Paper on External Acquisition, Internal Acquisition, and Technology

Technology companies spend huge amounts of money each year, on external technology acquisition.. High innovation and small companies are the biggest targets for acquisition. There are various reasons why companies engage in technology acquisition; Graebner, Eisenhardt, and Roundy (2010) discussed some of them. These includes: the need to enhance market power, through introduction of newer and better products; attaining strategic renewal of companies that are potentially declining, and also for companies to expand their technical capabilities. For instance, CISCO engaged in external technology acquisition; which resulted in enhanced videoconferencing capabilities and also increased the demand for networking products from the company. Once a technology has been acquired or in the process of acquisition, an organization has to follow up on various success factors to ensure that the acquired technologies accomplish their objectives.

External acquisition, requires effective partnership between suppliers of the technologies and the buyers. The success of such an acquisition would require effective management of those partnerships, effective execution of co-developmental projects, and an effective transmission of the acquired technology to the recipient system (Baker & Hart 2008). For these to happen satisfactorily; there is a need for collaboration between the acquiring firm and the supplier. This enables the suppliers to understand the needs of the acquiring firm and subsequently address those needs, through the new technologies. The companies engaging in the trade should also be a good fit. This can be ascertained based on due diligence, conducted prior to the execution of the acquisition. While acquiring new technologies, the existing technologies should not be completely eliminated (Vollmer, Springs, and Hawker 2012). The acquiring company, therefore, should retain the entire or major parts of the existing technologies, before fully implementing the new ones.

Question 2: Internal Acquisition

Research and Development (R&D) in any given organization, is one of the strategies used for internal acquisition of capacity. R& D enables organizations to change their performance with changes in technology (Laws, 2003). Companies, such as those in the technology industry, and others in fast changing business environments, requires great levels of innovation to keep up with the changing consumer needs. According to Berchicci (2013) R&D as a form of internal acquisition, determines the level of innovation associated with an organization. Where there is limited focus on internal R&D, there would be need for outsourcing of R&D resources; which subsequently results in lower levels of in-house capacity. Similarly, high levels of R&D imply sufficiency in the competence levels accorded (Cassiman and Veugelers 2002). An example of internal acquisition through R&D would be the case of a company like Apple Inc. engaging in R&D to improve the iPhone.

Internal acquisition is distinct from external acquisition in that, in the former, the product or technology being acquired does not change ownership, but is itself modified to address the changing needs of the existing owner. External acquisition on the other hand, deals with a change of ownership from one party to another. A perfect example of external acquisition, is the purchase of LinkedIn by Microsoft in 2015 (Parker 2015). The value of the acquiring company is, in such a case, changed by the cost of the acquisition. In an internal acquisition, the buyer gains intellectually as well as technologically. A firm’s technology outsourcing needs are inversely proportional to the level of R&D in which it engages. Berchicci (2013) asserts that, firms with weak R&D capacity are more likely to outsource R&D compared to those with strong R&D capacity.

Question 3: Dell Inc.

Dell is one of the computer technology companies that hold major market shares in the world. The company has grown through the years, progressing from a conventional personal computers (PC) Start-up Company, to a global leader in the technology industry. Dell has built its heritage through the years, by its commitment to customer needs. The company’s strategy is to provide solutions and products that are suitable for the customers’ business lifestyle and to address their business needs (Holzner, 2006). One of the strategiesit extensively use, is to expand the company’s offerings, to cater for the needs of customers. To achieve this, the company engages in acquisition of companies, such as Gale Technologies, which are well performing in certain areas (Dell Inc. 2018). Dell then preserves the characteristics that make the acquired companies successful in their respective technology areas.

Recently, the company acquired ‘SecureWorks Information Security Services’, which provides data protection services for companies. Gale Technologies,  acquired earlier, provides infrastructure automation software; which enables organizations to incorporate hybrid clouds and on-premise deployment activities, to enhance self-access to infrastructure. With its focus on innovation and improving customer experience, Dell Inc. engages in research and development activities, aimed at expanding the organizational offerings to global customers. The customer-driven innovation practices has enabled Dell to develop solutions towards some of the global challenges in information technology management (Holzner, 2006). Rather than competing with global suppliers, Dell works based on a partnering strategy, through which they collaborate with global leaders and industry groups, to help in realizing leadership in standards and technologies. Since its first innovation, Dell continues to work towards ground breaking developments in enterprise, small business, and home computing.

 

Reference List

Baker, M & Hart, S 2008, The marketing book, Routledge. Available from: <https://books.google.co.ke/books?id=fh-YIN69i6EC&pg=PA268&lpg=PA268&dq=Books+on++technology+acquisition+and+success+factors&source=bl&ots=A_3YyLEpvc&sig=oRHSr2gGE2-ITn10Obd5MvLJF64&hl=en&sa=X&ved=0ahUKEwik3vnW0JTcAhUbTo8KHRjACW0Q6AEIYjAI#v=onepage&q=Books%20on%20%20technology%20acquisition%20and%20success%20factors&f=false>. [10 July 2018].

Berchicci, L 2013, ‘Towards an open R&D system: internal R&D investment, external knowledge acquisition and innovative performance’, Research Policy, vol. 42, no. 1, pp. 117- 127. Available from: <https://www.sciencedirect.com/science/article/pii/S0048733312001266>. [10 July 2018].

Cassiman, B & Veugelers, R 2002, ‘DP3284 Complementarity in the innovation strategy: internal r&d, external technology acquisition and cooperation’, London, Center for Economic Policy Research. Available from <https://cepr.org/active/publications/cite.php?Type=DP&Item=3284>. [10 July 2018].

Dell Inc. 2018, About Dell, Available from: <http://www.dell.com/learn/ed/en/edcorp1/about-dell-innovation-at-dell?c=ed&l=en&s=corp&cs=edcorp1>. [10 July 2018].

Graebner, ME, Eisenhardt, KM & Roundy, PT 2010, ‘Success and failure in technology acquisitions: Lessons for buyers and sellers’, Academy of Management Perspectives, vol. 24, no. 3, pp. 73- 92. Available from: <https://www.jstor.org/stable/29764975?seq=1#page_scan_tab_contents>. [10 July 2018].

Holzner, S 2006, How Dell does it, McGraw Hill Professional, Available from: <https://books.google.co.ke/books?id=dkLtQyAe45gC&dq=editions:ISBN0072262540>. [10 July 2018].

Laws, S 2003, Research for development: a practical guide, Sage Publications, Available from: <https://books.google.co.ke/books?id=m1n4sOFVOmcC&printsec=frontcover#v=onepage&q&f=false>. [10 July 2018]

Parker, C 2015, ‘The 12 biggest technology acquisitions of all time’, World Economic Forum, Available from: <https://www.weforum.org/agenda/2015/10/the-12-biggest-technology-acquisitions-of-all-time/>. [10 July 2015].

Vollmer, CAH, Springs, G & Hawkes Jnr, HP 2012, ‘How to run a hurry- up offense – six key success factors for digital acquisition integration’, Pwc Strategy. Available from: <https://www.strategyand.pwc.com/media/file/How-to-run-a-hurry-up-offense.pdf>. [10 July 2018].