What is Happening?  Earlier this week, several trade media outlets reported that Dell was in talks to acquire one of its core software partners, Quest Software. Quest offers solutions designed to “simplify the management of IT across physical, virtual and cloud environments,” according to its website. Regardless of whether or not the acquisition occurs, Saugatuck sees this type of activity as another indicator of two key trends:

• Enterprise IT leaders and organizations are looking to traditional, IT Master Brands (“comfort vendors,” as we call them) for ways to manage increasingly-uncertain IT architectures and environments; and
• Traditional IT Master Brands are shifting their M&A activity to not only maintain their enterprise presence, but to establish or enhance credibility in a shifting, “boundary-free” IT and business environment.

Why is it Happening?  Leading, competitive IT providers constantly acquire and divest other providers, technologies, and services to maintain and improve their competitive positioning. They follow trends based on what they see a critical mass of enterprise customers doing. And what the providers see their customers doing now is not only moving to Cloud, but changing – really, re-architecting – their IT and business infrastructures to reflect changing ways of doing business, and to reflect increasing/changing business opportunities.

The new PureSystems packaged server offerings from IBM spotlight potential benefits from systems-level integration that Saugatuck outlined almost two years ago as key for enterprise Cloud development, deployment and management (800MKT, Cloud Selection: Acquisition of Integrated Systems, 28Oct2010). A new Strategic Perspective for Saugatuck CRS clients offers the PureSystems Patterns offering as an example of how enterprise IT orgs can save on integration testing and enable redistribution of IT staffing.

There are potentially significant constraints and limitations, even challenges to gaining such benefits, including the economics of legacy vs. new hardware and systems; it’s not all beer and skittles by any means. But as is examined in the Strategic Perspective, Saugatuck expects significant growth in the range and number of such systems being developed, sold, and used - and we project that the amount of staffing required to deploy and maintain infrastructures will shrink over time. Even a relatively small decrease in the resources required for integration testing and maintenance can yield relatively large increases in manpower available for new business solutions.

IT and business leaders responsible for making sure that their investments don’t cripple their enterprise’s ability to do business should take a look at Mike West’s latest Strategic Perspective, which introduces Saugatuck’s Risk/Reward Assessment model.

We see this as the first approach to IT assessment that provides both buyers and providers with an objective, truly useful means to identify and then manage challenges in understanding, evaluating, selecting, and managing IT solutions in this new era of the Boundary-free Enterprise^™ and dramatically-altered IT/business master architectures, and the processes and practices needed to cost-effectively manage them.

What is Happening? Less than a week after laying out and demonstrating commitment to its comprehensive, Cloud-centric business and technology strategy at its Sapphire user event, SAP AG announced that it has agreed to buy collaborative commerce platform provider Ariba Inc. for $4.3 billion – about $45 per share of Ariba’s outstanding stock.

According to the company, Ariba's global trading platform connects and automates more than $319 billion in commercial transactions between some 730,000 companies. Ariba reported $444 million revenue for fiscal 2011, a 39 percent increase over fiscal 2010. Estimates from leading Wall Street analysts such as Jason Maynard of Wells Fargo Securities pegged fiscal 2012 and 2013 revenues at $532 million and $608 million respectively, prior to the announcement. This implies that SAP is paying approximately 8x estimated forward fiscal 2012 revenue for Ariba. In comparison, SAP paid approximately 7.5x estimated forward fiscal 2012 revenue for SuccessFactors.

OK, it’s official: Google formally owns Motorola Mobility (MoMo). Now what?

Here’s what we had to say in August 2011 about the situation: