dynamic.) As in that case, midsize firms generally benefit from a more diversified, less controlled ecosystem. Therefore, that the IT community at midsize firms has much reason to welcome an industry trend toward divestiture. Such a trend will mean more independent options from which to choose and consequently, less risk of heavy-handed dominance by individual large vendors.
For IT managers at midsize firms, having more choices does come with a cost: More choices have to be made, meaning an increased load of evaluation. All the same, this is a task that promises greater efficiency down the road.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. Like us on Facebook. Follow us on Twitter.