As Insight this week announced its intention to acquire fellow reselling giant PCM, channel players across the US witnessed yet another acquisition in the fast-changing landscape.
Insight valued PCM at $581m, and is slated to make annual cost savings of $70m by 2021 by consolidating IT and delivery systems, real estate and operational integrations, according to Insight's announcement.
In reality, though, what does all this mean for US channel players and their customers? Insight CEO Ken Lamneck said in the announcement that the combined firm will be "even better positioned to capitalize on our solution area investments through the addition of more technical and sales resources and access to thousands of new clients…".
But does bigger mean better? And how will this, plus the acquisition more broadly, affect the US channel and Insight's fellow solution providers, if at all?
Where channel players agree they may feel the impact of an acquisition such as the Insight-PCM deal is in the potential for new customers. Seth Russell, CEO and president at St. Louis, MO-based Computer St. Louis points out that while the majority of customers tend to stay with a newly combined entity, there are always customers who will be "disenchanted' with the acquisition and be seeking a new service provider. In the case of Insight and PCM, it will be providers in the product space that could take benefit from this customer drop off, Russell notes.
For those channel players looking to take advantage of this "customer churn and shuffle", they would do well to monitor the next 18 to 24 months of activity at Insight, according to George Bardissi, president and CEO at Philadelphia, PA-based Bardissi Enterprises, who says this is likely the key period for customer drop-offs.
"During that period these entities will largely continue to run the way they've always run until they figure out how the combined organization will look after the transition period, so anyone who competes with them has a window, because if there's going to be a backlash where customers are unhappy with the level of service they're getting from these entities during the transition, then this is the time when they'll make a shift."
He points out that just because a firm becomes larger and gains more staff, it doesn't mean the service is going to get better. Quite the opposite - merging firms can often struggle to be agile and are also at risk of losing focus on the customer as they proceed with trying to bring together the two entities.
"This is where customers may say ‘maybe I don't want the mega company, maybe I want somebody that's a little bit more willing to be nimble and able to react to my business'. And that's where the smaller service provider can win in that period," Bardissi told CPI.
Customers aren't the only way smaller players may benefit when a huge channel acquisition takes place. Staff lay-offs are inevitable, according to Raj Goel, CTO at New York City, NY-based Brainlink, which means that talented people will be in the market looking for new positions. This has a number of implications for smaller channel players, including talent acquisition, customer gain and market saturation.
"They're going to lay off some really good people and some long-term relationships," Goel told CPI in an interview. "And laid-off staffers…will take their book of contacts and book of business with them to a competitor. That's what I see happening, which means this is, I think, an opportunity for resellers who are competing with Insight and PCM to possibly acquire really good sales or operations folks at a discount."
The movement of staff also, of course, means further movement of customers. Goel notes that often customers lose key contacts at the newly acquired firm and so will seek them out at their new company.
"I think you're going to see some client defections, because we've already seen that ourselves where some of the vendors we work with post-merger let people go. And do we follow those people to their new employers? Yes, because the team left behind was just terrible."
The channel may also find that staff laid off by a newly merged entity will choose to work for themselves rather than join a competitor, according to Russell. For existing VARs and MSPs, this brings with it questions not only of competition, but also saturation and fragmentation.
"There will be people - especially people who are a part of those companies that are acquired - who decide ‘I'll just do it on my own for a while', and then someday they might join another company again," Russell said. "I think this will continue to create fragmentation in the market. It may consolidate slightly, but not in a meaningful way."
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