PwC: SDN to Drive Mergers and Acquisitions
PwC acquisitions and deals report identifies commoditization, convergence as deal influencers in 2014.
Driven by factors like software defined networking (SDN), more mergers and acquisitions look likely for the networking industry vendor landscape in 2014.
Multinational consulting and professional services firm PricewaterhouseCoopers (PwC) yesterday released its "US Technology Deals Insights" mergers and acquisitions analysis report, which points to software defined networking (SDN) as a major driver of change in the industry moving forward.
Among the reasons PwC lists for SDN's prominence are "commoditization concerns." SDN in general is expected to "make more efficient use of hardware components," the report observes. The abstraction of intelligence out of networking gear and into software means commodity hardware could play a large role in the software-defined future, with the physical network operating primarily to pass packets. In response, hardware companies will look for ways to add value and differentiate their offerings to remain competitive, PwC predicts. This quest for differentiation may lead to more mergers and acquisitions moving forward. The quest for differentiation also underlies expected "growth and expansion" of vendors as software, hardware, and IT services continue to converge.
Hardware overall had "the highest deal value of any technology sector since the Great Recession," the PwC report states, adding up to "nearly half of total US technology deal value." Volume activity did decline, as it did throughout the technology industry overall, but deal volume grew steadily. 78 percent of the year's total hardware and networking deal value closed near the end of 2013. Among the major deals PwC named were the $24.9 billion privatization of Dell in Q4 and Cisco's $2.7 billion acquisition of Sourcefire, also in Q4. Looking forward, PwC expects 2014 to start strong as Microsoft closes its $7.2 billion acquisition of Nokia's device and services business unit.
“User experience, new revenue models and process efficiencies will be at the heart of what technology companies want to accomplish with deal activity in 2014. The underlying theme is to enable intelligence for everything across industries,” said Rob Fisher, PwC’s US technology deals leader, in a statement.
Jude Chao is managing editor of Enterprise Networking Planet. Follow her on Twitter @judechao.