Mergers and the rush for services

Summary:Peter Judge: What's going to happen this year? One sure bet is some more mergers, as big companies try to buy their way into services.

It is safe to say that the year is now properly underway. As I write this, some of the biggest IT companies are preparing to release their quarterly results -- Apple, Intel, Yahoo! and Sun, for starters. My colleague Rupert Goodwins was off to the BBC on Wednesday night to predict (on World Business Report) what would happen, and then explain (frighteningly early on Thursday morning on BBC1 TV) what actually took place.

"How embarrassing can that be?" he chortles, as he leaps into a silver Mercedes, driven by a chauffeur who's clearly seen him many times before.

What will the results show? It's a safe bet they will not be good, but they won't be completely disastrous. No-one says anything except that this will be a flat year, with tech stocks staying at low prices, and vendors struggling to make any headway.

So what does this mean is going to happen this year?

In one word: mergers. Some vendors have cash piles built up during the boom times, while everyone's stock price is at an all-time low. If revenues are low in your home business area, now is the time to pick up a bargain.

But what partners will IT vendors be looking for? Many mergers will do the usual things -- eliminating a rival, or filling in gaps to create a broader supplier. If Sun merged with Fujitsu, for instance, that might create a stronger Sparc-based entity, although Scott McNealy wouldn't naturally buy that kind of merger. As a rugged individualist not much interested in what the rest of the industry thinks, he'd be more likely to pal up with Apple.

But there's a much bigger prospect for mergers this year, and it is to buy your way into new areas. And the biggest of these will surely be services. Not "Web services" -- though we can expect to see some activity continuing there. We are talking about plain old services: consultancy and outsourcing.

Services itself is expected to change, as consulting, systems integration and support become parts of the big "end-to-end" service provided by outsourcing. Or we should say "business process outsourcing" (BPO), the trendy new term that expresses the fact that services company want to take on not just the technology, but whole parts of business administration for their customers.

Topics: Tech Industry

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