Stay or Go? Navigating Tech Investment Decisions Amid Never-Ending M&A Activity

Regardless of the business climate at any given moment, merger and acquisition (M&A) activity generally continues unabated. In the past year across the cloud/FinOps landscape alone, we've seen IBM's acquisition of Apptio for $4.6 billion, HP's acquisition of OpsRamp for an undisclosed amount, and most recently, Broadcom's acquisition of VMware for roughly $61 billion. These deals are often sweet for shareholders, but they can be far murkier for the enterprises that rely on the acquired companies for essential products and strategic services. Acquisitions send ripples through the tech industry, leaving ecosystem players with myriad questions about their future and seeking clarity on how to navigate the evolving landscape.

In a business landscape constantly in flux, enterprises need to embrace adaptability, proactive thinking, and strategic planning. They need to wager on which vendors and partners will have staying power and will do right by them. Oftentimes, these are big bets.

So how should enterprise leaders decide how to proceed when their partner or their vendor has been acquired? Here's a framework for systematically grappling with the challenging decision of whether to continue with a vendor post-acquisition or switch to a new provider.

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1. Understand the New Dynamics

The first step in navigating uncertainty is gaining a comprehensive understanding of the new landscape and business dynamics, which typically introduce shifts in product roadmaps, support structures, and partner programs. Enterprises must seek clarity by pressing their partner or vendor for frequent updates about the changes and their potential impact on existing infrastructures and operations.

Transparency is essential, as is receiving assurance that they have the proper support staff in place to ease the transition. If the new entity can't provide that clarity quickly, that might be an indicator that your organization is not going to be a priority for them.

2. Consider Vendor Size

The next consideration is whether the advantages of size outweigh the advantages of personalized attention. When the acquisition ends up creating or adding to a mega vendor, there can be advantages to staying with the new entity:

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However, in many cases, it may make more sense to turn to a smaller, dedicated, more nimble vendor that can be more adaptable to your organization's specific needs:

The choice between a smaller provider and a mega provider depends on the specific needs, priorities, and resources of your organization. Even if the above doesn't clarify the decision for you, there are other important considerations to take into account.

3. Build a Strategy Around Diversified Vendors Committed to Interoperability

As the tech industry undergoes major transformations, there can be advantages to diversifying vendor relationships and investments. Relying on only a single provider or even just a few may leave an enterprise vulnerable to disruptions caused by further acquisitions or other market shifts.

The best way to future-proof your organization against vulnerability to further marketplace disruption is to align with vendors that are committed to full interoperability. Today's cloud tech stacks comprise numerous tools, services, and applications that must work together seamlessly to manage all business operations. While mega providers may offer a one-stop shop for all components in your stack, if these components aren't fully modular and interoperable, your organization runs the risk of getting locked into paying for and/or using tools and services you don't want or need. Aligning with vendors that swear by a composable approach — open, interoperable, and replaceable — will ensure your organization has access to the most relevant solutions that are custom-fit to your organization's current needs (inclusive of your homegrown proprietary solutions) and changeable when your needs evolve.

When evaluating vendors, listen carefully for clues to indicate which vendors are in the ecosystem for the long haul as opposed to looking for a quick exit:

These insights can paint a pretty clear picture of your vendor's staying power. If the vendor works with a number of government agencies and are deeply integrated in the public sector, for example, chances are they're here for the long haul and will continue to build innovative solutions.

4. Assess Likely Impact on Operations

If your organization is considering staying with the acquired vendor, perform a thorough assessment of the acquisition's potential impact on your organization's operations. Be sure to assess the compatibility of the new management, structure, playbook, roadmap, etc., to identify likely gaps. If any gaps are identified, be sure the vendor has a formal process in place to address any issues.

Furthermore, seek to fully understand the financial impacts to your organization of continuing with the acquired vendor. Oftentimes, new pricing structures, models, thresholds, packages, and payment term nuances can disrupt if not blow up the previous economics of working with the vendor. Know exactly what you are buying and the total cost of ownership. Assume or presume nothing. Proactive and thorough thinking will help prepare your organization for any challenges or disruptions that arise from the acquisition.

5. Ensure Effective Communication During Whatever Path You Decide to Take

The final consideration here may be last on this list, but it shouldn't be last on your priority list. Make sure you thoroughly communicate with your internal teams, especially the most affected departments. External change to a trusted vendor or partner can have significant effects on your organization's personnel. Engage your internal communications team to effectively articulate how your organization is responding to your vendor's or partner's acquisition. The last thing your organization wants is to experience a high degree of turnover or burnout among the teams that are on the front lines of working with the vendor or partner.

Navigating the ever-evolving landscape of tech investment decisions amidst ongoing M&A activity requires a strategic approach grounded in adaptability, foresight, and clear communication. It also demands that you dispassionately read the tea leaves and act upon what you see accordingly. Enterprises must diligently assess the new dynamics introduced by acquisitions, carefully weighing the advantages of partnering with mega vendors against the benefits of personalized attention from smaller providers. By following this five-step guide, enterprise IT decision-makers can navigate the complexities of tech investment decisions with confidence and resilience in the face of ongoing industry shifts.

Craig Hinkley is CEO of CloudBolt Software.