IT Weekly Middle East Newsletter 20th March 2005

It’s as if the dot.com bust never happened: mergers and acquisitions in the IT industry seem to be firmly back on the agenda, with a positive flood of deals in the last few months.

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By  Peter Branton Published  March 20, 2005

Getting IT back in the limelight|~||~||~|It’s as if the dot.com bust never happened: mergers and acquisitions in the IT industry seem to be firmly back on the agenda, with a positive flood of deals in the last few months. This latest phase seems to have begun with last year’s Oracle/PeopleSoft saga and Symantec’s snapping up of Veritas, plus a number of other deals. The pace doesn’t seem to have slowed this year either, with Oracle (again) now involved in a bidding war with SAP for Retek, a small retail supplier, and the news last week that IBM is planning to buy integration software firm Ascential Software for a cool US$1.1 billion. What’s driving these big-money deals? Well, for one thing, confidence that the long downturn in worldwide IT spending is finally over. Admittedly, that last sentence could have been written at any stage in the past three years. Equally, there have been plenty of promising signs in the IT industry in the same time period, so it would be unfair to say that a multi-billion dollar industry has been all doom and gloom these past few years. Certainly, a Middle East IT sales manager would be able to point to healthy performances and ask just what is this fuss about a downturn? Beyond the healthy sales figures there seems to be a belief that IT matters again: Oracle and SAP aren’t interested in Retek because it will boost their bottom lines, its sales figures are a fraction of theirs. But retail is a sector that could be hugely impacted by IT, initiatives like radio frequency identification (RFID) could literally transform the way firms do business. Instead of companies looking at how to make the most of their IT investment, we could see IT actually being used to drive business growth. And that’s not really a sentence that could have been written at any stage in the last three years. Let’s face it, for us older hacks, the gloss has gone off the IT industry a little bit in the noughties. In the late 1990s it was possible (with a little creative thinking) to believe that you were reporting on the most vital sector of industry. The New Economy was sustained by the benefits that IT brought to business, the best was still round the corner with e-commerce, and the next kings of industry were all working in start-ups, with business plans written on the backs of napkins. Or so we all thought, late at night, when we should have known better. It won’t be the same again of course. Once bitten, twice shy, as the saying goes, and plenty of people got very badly bitten indeed. Venture capitalists won’t be quite so adventurous when it comes to giving cash to IT start-ups in the future. CIOs want to know the product they’re buying is going to help them do their job now, not offer some enticing possibility of changing what they’re doing. And as for business plans and napkins? Bernard Ebbers, once hailed as the brilliant entrepreneur CEO of Worldcom (who did write a business plan on a napkin) is now standing trial for corporate fraud. “I don’t know about technology and I don’t know about finance and accounting,” he told a courtroom last month. Presumably, he’s also rusty on restaurant linen, although it doesn’t seem to have come up in evidence. So, hopefully, we won’t see the worst excess of a few years ago being repeated and the IT industry will focus on what it ultimately does best instead — making products and providing services. Furthermore, one hopes the improvements that are made will be sustainable and we’ll all get on with our jobs. But remember, IT is back on the corporate agenda, whether you want it there or not. ||**||

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