GartnerG2 Says Mergers and Acquisitions Are No Longer the Quick-Fix for Businesses; Relationships Provide More Flexibility and Agility
Special Report Examines Growth Opportunities Through Relationships, Not Ownership
SAN JOSE, Calif., August 5, 2002 - Mergers and acquisitions (M&A) are no longer the growth weapon they were before, so for companies to return to growth, executives must seize alternatives to M&A, according to GartnerG2, a research service of Gartner, Inc. (NYSE: IT and ITB). GartnerG2 analysts said companies should look at building relationships with other companies to meet customer demands.

"We have entered an era of real-time business that requires unprecedented agility and responsiveness. To react quickly to changing conditions, businesses must be flexible and nimble," said Cathy Spencer, research director covering strategic sourcing for GartnerG2. "Rather than broadening scope and increasing scale through M&A, many companies are choosing to develop broad reach through new technologies and business relationships and forming integrated business ecosystems.

GartnerG2 analysts say there are processes and functions within every business that could be performed better by other companies by building a variety of sourcing relationships. Most of today's sourcing relationships are tactical in nature, primarily driven by cost reduction. This will change over the next five years as many sourcing relationships become strategic and begin to include the most critical sources of business value, and encompass the notion of sharing competencies among companies for mutual benefit.

"From a business leader's point of view, sourcing decisions are deceptively simple: there are activities and processes your company should be doing itself and there are activities and processes that should be given to others," said Neil MacDonald, vice president and director of research for GartnerG2. "However, most businesses don't understand that the rules governing the "build versus buy" decision have changed. Getting this decision right means business growth, market leadership, faster delivery of solutions to market and improved agility. Getting it wrong means relegating yourself to the pack of followers or, in some cases, extinction."

GartnerG2 analysts say the first step in leveraging business partner competencies is for companies to identify their value discipline - their chosen path of competitive differentiation - and identify the critical business processes and functions that define value in the minds of their customers. Then companies need to identify which of those critical processes are part of their competitive differentiation and are core competencies Processes and functions that are non-core should be outsourced.

"In today's competitive business environment, you cannot succeed by trying to be all things to all people. Choose one specific value discipline for your business to pursue, and then select partners with competencies that complement it," said Spencer. "Partners that truly enhance or extend your core competency are essential to your competitiveness. Companies will achieve growth objectives by combining the typical core processes from the other value disciplines with their own value discipline through strategic relationships."

Additional information is available in the GartnerG2 report, "Beyond M&A: Growth Through Relationship, Not Ownership." This report examines the changing dynamics of mergers and acquisitions and provides recommendations on developing strategy, defining growth objectives and managing relationships between business partners. To obtain a free copy of the report, please go to www.gartnerG2.com.

Strategic sourcing involves developing a sourcing strategy and assessing the needs of the organization and whether or not certain functions should be outsourced or remain in-house. Gartner wrote the book on strategic sourcing and this essential piece takes all of the knowledge and real-world experience of Gartner analysts and consultants and integrates it into clear directives that can be used to achieve successful sourcing relationships. To order a free copy of Strategic Sourcing: The Book, please go to www.gartner.com/sourcing.

GartnerG2 is a research service from Gartner that helps business strategists guide and grow their businesses. For more information on the report and about GartnerG2 services, please visit www.gartnerG2.com.

Gartner, Inc. is a research and advisory firm that helps more than 10,500 clients understand technology and drive business growth. Gartner's businesses consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,000 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. Fiscal 2001 revenue totaled $963 million. For more information, visit www.gartner.com.
Contact:
Christy Pettey
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