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CIO Jury: M&As bad for innovation and competition

Tech industry consolidation delivers little value to IT buyers

The current wave of consolidation in the tech industry is bad for innovation and competition and rarely leads to the promised price cuts for customers, according to leading IT buyers.

Technology merger and acquisitions (M&As) have reached an all-time high during the first half of this year but two-thirds of silicon.com's 12-strong CIO Jury IT user panel said this is not a positive trend for IT buyers and users.

One of the key negatives from consolidation among IT suppliers is less innovation in products, according to many of the CIO Jury.

Peter Birley, IT director at law firm Browne Jacobson, said: "I believe there is a risk to the entrepreneurial development of a product as the agenda changes after consolidation to one of economies of scale and cross selling opportunities."

Phil Young, head of IT operations at Amtrak Express Parcels, said: "M&A in these sectors gives rise to my concerns over market domination and saturation that will then push to one side creative companies who are unable to compete due to the domination strategies of these large corporates."

One of the promises of M&As is often that of cost savings from 'synergies' that can be passed on to the customer but Russell Altendorff, IT director at the London Business School, disagreed.

He said: "Consolidation should push costs down as a result of scale but it doesn't. It increases marketing spend to support monopoly practices and power."

Ted Woodhouse, director of IT strategy at Leeds Teaching Hospitals NHS Trust, said: "My experience is that anything that reduces competition is, by and large, bad for the customer. It may take years but that's the result. Which is, of course, from the suppliers' point of view, one reason why M&As are happening."

But not everyone agreed. Luke Mellors, IT director at hotel reservation company Expotel, said consolidation can be a good thing and a bad thing.

He said: "Where two companies such as ATI and AMD come together consumers will greatly benefit because of increased competition with Intel and the innovation this breeds."

John Odell, group IT director at the BBA Group, added: "For us, we now negotiate with one large player who has a business model that helps us, reduces our upgrade costs and cuts our management efforts."

Mark Devine, IT director at ACCA, said that it is market forces that are responsible for software industry consolidation.

"As purchasers of goods and services we demand product suites and keen pricing. We are therefore partly responsible for suppliers buying market share, expanding their product portfolio, consolidating their back-office functions and offshoring production to Asia."

But Paul Broome, IT director at 192.com, disagreed. He said: "We do not want to return to the complacent computing days when suppliers were IBM, NCR and Unisys. It took DEC to break up the ancient computer world with its PDP and VAX systems and offering sophisticated systems in economic packages."

Today's CIO Jury was...

Russell Altendorff, IT director, London Business School
Alastair Behenna, CIO, Harvey Nash
Peter Birley, IT director, Browne Jacobson
Chris Broad, head of IS&T, UK Atomic Energy Authority
Paul Broome, IT director at 192.com
Mark Devine, IT director, ACCA
Luke Mellors, IT director, Expotel
Colin Moore, head of IS, Department for Education and Skills
Rob Neil, head of ICT and customer service, Ashford Borough Council
John Odell, group IT director, BBA Group
Ted Woodhouse, director of IT strategy, Leeds Teaching Hospitals NHS Trust
Phil Young, head of IT operations, Amtrak Express Parcels

If you are a CIO, IT director or equivalent at a large or small company in the private or public sector and you want to be part of silicon.com's CIO Jury pool, or you know an IT chief who should be, then drop us a line at editorial@silicon.com

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