Since the first of the year, there has been an unprecedented number of large, high profile computer industry mergers, merger attempts and merger rumors. We have seen IBM & Lotus, Microsoft & Intuit, Computer Associates & Legent, Novell & Borland, EDS & A.T. Kearney. ParcPlace & Digitalk, and many others too numerous to list.

These companies cover a wide range of markets from the PC through the mainframe, from applications through middleware and operating systems, from turn-key services to consulting. Without getting embroiled in the details of individual situations, what can be inferred from these moves? Can we predict any general outcomes? And what do these kinds of deals mean for the computer industry and for the end users?

The pre-merger press releases always suggest there will be great benefits for the end-users and stock holders from possible synergy's and more marketing muscle immediately post-merger. Perhaps in the short run, some of these will happen – certainly Lotus's stockholders are happy. But from past experiences we should take these superlatives with a big grain of salt. In large mergers like these, it has usually proven to be considerably more difficult to successfully meld the two business operations than the respective top managers believe. Vastly different business cultures, different priorities that fail to change after an acquisition, and the normal efforts to consolidate and become more profitable in order to 'justify' the merger often conspire to cause a loss of productivity and focus.

These effects are bad enough by themselves, usually causing fairly substantial negative blips in product quality, service support and profit margins. If not properly managed, these dislocations can even cause the loss of key personnel and that can lead to a nearly complete loss of the vision and zeal that led to the original successes for the acquired company. There are many recent examples of this "more is less" merger problem such as Borland & dBase or Sysbase & Powersoft. These companies and many others have had great difficulty maintaining the growth curves of the acquired companies or products.

Certainly, once in a while there is true synergy or it does makes sense to reduce the time to market by buying the product through a merger. These are typically smaller companies that stay in their primary markets or products, and have the depth of management to build success. Unfortunately, you must build synergy – you can't buy it. These successes are in the clear minority. Also, while most large examples have been general negative for the consumer and the products, they have not been uniformly bad for the acquiring companies. If they are astutely managed (sometimes a bigger if than you'd think), they can financially milk the acquired product base for several years before end-users fully realize the product is no longer receiving the investment needed to keep it competitive for the long haul. The general business climate seems to be improving and the rest of the DP community seems to be through with downsizing. Many companies are beginning to selectively hire again, so watch out for downsizings of staff after a merger.

A more positive but indirect effect is the result of staff turnover. These people (usually among the most talented) will find jobs where they are allowed to build better products. Often they form startups composed solely of highly motivated people. Because these individuals know what works and what's missing from the old products, and because they usually have lower cost structures, these startups can frequently become the product and cost leaders in the industry in surprisingly short time frames. Sometimes what is seen today as an anti-competitive merger may actually end up stimulating better competition down the road.

I think we can easily conclude from the current merger mania that technology is moving too fast for even the primary vendors to keep up with it. We on the endures side of the spectrum have known the rate of change has been nearly impossible to keep up with for several years now. It's comforting (but more than a little scary) to learn the large companies are having similar problems. If these companies had their own houses in order, most of them would choose to build new businesses internally, from scratch. The fact they aren't is a clear indication they are concerned they don't have the time or resources to develop and bring to market competitive products in the areas of their acquisitions.

But why not? What leads one company to be successful with product development while others must buy existing product through mergers? One difference is that well managed development companies stay focused on what they are already successful at, or know they can become successful at. Plans for many alternative new projects are developed well before the company can start them or the market needs them. These companies are growing as fast as they can and normally have to ration their capital by restricting new projects. They rarely have the time or the finances to look into mergers.

If you agree with this view, you may suspect (as I do) that merger mania is a mask for poor internal planning or just plain bad management. It is an open admission management didn't have the market savvy to plan the product in advance and doesn't feel it has the staff to build it at the purchase cost. This even with the understanding that buying a production product usually takes several times its development costs. It also is an admission they don't perceive a better return on the capital involved by funding a project in their own company or their own line of business. It's not hard to see why so many of these high-profile, highly promoted mergers turn out to be high-profile flops.

Since you and I can't change the times or the mentality of the IBM's and Novell's of the world, one way we can extract something positive from their maneuvers is to observe carefully and attempt to learn from them. Corporate management's job is clearly to stay ahead of the marketplace. You do this by focusing on and developing your companies known strengths and core competencies. R&D is the marrow in the bones that keeps your company alive, when you cut it too far you cut your future. Management must seek to expand the number and range of product opportunities so that when you are prepared to expand, you will have a broad spectrum of internal options to chose from. Looking out for your customer's needs, tomorrow's needs as well as today's needs, is the only predictable road to success.