Acquisition Targets

Acquisition Targets

Stephen J. Andriole
DOI: 10.4018/978-1-60566-018-9.ch002
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This chapter looks at the range of investment targets ranging all the way from software applications to communications networks to new advanced technologies like Web 2.0 and Web 3.0. The chapter talks about the opportunities in succession describing the range of opportunities available to CIOs, vendors, and VCs. The chapter also highlights the individual opportunities for all three investors through investment guidelines that appear at the end of each major section.
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Applications Targets

Everyone uses software applications almost every day. Those who shop on or bid on eBay use applications. Everyone who uses e-mail or searches for optimal driving routes uses software applications, and of course everyone who sits in front of a screen anywhere in companies around the world use applications to calculate sales, check inventory, or just close the books use software applications. Some of these are very well-known, such as Microsoft Office which contains software applications for word processing, presentation graphics, and spreadsheet calculations. Some are less known and more specialized, like Manugistics’ supply chain planning and management applications.

Those who invest in technology invest in software applications; they are everywhere. Applications “face” those who use computing and communications technology; they are what we interact with every time we log on to a network or the Internet or boot up our PCs. Applications permit us to communicate with data and through preprogrammed instructions for communicating with people, information, companies, customers, and suppliers.

There are a variety of applications we use all the time. There are mainstream applications—like the aforementioned Microsoft Office—and less popular ones, like tools we use to manage our time, ideas, and contacts. I have developed a matrix for describing the range of applications that populate small, medium and large companies, and excite, depress, and confuse, all kinds of investors in applications that can revolutionize the way companies transact business. The applications that excite companies are of course what the major, and entrepreneurial, technology providers seek to design, develop and sell, and what private equity venture capitalists task their various “deal flow” mechanisms to find.

From the perspective of a buyer of technology (a CIO, for example), the matrix is intended to guide an assessment and then a selection process. Companies need to profile their current applications portfolio and then plan for the next one. Nothing radical is implied here: it is impossible to throw away all of the old to make room for the new. At the same time, companies need to migrate constantly and efficiently. From the perspective of investors (a venture capitalist, for example), the matrix is intended to help identify investment opportunities, and from the perspective of technology vendors (for example, an enterprise software developer like SAP AG), the framework will help spot enhancements and whole new applications that their customers might buy.

The matrix appears in Figure 1 and indicates the range of available applications. The boxes represent opportunities and challenges for CIOs, venture capitalists and vendors—for anyone who creates, deploys, and supports software applications.

Figure 1.

The range of application targets


If you are looking at the applications matrix in Figure 1, what do you see? It depends on the lens you use to assess the opportunities and challenges within its cells. CIOs see the basic applications that enable business processes, the applications that just about everyone in their companies touch every day. Venture capitalists see the cells as containers of marketable technology, and vendors see the list as opportunities to sell more software to existing and new customers.

The first stop is personal digital assistant (PDA) and related “thin client” applications and, by extension, desktop and laptop applications.

There are a series of clear trends that define this area. We know that most desktop and desktop computers run Microsoft Office and that Office will dominate well into the 21st century but will do so by creating, reacting, and adapting to increasingly open source software standards. There will be a significant challenge to Office’s dominance from the Open Source vendors but Microsoft will likely respond by modifying its pricing policies to create enough cost-benefit ambiguity that most users will ultimately stay with Office. On the other hand, if Microsoft fails to respond to either pricing or open standards pressure, it could lose market share.

The desktop browser—the application we use to get to the Internet and the World Wide Web—will become the ubiquitous front-end to desktop applications and applications integrated with “local” (desk-top, laptop, PDA/thin client) computing and the computing that occurs externally when users go on to the Web to search for information or assemble transaction components.

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