|Indiana Jones and the Merger of Doom, Cont'd|
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Now, let's discuss how Indiana Jones fits into this picture.|
In the movie Indiana Jones and the Temple of Doom the quest was to find the three missing 'Sankara' stones. These stones had powers which were revered and protected by the people of a small village, and they were stolen by someone.
As our hero joins the quest and investigates the missing stones, he finds that not only has the small village suffered as a result of the theft but that all the children have also gone missing. He later learns about the Thuggee cult and how they have enslaved the children of the village in a dark cave to search for more Sankara stones.
"someone seems to have stolen the jobs for no obvious reason."
This plot line is nearly identical to what happens when a large public company buys a small private software company. The workers in the company essentially come into work one day and find that many of their jobs are missing - someone seems to have stolen the jobs for no obvious reason. As the workers are fed information by the aquiring company, they soon learn that if they want to get their jobs back they have to venture out on a quest to find them on their own. About the time the employees hit the streets, it becomes more obvious that the children of the company (the users) have been duped and will be left on their own to toil away with whatever version of the software they already have. The customers become like the enslaved children: kept in the dark, chained to the last release, fed very little, and rarely receiving any communication.
If you think this sounds harsh, then you probably have not been on the receiving end of a merger.
Mergers occur when the Aquiring company 'wants' something.
I am sure that in some mergers, the ability to acquire and extinguish a competitors' product can be a measurable goal. But to think that by eliminating a good product the customers will flock to the Acquirer is simply foolish. You do not need to be an expert on ecomonics to know what the public perception of merger activity is like.
When compared with Versata, my past employer was not a competitor. In fact, the Versata website reads more like a Professional Services company than a software provider, so I don't think competition can be the issue.
If there is no competition, then one would think that the Aquiring company was in need of the technology for some reason. Perhaps it filled a hole in their product offering. Perhaps something about the Aquirers' existing products warranted the need for the product being aquired. Perhaps something about the product being aquired complements the needs of existing users. In any case, its unclear as to why the merger was occuring and probably only the board members actually know the reality.
If you look at the stock prices of public software companies that have aquired private software companies you see an obvious and consistent trend - post-merger, the aquiring companys' stock goes down for a while.
What is odd about this trend, is that it has been the same regardless of the state of the economy. It was the trend throughout the 90's, it was the trend during the dot-com boom, and it is still the trend during this period of $4 per gallon gasoline. The reason for this trend is therefore not tied to monetary-specific concerns.
The reason that the Aquirers stock goes down is that the investors and customers relate M&A activity to a direct loss of customer satisfaction for the company being aquired.
I find this to be somewhat striking, and I don't understand why this is not a bigger issue.
With Versata buying my past employer I cannot deduce any sensible business reason why they would want the technology. More importantly, if they want the technology so much, then why would they not keep the people and intellectual property that comprises the technology? Yet, regardless of the real justifications for the aquisition one thing will turn out to be true - the customers of the company being aquired will suffer as a result of the merger.
Good support will be hard to get if the people supporting the product do not know how it works or how to resolve issues. People that have paid for regular updates and releases will likely be delayed while the Aquirer figures out how to get the build system to work and how/where to make code changes. It will be some time before any new features are added since the Aquirer will have to learn about what the customers have been told to expect. In some regards, it will take the aquiring company some time just to be able to identify the customers it aquired, much less learn about their needs.
From my point of view, we can take the trends of the past and learn something from them. We can change the way a company approaches a merger and make a better situation for the employees as well as produce an uninterrupted user experience which does not take a turn for the worse. For the benefit of the customers and future sales opportunity it seems obvious that the Aquiring company need to focus on the people. (and by this, I mean to actually focus on the people, and not pay lip service to the idea as so many aquiring companies do) When you aquire a company you also aquire its employees, its user-base, and the intellectual property therein.
Unlike Indiana Jones, an aquirer should not take the technology as some kind of Golden Artifact. As we know from Indy, taking a Golden Artifact usually has serious rammifications. Indiana knows that aquiring the Artifact against the wieshes of its owners means running out of some place to avoid impending death rolling up behind him. When he gets out, the quest is over, the journey has reached its conclusion, and he is lauded for bringing this rare antiquity back into our collective awareness.
Mergers are not the same, and should not be treated as the same. A merger should not be a grab for a Golden Artifact because the item was created by, and for a lot of people. Mergers should be approached as if they were small villages with their own Sankara stones. The Aquirer should not forceably take the prize and enslave the people, the Aquirer should come to the villiage and negotiate the transfer of the prize, workers, users, and everything else.
The only remaining question about the merger of Versata and my past employer is how long the users will suffer. I have been at jobs where they had major 'oh shit' moments when it was realized that the product they aquired could not be maintained by anyone other than the people that have already been let go. If Versata has not had this moment yet, its my guess that it will happen any day now.