Where do your loyalties lie?

Industry consolidation will force VARs to choose their battles carefully

Tags: 3Com CorporationChannel developmentCisco Systems IncorporatedUSAUnited Arab Emirates
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By  Andrew Seymour Published  November 15, 2009

You can always count on a merger or acquisition to expose the fickle side of the IT business.

The union of rival organisations - as they invariably are - instantly transforms the very loyalties of all parties involved. Almost overnight, companies far more accustomed to dismissing each other's offerings suddenly can't stop enthusing about what an inspired idea it is to combine their assets.

HP and 3Com's PR chiefs received their chance to get all superfluous last week, wasting no time in stating how fantastic the pair's US$2.7 billion merger would be for customers and the industry in general.

We shouldn't really expect otherwise - that's the way these things work after all - but the reality is that there is often a different story to be told once the smiles and back-slapping subside.

As M&A experts are fond of pointing out when details of such transactions emerge, one and one never equals two - not just in terms of revenue and profit, but also in terms of resources. 

It's been suggested that HP and 3Com share a culture that is conducive to a smooth integration. That may well prove to be the case, but I'd be surprised if there is a 3Com employee out there who hasn't felt some trepidation about what it all means for their future.

They will know only too well that for all the competitive benefits that such a merger reputedly promises, the word ‘duplication' has never sat well in the corporate domain.

I'm sure the next few months will see certain fears and anxieties expressed, and for many it will feel like there are an awful lot more questions than answers.

The point I am getting to is that the same sort of sentiments will also be felt in the partner community.

There has already been plenty said about how a combined 3Com and HP channel will be capable of giving the competition a stronger run for its money, especially Cisco. 

On paper it looks a good fit. The tie-up will massively reinforce HP's Ethernet switching offerings and strengthen its security capabilities through the TippingPoint portfolio. The addition of 3Com's voice, IP products and low-end OfficeConnect portfolio also throws up some interesting permutations.

But that won't prevent resellers from wondering how all the different pieces of the jigsaw are going to fit together and, more pertinently, what it means for the direction of their businesses. Partners of both companies, I'm sure, will be keeping a very close eye on developments as they unfold.

It is not difficult to see why deals of the HP-3Com nature prompt partners to speculate where and how they will fit into the equation later down the line.

There have already been murmurs from solutions providers, for example, about the prospect of getting caught up in an HP and Cisco networking equipment price war if both vendors push partners to choose one over the other.

The HP-3Com agreement is the latest in a growing list of so-called ‘game changing' mergers that has materialised this year, following closely on the heels of the Oracle-Sun and Avaya-Nortel pacts in particular.

The industry's natural proclivity for consolidation, coupled with the economic pressures that we have come to know only too well, suggests more of these heavyweight deals are never too far away.

This all renders it something of a defining time for partners of vendors involved in the M&A trend. Weighing up where to invest and who to invest with is no easy task. Especially when the stakes can change with so little warning.

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