Hacker News Reader

Growth through acquisition is a pretty workable model. Especially when you cut the resulting companies to the bone and basically put their product on life support.

For products used by big enterprises its pretty amazing how long a product can go without meaningful updates and still have companies paying for maintenance. I've seen it a few times now, the engineering/testing is basically cut to one developer who's job is basically to fix bugs and nothing else. For many enterprises this is a pretty decent model. In many cases they don't need or want new features, and the IT guys are very happy if they just get a point release once or twice a year that is a 100% drop in replacement with some bugs fixed.

For a large conglomerate that can sell new licenses as part of a bundle deal, its a good plan to, the customer base grows at about the same rate as people drop the products. The result is just a constant cash flow with basically no overhead.

It's probably not a terrible business model in some regards. However, as a software engineer there - it was miserable. Compensation was crap too. I wouldn't recommend it as a place to work unless you're high up. I think those people got $$$.

I would pay _more_ for many products, if they offered this option.

I don't want whatever dark patterns and bonus features ( https://devblogs.microsoft.com/oldnewthing/20061101-03/?p=29... ) marketing came up with this year. I want the basic functionality you had at 1.0, with all the bugfixes since.

Exactly my thoughts as well! The average update to a product I use regularly is strongly negative. If I'm already using it that means that it mostly does what I need it to. Constant updates are far more likely to change or degrade existing functionality and/or add bloat that slows performance or clutters the UI, than they are to improve something that already works.

I strongly agree! I really like the idea of a "finished" product that doesn't keep adding new features and growing the team just because they took too much funding and need to find more ways to grow. This is kind of product I'm trying to build with my startup [1]. (I did take some funding from Earnest Capital, but this was just to help with my personal living expenses and pay for a few larger projects.)

[1] https://docspring.com

[2] https://earnestcapital.com

Reminds me of how this has not worked - for Mint.com. It was cool when it first came out, got acquired by intuit and now is an old, kinda useless app that was never updated.

Yup - this was the CA (Computer Associates) working model for decades. And as further commenters in the thread show, sometimes for enterprises reliably staying the same year after year is a GOOD thing.

I think many companies built around one successful product will hit that point in their lifecycle... where putting more work into perfecting and improving the product provides diminishing returns, but there is a solid demand for the current version of the product.

At that point, it is absolutely the best thing to get rid of everyone and just keep selling the product you have. Too often a company tries to hold on to long, adding new features that don't actually improve anything.

I wish more companies were willing to admit when they reached that point.

A lot of companies try to pivot using the core product as income to find the next big win, with varying levels of success.

But, yes your right at some point you have to admit your product is mature, and cut the engineering effort on that product, hopefully before you start driving customers away.

Evernote.

Quintus: "People should know when they're conquered."

Gen. Maximus: "Would you, Quintus? Would I?"

- Gladiator, 2000

This used to be the standard acquisition model for a few decades but I felt that since 2010 most large corporations figured out this wasn't a great strategy as they lost all the mindshare and eventually the market to a new competitor that sprung up from nowhere.

When I was at Oracle this was a well known business plan, if Oracle acquired it a bunch of guys who knew the market/problem well would get together, seek funding and start a competitor aimed at the existing customer base. People couldnt be happier to get out of working with Oracle so it worked well for a long time.

More recently larger companies have learned to leave their acquisitions alone. Just look at LinkedIn as a great example.

Interesting, I know that Oracle paid $850 million for moat analytics, would you happen to know any competitors that could have sprung from that acquisition?

OpenText acquired Documentum, which itself acquired a whole bunch of other companies earlier.

They're both to me agglomeration of barely integrated, confusing products that require a small army to maintain.

If someone could acquire the memories of Documentum from my mind I might pay them!

lol... Documentum... there's name I haven heard in ages.

The legacy cms... Interwoven, Vignette, Teamsite. Seems like Open Text acquired them all! What a mess!

Interwoven and teamsite are the same thing (former teamsite dev here). A friend of mine once said that OpenText is where enterprise CMS’ go to die.

What's worse is, that they also acquired multiple competing businesses on the market with similar products in a very short time frame, Web Content Management Software in our case. That was about a decade ago. This wreaked havoc on the morale of the teams within.

On one hand, they had to handle a new management and culture of a global company, which is completely different compared to the smaller scale they worked in before.

On the other hand, each team knew, that they had to prove to management, that their product was superior compared to the others. Any attempt to integrate those products with each other or learn from them was futile, because you could not simply remove competitive behavior among those teams.

The best decision in my life was leaving this nightmare. I never heard of the products again.

> (Strategy of the company AFAIK is to acquire lots of enterprise offerings, integrate the product with their current offering, fire everyone they can, and then sell the product with their current offering in hopes of getting bigger numbers to prop up stock price further)

That's profitable because enterprise sales are so glacial.

So, if you have the money, it's better to wait until somebody else finishes the slog and gets the contract, and then you can just buy that company to get the enterprise customer.

As a former customer, it’s that the quality of service and the overall understanding of the products disappeared once they became OpenText property.

Never had an issue with the original vendors but OpenText made the decision to not renew easier.

That does not engender confidence when choosing products. I would be wary of them letting products either wither or just milk their momentum for as long as they can.

The aquire and fire strat is business as a whole. You dont need 5 people doing the job of 2 when it comes to convergence.

The much mocked "synergies" that come from an acquisition. I never did understand why people make fun of that term so much, it's a very simple concept.

When a word is used to the point of meaninglessness (when "expected synergies" don't exist), or when its use is really a euphemism for "we're going to fire a bunch of people" then it exposes itself to mockery.

Synergy's eventual heat death was, I'd hypothesize, greatly accelerated due to its preponderance in merger announcements and consulting decks in the 80s, 90s, and 2000s.

Would be nice to use it again without caveats. Maybe one day.

Eliminating duplicative or wasteful structures are “synergies” whether that’s engineering, sales, support, manufacturing, or G&A staff, real estate, or basically anything else that has a fixed cost component.

The fact that we’re in a people-heavy and asset-light industry means that these synergies are often people-related doesn’t make the use of the term improper or a euphemism any more than any other industry common term.

The dictionary definition of this is typically something like "when combined, greater than the sum of their individual parts."

I guess technically if you combine two companies and accomplish the same thing but more cheaply due to overlap the company is therefore "greater" but you see where the meaning is already watered down from its original intent. This is elimination of redundancy, not synergy.

"This merger will result in a big ROI due to redundancy that can be eliminated" is the proper way to say it. Not "This merger will realize a number of synergies". Hence the euphemism comment.

> Eliminating duplicative or wasteful structures are “synergies” whether that’s engineering, sales, support, manufacturing, or G&A staff, real estate, or basically anything else that has a fixed cost component.

I would characterize that as removing redundancy. Synergy has a different definition altogether.

The definitions I found across several dictionaries (after looking just now) all amounted to something like:

> the interaction of elements that when combined produce a total effect that is greater than the sum of the individual elements, contributions, etc.

When an intended effect of a for-profit company is profit and a combination of two companies becomes more profitable (has a greater total intended effect) as a result of the combination, how is that altogether different?

Because the definition of "synergy" doesn't contain the part where you start firing people and closing departments to deduplicate jobs done in the now merged companies.

It's because it was radically overused by managers trying to justify all sorts of dumbassery, so much so that it became a joke. E.g., it was memorialized in this lovely deck of corporate jargon flashcards: https://www.amazon.com/Corporate-Flashcards-Knock/dp/1601060...

Nah. Per a study The Economist covered some years back, about half of all mergers destroy value.

The acquire-and-cut-to-the-bone strategy is a good way to juice short-term numbers, but it's bad in the long term in that you destroy the drivers of long-term growth. All the execs get their bonuses and get to cash out their options at a high value, it's bad for everybody else in the long term: customers, employees, investors.

The theoretical justification for post-merger cuts has also been declining for some time. Improved computation and communication have made it much easier to outsource non-critical functions, so merged companies will have a lot redundancy today. E.g., in a merger 20 years ago, maybe two merged tech companies could consolidate data centers and get rid of a bunch of ops staff. Now maybe they get a slight improvement on their AWS bill and they can lose a few execs, but it's not nearly the same.

And let's not forget the diseconomies of scale. Everybody here should already know that small companies can innovate much more quickly than large ones. And mergers have their own costs; I consulted for a while for a company that grew mainly through mergers, and you cannot imagine the number of meetings that existed just to bridge fault lines between different legacy software, different teams, different offices. It was a mess.

"half of all mergers destroy value"

I keep hearing this and it is from a widely misunderstood study. It did not find that half of all mergers destroyed value, instead, it found that only half of mergers created value. The proportion of mergers that destroyed value was much smaller (about 20% iirc). Unfortunately, most people did not bother looking beyond the headline and extrapolated incorrectly.

You appear to have the numbers backwards: https://www.theguardian.com/business/1999/nov/29/10