The Merger Wave

Filed in archive Outsourcing Suppliers on September 28, 2009

© red twolips

The past week has seen two mega-deals where U.S.-based outsourcing providers Perot Systems (PER) and Affiliated Computer Systems (ACS) have been purchased by Dell Computer (DELL) and Xerox Corporation (XRX), respectively. Both acquisitions are interesting for what they are - and what they're not.

After years of "focusing on core competencies," both Dell and Xerox appear to be seeking to expand their reach into other aspects of their corporate clients' business. Neither of these could really be viewed as synergistic, however, as both Dell's and Xerox's core business model is based on selling hardware and related services.

Certainly, I'm sure that the folks at Dell believe that the Perot deal will mean some more server sales, but will it really mean sea changes for those organizations using HP servers? Similarly, I would expect that Xerox may sell a few more imaging devices to its new-found customer base, but will it cause the wholesale displacement of Canon or Ricoh machines? Probably not.

So, we're left to believe that these are opportunistic deals where intrinsic value is perceived. This could be a good sign for the outsourcing industry as a whole, as it means that outsourcing providers are being seen as good investment opportunities.

One more interesting aside - for years, many have suspected that these organizations would be acquired by cash-rich Indian firms in an effort to expand their U.S. footprint. That trend failed to materialize to the level expected, however, leaving India-based firms still on the outside looking in at the U.S. market.