Are the successful partner organizations ready to be acquired by larger companies?

Mergers and Acquisitions amongst vendors continue in technology world. Oracle buying Sun, Intel acquiring McAfee, Microsoft takes over Skype. The list is endless. The M & A trend is spilling over to channel community in India. Lately, private equity firms or larger system integrators are investing in established partner organizations (systems integrators / solution providers). In past three years, Avnet acquired Ontrack Solutions, Momentum Infocare was acquired by Printing and Imaging solution provider Ricoh and lately KPIT Cummins invested 50% stake in Systime (a 100% subsidiary of CMS group).
With competitive landscape and changing technology, partners need to enhance skill sets, invest in IT infrastructure and plan business strategy which requires capital. “Beyond a point, it is difficult to hold on to skilled employees, ensure business growth and raise capital. M & A acts as excellent vehicle of growth for partners to become a part of larger organization,” says Naresh Desai, GM, Avnet Technology Solutions India.
M & A solves the crucial issue of finance stability and accelerate business plans of acquired partners. Sanjay Agarwal, Director, Momentum Infocare agrees, “Ricoh India’s national presence, brand value and our IT expertise will certainly help merged entity grow much faster and expand quicker in solution provider space.”

The Synergy Factor
KPIT Cummins took 50% stake in Systime, one of the world’s largest Oracle JD Edwards solutions and service provider. The combined entity with over 2000+ Oracle consultants globally is expected to rake in 125 million USD revenues by FY13. “This partnership will help strengthen our relationship with largest partner Oracle. KPIT and Systime will give ability to consult clients on larger Oracle portfolio including Exadata, Exalogic, Golden Gate,” says Pawan Sharma, President & Head- Integrated Enterprise Solutions, KPIT Cummins.
Last year, a private equity firm Zephyr Management invested $10 million in Trimax IT Infrastructure and Services, an end-to-end IT services and solutions provider. “Investment helped augment our long term source of capital. Trimax has successfully built capabilities to execute large scale complex projects and the investments have enabled us to expand operations across various business verticals,”concurs Surya Prakash Madrecha, CMD, Trimax IT Services & Infrastructure.
Acquisition of a SI company by Ricoh is surprising. Agarwal of Momentum Infocare clarifies, “IT Services is an important business line for Ricoh across other parts of the world. This acquisition will tremendously enhance Ricoh India’s knowledge and competency in the field of IT Services and Solutions and act as a one-stop solution provider to our customers.”
Manufacturing is a very important industry vertical for KPIT Cummins as it comprises 80%+ of company revenues. “We identified Oracle JD Edwards as an important piece to become one of the largest vendors of Oracle solutions and services to global manufacturing and energy industries. Systime with focus on similar verticals and strategy was a strategic and cultural fit for KPIT Cummins,” informs Sharma at KPIT Cummins.
When Ontrack Solutions got acquired by Avnet in 2008, there was speculation about co-existence of VAD (Avnet) and SI Company. Desai at Avnet clarifies, “We still do end customer projects but the route is different as everything is now routed through channels. With more resources
and global expertise of Avnet as VAD, partners see more value with us for
enterprise deals.”
Merits Of Partners
It is important for any partner organization to have a vision and business strategies that supports it, a product portfolio that compliments the market requirements and delivery that is in line with the commitments, supported by a team of qualified professional, says Agarwal at Momentum Infocare.
Trimax created a strong foundation to adapt to changing market dynamics and the business model of the group is scalable through a strong team of professionals to provide the required impetus to the group. I am sure our investors considered these points before investing in Trimax, says Madrecha. He adds,Trimax has in-depth understanding of IT products, services and business catering to over 800 customers in SME, Enterprise and government sector.
The selection of a company for strategic investment includes strategy and scope of offerings – complementary for the success of the combined entity, capabilities that substantially enhance the positioning of the combined entity ,good corporate governance practices ,good cash and credit record and references, points out Sharma at KPIT Cummins. Enhanced Skillsets and excellent supply chain management were few of the many merits Avnet saw in Ontrack Solutions during acquisition as per Desai.
The Good Indication
Trimax is focusing on cloud computing services. “The customer is increasingly looking for SLA based services with low cost, one point contact, flexibility and accessibility coupled with onsite and remote support. We would focus on domestic market for SMEs and turnkey projects in government and private sector,” says Madrecha.
KPIT Cummins and Systime will start executing joint go-to-market strategies for entire Oracle suite and will participate in the large Oracle deals leveraging their combined capabilities in the comprehensive consulting, faster implementation and the better support services.
M & A and Initial Public Offering (IPO) are the primary routes to raise capital for partner organizations. However, most IPOs of SI companies have not been much successful. M & A will hence be the flavor though it will happen as far and few and not by the dozens, opines Desai at Avnet.
It is an interesting time for the proficient partner companies as their growth chart might be on the radar of investment companies or larger partner companies.