Merger & acquisition activity heats up as utility computing services sector grows
On November 12, mindSHIFT Technologies, a Virginia-based utility computing services company, announced its acquisition of The Telluride Group, a Boston area managed service provider (MSP), a move that sets the tone for a growing number of mergers and acquisitions in this rapidly evolving market over the coming year.
mindSHIFT, focused on small and medium sized businesses (SMBs), has been on the acquisition prowl for the past year in an attempt to build a nationwide presence and to aggressively expand its customer base. mindSHIFT's purchase of Telluride is the latest in a series of acquisitions made by the company in 2003. In February mindSHIFT acquired Universal Access Consulting (UAC), a New Jersey-based IT services firm, and in June mindSHIFT purchased Oleran Net Solutions (Oleran), a Washington, DC-area managed server and security outsourcing provider.
The combined companies can now provide a suite of managed IT services to clients in fifteen states from regional operation centers in the New England area, the New York/New Jersey/Connecticut area, and the Baltimore/Washington, DC area. mindSHIFT's utility computing services now include network monitoring and e-mail management, LAN and PC desktop management, data backup and disaster recovery, anti-virus and managed security, and help desk support.
The Telluride acquisition is mindSHIFT's first use of the $11
million the company received from the latest round of funding it secured in
November from Fidelity Ventures, the venture capital arm of Fidelity
Investments, and Columbia Capital.
mindSHIFT's Telluride acquisition reinforces one of the key findings of the recent MSPAlliance/THINKstrategies industry benchmark study. The study showed that nearly seventy percent of the fifty study participants are currently seeking merger and acquisition candidates, and more than half are available for merger and acquisition offers.
Industry consolidation is natural in any volatile, high growth industry. Acquiring companies, like mindSHIFT, are betting they can succeed by rolling up a series of regional MSPs, accumulating their customers, adding their service delivery capabilities, and gaining economies of scale.
Consolidation will certainly not be easy on the great number of utility computing service providers who will disappear by the end of 2004. Nor will it be easy on the acquiring companies who must take on the burden and the not insignificant challenge of integration while keeping pace with the rapidly changing requirements of the utility computing services market. Acquiring companies must not only maintain but also improve service and support levels even as they try to squeeze greater operating efficiencies and greater profitability out of their expanded operations.
The consolidation of the utility computing service provider population will also undoubtedly affect current and potential customers. If your organization is currently contracting for utility computing services or is considering these services, the best way to prevent the consolidation trend from adversely impacting you is to make sure the corporate executives don't take your business for granted. Ask to meet the new management team so that you can learn not only how they are going to maintain current service levels but also how they intend to improve the quality of service you will receive in the future.
utilitycomputing.itworld.com
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