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Over the past few years, there has been an explosion of mergers and acquisitions within the IT service space. Hundreds of smaller IT providers that provide a boutique service to their local businesses of a similar size, have been bought up by larger and more corporate IT providers.
What started this trend?
There are two main reasons why so many smaller IT service providers have been bought out.
The first is because there has been an influx of private equity investment into the space (largely driven by American firms), and the second is because business founders of small providers have decided to sell up.
Medium to large sized IT providers that have taken private equity investment have been given the opportunity to bypass organic growth by buying up smaller IT providers. They can then merge the clientele of the smaller providers with their own and achieve a larger market share at a quicker rate.
But why are so many small IT providers selling up?
The period of 1996 to 2002 saw the establishment of hundreds of IT service providers in the UK. Most of the business founders were in their late 20s at the time. Fast forward a few decades to the 2020s, and now many of these business founders are in their mid-50s and thinking about retirement.
It is completely reasonable for a business founder to accept a generous offer of a merger and/or acquisition for their business which will contribute to their retirement fund after decades of stress and excitement of being an entrepreneur.
What are the consequences for the clients of those small IT service providers?
These mergers and acquisitions have led to a big decline in service quality.
Some examples of the decline in quality service can be seen in the response times in how long it takes for the provider to begin working on a logged ticket. The response time could go from within 30 minutes to start working on an issue to within 24-48 hours! The larger IT provider is probably dealing with a much larger client base than your previous provider, which could lead to slower response times when clients need help or support.
Other examples can include poor communication and inconsistent service. The larger IT provider may not communicate as effectively with clients as the smaller IT provider did. Clients may feel ignored or undervalued and may not be kept up to date on important changes or updates. Additionally, the larger IT provider may not be able to provide the same level of personalised service that the smaller IT provider did, so clients may feel like they are just a number.
The merger may also create a mismatch in service expectations between the size of the organisation that partnered with a smaller IT provider and the larger corporation that has now acquired them. It is highly likely that a small-medium sized business would not have chosen to work with a large corporate IT provider which is why they chose to work with a smaller one in the first place.
The clients of the smaller IT provider that was acquired may now experience ‘getting lost in the system’ amongst this huge client pool they now find themselves in.
The relationship with the IT provider now becomes more transactional.
The reality of a merger and acquisition through private equity investment, is that all investors require a return on investment. This will likely lead to the larger IT provider who has taken investment to become shareholder and profit driven as opposed to service driven.
It’s an unfortunate reality that if your business is in this situation, and the new larger IT provider has many other clients that are bigger than you are, then your business just will not be a priority for them.
We are now beginning to see the consequences of these types of business deals as it is leading to many small-medium sized businesses wanting to change IT providers. Many are wanting to go back to a smaller boutique provider that can give that intimate but excellent service and bring great value to their business.
However, small IT providers that can offer these types of popular services to small-medium sized businesses in their local areas will soon begin to dwindle if they continue to be bought out.
What to do if you are currently in this situation as a business founder:
Firstly, you can start by arranging a meeting with your merger and acquisition manager as the larger company should have one. In the meeting you can discuss IT expectations and whether the new IT provider can match the service of your current provider or discuss any issues that your business has been experiencing since the takeover happened. If the meeting goes well then monitor the service for the next three months to see whether the service expectations are matched or if any improvement are made.
If no improvements are made after three to six months and you know deep down that this is not the right business relationship for you, then it is strongly recommended that you look into switching IT providers.
Your business is the result of all your hard work, grit and determination and it deserves to be protected. Your business deserves an IT provider that will form an equal partnership with you to enable your success and not make your life difficult by providing poor service and inadequate IT functions.
If you are seriously thinking about switching IT providers, then we have written a step-by-step guide detailing exactly what you can expect when you go through the process and how long it is likely to take to complete. Click here to view it.
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