Top 7 Reasons for the External Acquisition of Technology

Acquisitions are one of the most common types of investment within the corporate world today. This occurs when a corporation either purchases another firm that is already operational or makes an outright purchase of an already operational firm that wishes to enter the corporation’s market via mergers and acquisitions (M&A). Although these types of transactions are commonplace throughout many different types of businesses, technology is often considered to be one of the few areas where a company must have an acquisition in order to survive. That is not to say that there are no reasons for the acquisition of technology, however, the reasons for the external Acquiry acquisition of technology are unique to the technology sector.

Business Development: The Basics

One of the top reasons for technology acquisition is that it allows a firm that may not otherwise be able to remain competitive in their given market space, to do so by acquiring other firms with similar but less expensive technologies. The two main ways that this can happen is through direct technology integration, which involves the incorporation of existing technologies into one firm’s overall business plan or platform, or through indirect technology integration, which means that a firm may purchase technology from one firm and then integrate it into another firm’s platform, as a first step toward entering the market. While M&A strategies are often used to acquire the dominant technology in a given market space, technology acquisitions allow a firm to gain access to technology that may not yet be available through existing ownership or structure. Another reason for the purchase of technology is the creation of synergies between the newly acquired firm and its immediate and distant rivals. By developing a synergy between two or more similar firms, a firm can create new markets and enhance its competitive position in the overall market space.

Technology acquisition is also frequently used to improve the depth of a firm’s expertise in a particular technology space. As an example, Microsoft initially acquired programming language code-named Active Server Pages (ASP) from Sun Microsystems as an open source programming language that could be used by other Sun products, such as the Open Office suite. Through a series of code modifications, which included refactoring and general restructuring of the language into a more modular form, Microsoft was able to transform the ASP into a comprehensive tools platform that had extensive use in corporate environments, including Microsoft Office applications.

Another common reason for technology acquisition is technology duplication, which refers to the practice of purchasing the same technology as one of its competitors. For example, Cisco has made large investments in Cisco networking systems in an effort to monopolize the networking market. In order to gain advantage over Cisco, other firms have sought to adopt Cisco’s proprietary technology. In many cases, when a company acquires Cisco technology, it is doing so in an effort to remain ahead of Cisco in the global network market.

Finally, technology acquisition can also refer to the absorption of a firm’s knowledge of a specific technology into its own internally-developed technology platform. For instance, Apple Computer has developed the iPhone because of the research that their engineers performed to develop this application platform. In many cases, an organization needs to develop technologies internally before making them available to others. Asking an organization to purchase the technology outright allows it to dedicate its resources in research and development instead of diverting those resources into acquiring technology. As such, technology acquisition provides a solid way for companies to acquire new technologies that they can use to further improve their competitiveness in the market.

These are just a few of the several reasons why technology absorption is becoming a popular practice among corporations. One of the primary reasons why technology acquisition is a popular practice is the fact that it provides a company with significant short and long-term benefits. By acquiring specific technologies from a competitor or an independent provider, a corporation ensures that it will have the ability to customize that technology for its own purposes. Additionally, through technology acquisitions, a company can gain access to technology that may not be available through an independent provider. Lastly, technology acquisition gives a company the opportunity to differentiate its own products and services from that of its competitors, which is a key competitive strategy.