Why in-house R&D often beats acquired tech in great customers software

By ANDREW BOURNE
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When it comes to choosing technology providers for their businesses, CTOs and IT leaders have two options. The first is adopting a 'best-of-breed' approach, which involves hand-picking several disparate

apps and products by different vendors, each one serving a specific need effectively.

The second option is to take a 'single vendor/integrated stack' approach, choosing one tech provider who offers a suite of pre-integrated applications that addresses multiple business requirements in one go. Customers today increasinglyprefer the second option to streamline their business processes.

In a bid to cater to this demand for unified software suites, technology companies—especially those that provide best-of-breed apps, are racing to expand their capabilities.

Often, they do this through mergers and acquisitions (M&A), buying up apps to satisfy customers' growing needs. While this approach has some appeal -- most notably, it allows vendors to quickly secure market share without building something from the ground up -- this is inherently flawed.

By making extensive use of M&As, software vendors risk ending up with a poorly integrated “Frankenstein’s Monster”-style technology stack which falls short of the promise of application consolidation and doesn't really add value for customers.

The trouble with M&A - Cultural and technological integration issues M&A activity comes with an array of complications, including culture clashes, redundancies, office politics, increased attrition rates, and tech integration challenges.

In fact, a 2016 Harvard Business Review article went as far to say that "M&A is a mug's game, in which typically 70 percent - 90 percent of acquisitions are abysmal failures."

Those failures ultimately impact the customer, by putting them in the same situation they’d be in if they were trying to work with a string of different products.

Even the biggest companies struggle when it comes to successfully integrating acquisitions. In the consumer space, users know this all too well. Take Yahoo for example. When it bought Tumblr for $1.1-billion in 2013, it thought it had a surefire winner on its hands. Yahoo's idea was to strengthen its social media platform services by integrating Tumblr's blogs more tightly into its network using the former's personalization technology and search infrastructure.

Unfortunately, Yahoo never managed to properly integrate the micro-blogging social network and even stripped it of some of its most celebrated features.

Similarly, Microsoft’s difficulties with Skype are well-chronicled. Having acquired the peer-to-peer calling and messaging service for $8.5-billion in 2011,

Microsoft initially planned to integrate Skype’s telephony architecture into its user communication platform and a few other services.

That integration took so long and had such flawed execution that consumer confidence took a massive hit. As a result, when the Seattle-based tech giant launched Teams in 2016, it developed its own video-calling feature in-house instead of leveraging Skype's capabilities to ensure aesthetic consistency as well as a more streamlined fit among its enterprise collaboration solutions suite.

On observation, it is typically public companies that spend billions acquiring disparate technologies, in order to inherit massive customer bases and expand sales to satisfy investor demands for constant growth.

Unfortunately, when an acquisition fails, it's the customers who bear the brunt of incompatible integrations and broken user experiences.