Company mergers: what effect on future strategies?
As companies merge and brand loyalty fades, the main factors that will influence cash flow are relationships with customers and suppliers.
One in two of IT companies that have a household brand name will no longer exist in their present form in three years time, according to Gartner's chairman and CEO, Michael Fleisher. He predicts that the recent merger of Hewlett-Packard and Compaq is the first of many large acquisition agreements.
In addition to the effects of integration and the 'streamlining' of processes and products, mergers and take-overs must clearly have a significant effect on brand loyalty. Those of us who are old enough to remember the fierce loyalty that motorists felt for their favourite marque of motor car in the 1950s will also remember how quickly that loyalty evaporated as marque after marque disappeared, to become simply another badge on a characterless (even if it was sometimes better!) new model. One big, happy family is not always best! Choosing a new car become an intellectual exercise rather than an emotional one. And many years of carefully nurtured loyalty was lost.
Partners too But the mergers may well do more than simply upset brand-loyal customers. According to Fleisher, CEOs and CIOs will need to anticipate incredible consolidation, both in their own industries as well as in their suppliers. "Your most trusted partner may suddenly be subsumed by another company that you chose not to do business with", he suggested.
Focus on relationships Fleisher emphasised that the need for business leaders to understand how their companies generate revenue and cash flow will become critical, and that the only points at which cash flow will be able to be influenced will be the relationships that a business has with its customers and suppliers. For this reason he advised CIOs to focus all of their strategy on using IT to improve the relationship with their customers. He urged them to delegate all non-strategic business processes and devote all of their intellect and horsepower to strategic business issues.
Fleisher was speaking to more than 6,000 IT professionals at the opening of the Gartner Symposium/ITxpo 2001 in Orlando, Florida, this week.
For more details of what was said at the symposium, see www.gartner.com/symposium