Consolidation always has been a fact of life in the banking technology business -- really, in any business. It's almost inevitable that growing companies will try to boost their growth by acquiring their competitors. Another acquisition strategy is to attempt to enhance your value proposition by acquiring expertise, products and share in an area (i.e., a solution or market) in which you may not be seen as dominant.
Although acquisition activity frequently flourishes in "hot" technology areas, in our business we often see it taking place in segments that are less high-profile -- as evidenced by some big deals that have taken place recently in the document management/document technologies space. Earlier this month HP announced that it would acquire Lexington, Ky.-based Exstream Software, and just before the end of the year EMC confirmed plans to acquire Carlsbad, Calif.-based Document Sciences.
With all due respect, document technologies such as imaging, output and printing customization don't typically get the buzz that surrounds "sexier" offerings, such as mobile, telematics and social networking tools. But banks and other financial services organizations couldn't function without them. Although document management would not be considered a financial services-specific technology, both Exstream's and Document Sciences' offerings and customer bases show how important it is to financial institutions. And that, no doubt, is part of the appeal to the acquirers, with both HP and EMC theoretically looking to broaden their offerings to this business.
If you are a bank customer of Document Sciences or Exstream, should these deals make you happy or anxious? Merging with a larger, deeper-pocketed entity promises new sources of funding and expansion for smaller, technologically vertical solutions providers. However, more often than not, independence eventually goes by the wayside. Just as in bank mergers, business considerations relating to scale, redundancy, efficiency and branding eventually become the guiding considerations.
As far as why the spotlight is on the document management sector, it's possible that the business case for paperless, automated and customizable communications and transactions now is the proverbial slam dunk. Or it could simply be a competitive chain reaction.