Merger of two of the biggest technology companies - Part 1
Recently Microsoft announced takeover bid for yahoo at a premium of 60% over the 31st January stock price. As the talk is going around in the market, it seems that if the shareholders of yahoo agree, this deal will go through without much opposition from the regulatory bodies in USA and Europe (In any case, Microsoft has got the best lawyers to fight with antitrust lawsuits all over word to maintain its Windows monopoly). I feel that this deal will end the empire of one of the biggest success story in the software industry, Microsoft. There are many reasons for me to say this. I want discuss some of them here.
Organizations are not made of economic units: Both the organizations, Microsoft and Yahoo, have some of the best mind in the world working for them. They don’t have not only software geeks but also marketers, psychologist, graphic designers etc. All of these employees are working hard to make their respective organizations a success. The problem is when the merger talks proceeds senior management think of these employees as economic units and feel as if they can replace any employee by another or reduce any number of employee and will continue to get the same results. In this assumption, there are two problems. First, in any organization there are very few natural leaders who can do work without any supervision and can produce something wonderful that can give big advantages to the technology companies. These people are the first one to leave when there is uncertainty and it is not always easy to identify who these are. Second, when we are working with human, we cannot consider that the work of two employees will be total of the work they can do individually. This is because they are human and they have some friction. Higher the number we have to put together, higher the friction will be. Here we are talking of tens of thousands employees in two organizations.
Number of online visitors: Steve Balmer seems to assume that when the Microsoft and yahoo will merge they will have online visitors equal to the sum of individual visitors on two websites. I have doubt. There will be number of users who will be visiting both sites every day. They might stop visiting two different websites when they will become same.
Money for replicates applications: There are lots of applications both the companies have in common, e.g. mail services, news service, and ad program and so on. When they will merge they will have to decide which program to keep and which to scrap. It will not be easy to decide and it will be more difficult to integrate them. Yahoo has been anti Microsoft for a long time so deep inside the code of the applications, architecture will be such that that cannot be easily integrate with Microsoft applications. If they cannot be integrated successfully or take more time than expected, cost of integration will go high and saving from synergy will be difficult to gain.
Organizations are not made of economic units: Both the organizations, Microsoft and Yahoo, have some of the best mind in the world working for them. They don’t have not only software geeks but also marketers, psychologist, graphic designers etc. All of these employees are working hard to make their respective organizations a success. The problem is when the merger talks proceeds senior management think of these employees as economic units and feel as if they can replace any employee by another or reduce any number of employee and will continue to get the same results. In this assumption, there are two problems. First, in any organization there are very few natural leaders who can do work without any supervision and can produce something wonderful that can give big advantages to the technology companies. These people are the first one to leave when there is uncertainty and it is not always easy to identify who these are. Second, when we are working with human, we cannot consider that the work of two employees will be total of the work they can do individually. This is because they are human and they have some friction. Higher the number we have to put together, higher the friction will be. Here we are talking of tens of thousands employees in two organizations.
Number of online visitors: Steve Balmer seems to assume that when the Microsoft and yahoo will merge they will have online visitors equal to the sum of individual visitors on two websites. I have doubt. There will be number of users who will be visiting both sites every day. They might stop visiting two different websites when they will become same.
Money for replicates applications: There are lots of applications both the companies have in common, e.g. mail services, news service, and ad program and so on. When they will merge they will have to decide which program to keep and which to scrap. It will not be easy to decide and it will be more difficult to integrate them. Yahoo has been anti Microsoft for a long time so deep inside the code of the applications, architecture will be such that that cannot be easily integrate with Microsoft applications. If they cannot be integrated successfully or take more time than expected, cost of integration will go high and saving from synergy will be difficult to gain.
posted by s gupta | 1:59 AM
2 Comments:
Every time a merger happens between two companies generating the same services, there's always a challenge of phasing out a few applications. Though, this may seem difficult initially, in the long run the company will have considerable savings.
Also, even though the number of online visitors could decrease after the merger, the amount of time spent will definitely be more. The advertisement rates will be more and obviously the company will reap the benefits.
The most exciting thing to be seen is (if the deal goes through) how Microsoft will fight Google after the merger.
my fear is that very few mergers of this magnitude are ever successful. No dount yahoo has some strenghts and some good applications but it is also very clear that it is a mess in current form. And we should not forget that Microsoft has very little strength in the online applications. It is visible from the time when it bought Hotmail a long time back. even now microsoft has spent billion of dollar in developing its online application but it is not successful. I feel that Microsoft shoulf accept the fact that it can not compete in the online market and let others do work in that market. it has got lots of cash and it has wonderful software developers. it should utilize that strength to enter some other market. may be software applications for pharmecitical industry, just a thought...
Post a Comment
Links to this post:
Create a Link
<< Home