Wednesday, January 09, 2013
The new guard: Look at who is buying technology companies now
A few days ago, I pointed out the inevitability of the Internet and how it was going to play an increasing role in the companies that have traditionally not been classified as technology companies. Those companies — big and small — are going to find it difficult to find a future without utilizing technology. And that means embracing mobile, cloud, data and the state of connectedness.
For me that is one of the more exciting developments over the last few years and it should excite everyone in the technology ecosystem, especially startups. Traditionally, the buyers for startups have been the big tech companies themselves — Facebook, Google, Yahoo, Microsoft and sometimes Amazon and Apple. Sure Cisco would pony up some big dollars or HP would get drunk and blow its cash on something, but the big buyers for the web-and-oriented startups have usually been big web & mobile giants.
Now we are seeing the emergence of a group of companies who seem to be hungry buyers for technology. Just take a look: we are not even ten days into 2013 and we have already seen had two big acquisitions by what we in the Valley don’t see as technology companies. Avis bought ZipCar for about $500 million and today Athena Health announced that it was spending about $293 million on a doctor-focused app/service called Epocrates.
I wouldn’t be surprised if we see more of this in coming months. Why? The reasons are not that complex actually. Typically the tech giants buy startups (loosely speaking) in order to acquire talent and in very rare cases, technology (like Apple buying Siri). But for the most part, the motive behind Internet giants’ buying frenzy is mostly about finding the right people to keep competing with their rivals.
The big non-technology companies have similar needs but they are in much more desperate need of this makeover. Not only do they need the talent, these traditional corporations need a new technology-centric way of thinking if they need to evolve their business models for the post iPhone world.
Today a retailer like Macy’s or Walmart can get by on the strength of their scale and might. However, if in the future they need to combat Amazon, they need to adopt internet business practices and use data intelligently. My colleague Derrick Harris recently wrote that big data technologies, at least for now, are like manufacturing robots — helping people do things they do, faster, at a larger scale and cheaper than alternatives.
A physical retailer of tomorrow would somehow have to create a compelling app experience and use that data, geo-location information and buying habits to offer in-store discount (or a shopping experience) that is highly customized to an individual. If they don’t — well, Amazon or someone like Amazon is going to get my dollars.
Today it might not seem obvious, but a year or two from now, companies big and small are going to realize that emergence of mobile and other newer technologies are going to redefine the a business experience. As Ed Aten in a guest post pointed out this weekend, all businesses are now 24-hour operations. “The offline world is filled with friction, inefficiency, incomplete information, tedium and excess capacity,” he wrote. And that also means inefficient businesses and other edifices of a different era.
Think of this way: Today, a problem with your local Starbucks isn’t localized. Thanks to Twitter and Facebook, the internet is the new weapon of mass complaining. Price checks conducted via mobile apps are going to become a default behavior, especially as a whole generation of internet users (natives) grows up to become the next big consumer group.
To be clear, I am not saying that the traditional companies will stop doing what they do. It is just that they need to do it much more smartly, using technology and understanding that the internet is as much a business reality as say outsourcing or scale. A friend explained it best when he said that the U.S. auto industry in the 1970s and 1980s suffered because of process innovation at their Japanese counterparts. The state of connectedness is a similar kind of reality for businesses — all of them, including those in technology industry.
So startups, the next time someone asks you, “who is a potential buyer?” Just say, “We don’t know. It could be anyone.”