Every security industry merger and acquisition announcement leaves a lot of midmarket companies wondering, "What does this mean to my business?"
To help you ultimately decide whether to stick with an acquiring company or look elsewhere, it's important to understand the motives behind the acquisition strategy, review the product road map and evaluate the quality of service and support. In this tip, we'll review some essential security mergers-and-acquisitions questions.
What's the deal?
First, it's important to realize that no matter what the acquiring company's long-range plans are, they aren't likely to simply discontinue your product. "In the short term, at least, the company doing the acquiring is going to continue selling and supporting the product, if for no other reason than to keep revenue stream going," said Paul Roberts, senior analyst at Boston, Mass.-based 451 Group Inc.
You need to quickly determine, however, what is behind the deal and whether the product you invest in will survive. Security companies are acquired for a variety of reasons, and you need to analyze the deal and figure out which one is in play.
Some acquisitions are about cannibalizing the competition. The acquiring vendor won't be so bold as to say so, but over time, your vendor's product may be rebranded and quietly dropped. You'll need to decide if the product they offer in its place is as good as, or perhaps even better than the old one, and what kind of deal is on the table.
Vendors also merge in order to expand market share. Sometimes, two smaller companies merge to create a bigger one, perhaps putting them in a position to challenge a market leader. Or, the acquiring company wants to gain market share in particular verticals such as retail or health care, or perhaps geographic markets. In either case, this is more than likely to be good news for you, as their combined resources promise increased investment to improve their products and take on the competition.
The motive behind a deal could also have to do with filling a gap in a product portfolio. The acquisition of new technology could bolster existing product lines or move them into new markets. This could work out OK for you if this means a chance to move up to a better product, but not if it's pitched at large enterprises, rather than the midmarket.
Vendor support response critical
Vendor support could ultimately be the deciding factor as to whether you stick with an acquiring vendor, especially if it's a large company. Smaller vendors may be more generous with TLC for their clients, but suddenly after an acquisition by a large company, you may be a small fish in a big pond.
You need to closely look at service level agreements (SLAs) and how the acquiring vendor will handle them. If you have an SLA guaranteeing response time on support calls, is the new company still meeting that SLA? Will your support come through the VAR or IT solution provider you have been dealing with, or are they going to be dropped from the acquiring company's channel program?
Instead of talking to the support staff you got to know and count on, you may be shunted off to an overseas call center. Or, you may be offered the next level of service, at a price. Talk to customers and former customers of the acquiring company, as well as your VAR to get a read on support.
Keep an eye on the product roadmap
Ask the acquiring vendor questions about their product development road map, and gauge how well they execute. If they plan to grow the product, management will remain in key roles post-acquisition, and research and development will be well-funded and staffed.
"You can read between the lines," said 451 Group's Roberts. "When they talk about their long-term vision, you can get a sense if they are saying 'it's a great fit into our portfolio,' or they're interested in what the acquired company does and how it can fit into another solution, which indicates they are talking about integration down the road."
Chances are the new owners won't share detailed roadmap information with smaller companies, but industry analysts can be good sources of information. Your VAR may be helpful, especially if it already has a relationship with the purchasing vendor.
"One telltale sign is whether they can show a roadmap for development over the next 18 to 36 months," said Gartner VP and distinguished analyst Paul Proctor. "If they're serious [about developing the product], they've thought that through before the acquisition."
Then, over time, watch for whether or not the company is executing on its roadmap, he said. Are new releases on time, and are the all new features included as promised? For example, if they are missing three of the six new features they promised, and missing deadline by months, they are not executing well.
When your security vendor has been acquired, asking the right questions around product support, roadmaps and strategies will help you make good strategic decisions about whether to maintain your current relationship or look elsewhere.