We’ve recently seen a spate of acquisitions in the European channel, and they have been particularly interesting for one main reason – they have involved vendors acquiring partner organizations.
In our worldwide predictions earlier this year, we predicted that we would see accelerated M&A activity in the channel in 2018 and beyond. This prediction included partner organizations being acquired by one another, and specifically, partners being acquired by vendors. Just a few months in, and we’re seeing this begin to play out already.
DXC – the new company forged from the former CSC and HP Services businesses – recently acquired two Microsoft partners: eBECS and Sable 37. And just last week, Microsoft partner RedPixie was bought by HPE.
DXC stated that the acquisition duo will “significantly advance its position as one of Microsoft’s leading global independent Systems Integrator (SI) partners for Microsoft Dynamics 365”, adding that it will “enhance our ability to address client needs and add significant value.” For HPE, the key reason behind the RedPixie acquisition was to “continue to expand our comprehensive hybrid IT portfolio” in order to be “even better positioned to help our customers build new digital experiences and drive better business outcomes now and into the future.” Both sets of acquisitions have customers at the centre, and revolve around offering them a more comprehensive and wide cloud portfolio.
These moves are significant and bring to life a number of key market dynamics we at IDC have been seeing, talking about and analyzing for many months now.
On 4 April 2018, DXC announced intentions to buy two leading Microsoft Dynamics partners; UK-based eBECS and Australian outfit Sable37. The pair will join DXC Eclipse, a DXC company which itself is a Microsoft Gold Partner specializing in Dynamics 365, ERP and CRM.
This acquisition is particularly interesting as it represents, many of the key things we have been seeing in the industry. For a while now at IDC, we have been talking about how the traditional channel is evolving into an ecosystem. The traditional, linear, supply chain-like channel – where vendors sell to disties, which sell to resellers, which sell to customers – is evolving into more of a connected ecosystem. This ecosystem means that both vendors and partners need to work co-opetively, putting competition to one side to an extent and work with one other through alliances, and in partner-to-partner (P2P) collaborative relationships.
DXC’s acquisitions also caught our attention because of how it fits into our thinking about how M&A activity will evolve. In our predictions, we said: “IDC expects to see more vendors begin to acquire partner organizations.” Again, this development at DXC speaks directly to this prediction, as does the news at HPE and RedPixie.
RedPixie is a specialist Microsoft partner, and one of its most high-profile in the UK, regularly winning awards from the vendor. Now, it forms part of HPE, complementing its focus on “making hybrid IT simple”, according to its press release. HPE said RedPixie was acquired due to its expertise in designing and building its own secure hybrid cloud platforms, and its own cloud-ready applications, among other areas of expertise. It will join HPE’sPointnext services division. HPE also recently acquired CTP, which brought it capabilities in AWS and Google in the North America region. Now RedPixie will enhance its Azure offering within the UK and European region.
Acquiring partners – which have local knowledge and expertise, and often strong vertical alignment – offer vendors a great way to achieve specialization and local relationships and influence.
To conclude, the channel landscape is rapidly evolving, with much heavier focus being placed on alliances, ecosystems and partnerships than ever before. The DXC acquisition of two Microsoft partners embodies this dynamic perfectly, and speaks to the shift we are seeing, as does the HPE acquisition of Red Pixie. As time goes by, we expect more consolidation with: either partners acquiring one another, vendors acquiring their own partners, or vendors acquiring partners of other vendors with whom they collaborate. While the blurring of the lines in the channel means the industry will continue to exist in a state of flux, what is certain is that this type of M&A activity will only continue.
For more information about IDC’s Channels & Alliances research an overview of the program is provided here.