Shifting CIO role fuels increase in enterprise tech mergers

CIOs' growing involvement with company business strategy has supported the increase of mergers and acquisitions among global enterprise software companies, according to The Wall Street Journal.

In 2018, disclosed deals for enterprise software firms totaled $182.2 billion, according to acquisition advisory firm Hampleton Partners' recent analysis, The Wall Street Journal reports. Five of the most expensive transactions in 2018 included IBM's $34 billion acquisition of open-source cloud software vendor Red Hat and the nearly $7 billion athenahealth acquisition by Veritas Capital, a private equity firm, and Evergreen Coast Capital, an affiliate of hedge fund Elliott Management.

The increasing number of mergers and acquisitions is a result of a "buy rather than build approach" that IT and software companies have taken on to enhance their services, according to the report. The approach has been driven by the evolving CIO role, Chris Pick, chief marketing officer of technology for Apptio, a business management software company, told The Wall Street Journal.

CIOs' preference to work with fewer technology vendors to develop more strategic partnerships adds to the increase of M&A activity. Additionally, the executives' expertise in IT services makes them valuable when it comes to combining IT function and business strategy during the M&A process, Mr. Pick said.

CIOs can help post-transaction because "organizations need to quickly understand what they have, where it is, who is using it, what vendors are involved and how to optimize the new portfolio," Mr. Pick told The Wall Street Journal.

To view the full report, click here.

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