In the tech industry, acquisitions are a fact of life. Big companies look to acquisitions for innovation and talent, and many entrepreneurs hope that their hard work will one day result in their creations being acquired.
When it comes to who is doing the acquiring in 2010, Google is at the head of the pack. In search of technologies and services that compliment its initiatives, and perhaps even the next big thing, the search giant has snapped up 23 companies this year according to CB Insights.
Standing in stark contrast to Google's acquisition party is Microsoft. The software behemoth may be competing with other big tech companies and younger startups across a number of technology markets, but it hasn't made a single acquisition this year.
There are numerous possible reasons for this. Perhaps Microsoft became trigger shy after its failed bid for Yahoo. Perhaps it's too slow. Or perhaps it just doesn't see anything worth acquiring. Whatever the case, its lack of acquisitions is seen by many as a problem.
News.com's Dave Rosenberg wrote that by failing to acquire, "Microsoft is losing out not just on the top start-up technologies, but also on the best talent available." He notes that Microsoft has needs in a variety of spaces, from mobile to search to social networking, and there are plenty of startups doing interesting things in those spaces. Conceivably, some of those startups might be able to help Microsoft.
But it's also conceivable that they wouldn't. There are plenty of promising startups doing interesting things but many of them simply won't scale, even if they're bought out by a larger company. As we see time and time again, promising startups often fizzle out or die under larger corporate parents. Mismanagement may be a reason in some cases, but in many others, the startups had limited potential for scale anyway.
The truth is that a good number of acquisitions today are driven by the desire to acquire talent not products. But the truth is that talent often leaves soon after the deal is done. After all, many of the smartest people in tech can't fight the urge to do their own thing. Once they've sold their baby, they can only thrive by going out and creating another one.
So is Google buying too much, or is Microsoft buying too little? It's not the right question. Google and Microsoft obviously compete in some areas but not others. Microsoft's lack of acquisitions certainly raises some red flags about its overall competitiveness going forward. After all, it's hard to believe that tomorrow's groundbreaking innovation is going to come from within Microsoft. But it's not entirely clear that Google's acquisitions will help it evolve and innovate any more effectively either. It is now a mature company too, and its overall acquisition track record isn't all that impressive.
At the end of the day, companies need to remember that playing the acquisition game successfully doesn't come from making the most acquisitions. It comes from making the right acquisitions, and avoiding the wrong ones. If you don't acquire, it's impossible to make the right ones. If you acquire too much, it's difficult to avoid the wrong ones.