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New Twist

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Illustration: Witology

The Spigit-Mindjet merger has caused quite a stir. Analysts unanimously call the merger a harbinger of big changes in the enterprise social software market.

- First, with mergers and acquisitions activity heating up, the number and types of companies operating in the market will certainly change during market consolidation;
- Second, there will be a qualitative shift in demand and supply, which is already quite distinct – both customers and vendors are increasingly becoming aware that they will benefit more from enterprise social software if they take social collaboration to the next level.

Here we discuss the increasing mergers and acquisitions activity in the enterprise social software market. The shift in demand and supply will be discussed in the next post.

Bill Robinson, a famous columnist at Forbes, Wall Street Journal, Financial Times, etc., was the first to predict the restructuring of the enterprise social software market a year ago (I wrote about his prediction in this blog then). In short, that prediction was as follows.

“I'm going to make a prediction, right here; right now: This crowdsourcing phenomenon is just getting started and Yammer is just the beginning of what is sure to be a clown-car chase for the best companies in this sector. (This is about Microsoft’s purchase of Yammer.) The crowdsourcing of ideas, to me a new kind of mass-production assembly line for worker productivity, will make corporations more productive--large organizations can now do something that no management consultants or new mission statement ever could: get ideas that are good for the company out of employees' minds and into the profit center mode. To be able to regularly solicit, capture and execute upon the strong ideas of those on the front lines who really know what the customers want will be the panacea for the 21st century business world.

As the Microsofts, Googles, Salesforces, Oracles, SAPs and others grope around in the dark to buy companies whose hard-fought software technologies they should've been developing internally, an interesting shift is occurring--one that is long over due. Smaller, more dexterous, more creative businesses like Spigit are filling the void with much-needed Social Collaboration software to snap-on to the big enterprise suites such as MS's SharePoint and Yammer (now Microsoft ... well, sort of). Soon we will see other acquirers like SAP and Oracle getting into the fray and as a result there will be a headlong rush into buying these smaller player companies, creating bidding wars and leaving bodies in their wake.”

Last year saw Bill Robinson’s prediction come true. Interestingly, small firms turned out to be more nimble and successful not only at developing new social software, but also at restructuring the market. While the IT majors were catching the ‘largest fish’ (e.g. Salesforce was sold to Buddy Media for $689 million, and Google bought Waze for $1.3 billion), ‘small fish’ started the merger and acquisition process on their own (e.g. Highland Capital Partners bought CrowdSource for $12.5 million, and Lionbridge bought Virtual Solutions for $3.6 million). A record was set up by Spigit mentioned above in Bill Robinson's quote. The company succeeded in two M&A transactions within one year – it bought Crowdcast in September 2012 and merged with Mindjet 11 months later.

Dom Nicastro has his own explanation for that merger in the context of the mergers-and-acquisitions trend in this market segment – apart from the fact that large companies are less quick at carrying out M&A transactions than the smaller ones, the latter have their own strong motivation to merge.

"We expect more acquisitions coming down the pike. It is becoming continuously hard for vendors to distinguish themselves in the market – so why not join forces to become stronger"?

I have often mentioned in this blog that the offers of various social software vendors share many similarities. All social platforms are similar to each other – they all provide a standard set of social functions for communication and interaction. Different platforms for Idea Management and Open Innovation are also quite similar in functionality and operation. Back in 2010, Gartner analysts wrote about this in Who's Who In Innovation Management Technology, ‘The report shows how little the platforms of different vendors differ from each other in basic functionality.’ In their 2013 report, Gartner experts came to the same conclusion, ‘...many providers offer products with similar functionality.’

So, the rise in the number of mergers and acquisitions in the enterprise social software market is accounted for not only by the fact that IT majors are buying up the most promising technologies, but also by the fact that smaller vendors are trying to strengthen their market position.

However, not only these two types of companies are interested in M&A in the enterprise social software market. There are management consulting firms and PR consulting companies that have been flocking to the green pastures of social business. Well, they have plenty of experience working with customers and a lot of money. Many of them have already formulated their strategic priorities – social collaboration should be embedded into all business processes.

This is a new twist in the enterprise social software market, which has been highlighted by the Spigit-Mindjet merger. Time will show what comes of it – the rise or fall of the market. But all experts are very optimistic so far.

Below are the major M&A deals in the enterprise social software market for 2012 and 2013.


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Sergey Karelov

Соучредитель и CTO Witology