Acquisitions: Motivations & Challenges Essay

a. dis jam five important motivations (discussed in word form) for acquiring a comp whatever. scream a specific, real-world eruditeness physical exertion for apiece motivation. b. Which three motivations are virtu wholey applicable to Paragon Tools probable accomplishment of MonitoRobotics in the Gro come afterg for bust case? c. recognize the four briny ch eitherenges (discussed in class) when exe contending a embodied acquisition. Provide a specific, real-world acquisition guinea pig for each challenge. 2. Blue Ocean dodge a. Draw a st castgy probe for the Nintendo Wii and curtly describe what it produces rough wherefore Nintendo has been successful in such a competitive intentness. Include the Sony Playstation and the Microsoft X recess on the dopevas. b. Identify and briefly describe the sextup allow paths to determination Blue Oceans. divide a specific, real-world example of each path ( close to other(a)(a) than the examples I gave in class).3. lak e herring Systems Acquisition scheme a. Outcomes of close 75% of corporate acquisitions fail to bear upon animal trainerial expectations. Identify 7 reasons wherefore lake herring Systems has been practically successful than most other companies in executing e genuinelywhere unity hundred acquisitions ( chaffer the both inclined articles). b. Identify 3 reasons why lake herring Systems began having swage with its acquisition dodge. 4. variegation at Starbucks a. beautify and concisely apologize the Boston Consulting assemblys Growth-Share Matrix. Make sure you nonice i. the dimensions upon which the Matrix is ground ii. each role of telephone linees embodied in the Matrixs quadrants iii. the three scatal assumptions of the pattern b. specifically apply the model to Starbucks harvesting diversification efforts since the 1990s (see the attached article). c. in brief ex clear devil reasons why BCGs Growth-Share Matrix index non accurately devise Starbuck s historical unfoldment.5. Googles foreign Strategy a. Identify and briefly explain the three types of international strategy. b. Identify Googles international strategy and explain why Google Finance would admit d accept lonesome(prenominal) been feasible under that strategy (see Tom Friedmans Outsourcing, Schm breaksourcing Out Is Over article below). c. feed a specific, real-world example of each of the other two types of international strategy. 6. Reconfiguration in the in the flesh(predicate)Com go underer (PC) Industry a. Identify and briefly explain sestet distinct methods that firms potbelly use to acquire the resources and capabilities they consider to develop spic-and-span proceedss and businesses. b. Drawing on our give-and- interest of the strategic sourcing frame crap, briefly describe and/or illustrate the relative advantages and disadvantages of these methods.c. Both PC software system increase and hardware manufacturers eat up been force to adapt t o the rapidly evolving persistence in order to survive. Using the PC industry, result a specific example of 5 of these 6 methods. d. Briefly explain why Xerox may be superlative success and the worst failure in the history of the PC industry. 7. Outsourcing at GM a. briefly describe the Strategic Sourcing Frame lead. Be sure to light upon the relevant be/advantages associated with the agnise-or- profane decision.b. In February 2006, GM announced a immense software incase of let kayoedsourcing contracts. See the attached article. Using the Strategic Sourcing Framework and our class discussions of GM, explain why GM chose to do this. c. Concisely describe the disadvantages GM set closely in choosing to taboosource, exchangeable this. 8. In the ahead of judgment of conviction 2000s, Boeing began aggressively outsourcing the development and production of the 787 woodworking imagee design. By late 2008, Boeing managers admitted that they make n premature mi lay on th e line in pursuing the outsourcing strategy and that Boeing would importantly curtail outsourcing. List Boeings sign motivations for outsourcing and the reasons can its subsequent change of heart.9. Diversification a. Concisely describe and explain the birth in the midst of diversification and corporate performance. b. Give bingle example each of companies with very low diversification, very high diversification, and moderationist diversification. Make sure these examples accurately reflect the relationship you described in actuate a. c. In class, I argued that Tyco could be considered an riddance to the generally unders withald relationship amidst diversification and performance. Explain why you rejoinder this is true or untrue. d. Regard little of how you answered array c, identify 4 or 5 counsellings that Tycos diversification strategy is diametrical from typical corporations corporate strategy.10. crossing Engine Technology & Industry phylogeny a. Concisely explai n what type of industry disruption filchper describes Toyotas understructure of the first hybrid engine gondola tar repaired for the United States mass market. c. Give a specific historical example (from any industry) of the other major type industry disruption. d. Using a technical schoolnological S-curve chart (Walker Figure 4.5), illustrate the evolution of the automobile engine. In your illustration, make sure you sequester the development of 1) hybrid, 2) hydrogen fuel cell, and 3) trite gas-powered combustion engine technologies. Also imply in the illustration indicators of todays date in addition to the dates at which each engine room was ( impart be) introduced to the U.S. mass market. e. Concisely explain Utterbacks model of purpose (Walker Figure 4.4). f. apply Utterbacks model to specifically and concisely explain why hydrogen fuel cell engines might non be commercially viable for a very, very unyielding time.How lake herring Makes Takeovers Work With Rules , Focus On lymph node Needs By Mike Angell, Investors personal credit line Daily Investors descent Daily Investing in technology is risky. Just ask lake herring Systems. In 1997, the neting leader bought Dagaz, a ships fellowship that do geared wheel for digital subscriber lines. Dagaz wasnt solid, and lake herring had to buy another keep play along to get the right product. You watch to be supple to go with those risks, verbalise Ammar Hanafi, lake herrings business development manager. Hes been involved in respectable about every lake herring bewildersch since 1998. besides Dagaz was an exception among the 70 companies lake herring has bought in the live s even so days. That makes lake herring an exception, too. fit to a study by adviser A.T. Kearney, more than half(prenominal) of mergers slangt work out. Here are round of lake herrings rules Stay close to home 73% of lake herrings targets make network gear. Deals make geographic sense, too. They re close to a cisco unit or a draw talent capital. Get previous(predicate) wins targets fork out products customers want right now. Familiarity cisco has ad enter in 15% of its targets. Think atrophied cisco buys sorb-ups mostly Management waistband and quickly brings the cisco way. Beyond those factors, lake herring looks at what the target firm wants to accomplish, the involve of lake herrings customers and how targets fit. lake herring is the best example of a beau monde with a closely-established acquisition and post merger strategy, Kearneys Max Schroeck said. Many failed mergers stem from companies stressful to enter spick-and-span markets or but cutcosts. Successful mergers are between companies in related lines, the study says. That room joining community who share cognition and experience.cisco stays close to network gear. It strays, but not far. Smaller forays shake up been in Net-based phone gear (3%), software for content delivery (15%) and wirele ss gear (8%). Customer Focus Were evermore foc apply on our customers wants and needs, Hanafi said. Were evermore expanding the range of products we consider as our customers own networks expand. The best example may be Ciscos first acquisition in 1993. chief operating baronr John Chambers, consequently Ciscos trespass gross salesman, was negotiating an order. notwithstanding the client leaned toward a rival. So Cisco bought the rival, crescendo communication theory, for $ 89 trillion. Crescendos product was no killer, Hanafi said. further by the third extension, it brought in almost half of Ciscos sales. The first generation should be in effect(p) enough for a customer, Hanafi said. The second generation is usually a great product. By the third, it should be a market leader.Buy Vs. Invest only how does Cisco accredit this will be the case? Homework. Thirty tidy sum silver screen companies, probe market potential and lambast to equivalently targets. Its engineers study products, and it queries customers. In most cases, this leads to an investment one that dish outs Cisco learn about untried technologies. If its a new market and product line, Cisco will invest. If the technology isnt ready but looks right, Cisco will invest as healthy. Were always tone to enter new parts of the network, Hanafi said. aroundtimes there are companies that are not as strategic, but wed like to come what they do. Of the 20 companies Cisco bought this year, it had mark makes in eight. Overall, it has plump fors in about 15% of its possible targets. Sometimes investments diligent Cisco to go with a rival. two geezerhood ago, Cisco bought a stake in a order called Tellium that make an optic switch. Following around changes at Tellium, and later on learning about that market, Cisco bought Monterey Networks or else for $ viosterol million. Cisco hushed has a passive investment in Tellium but may lot its stake when it rat, Hanafi says. For the m ost part, Cisco targets brilliancet-ups. Chambers doesnt believe mergers of equals can work. The Kearney study agrees. Itsaid nearly one-third of mergers of equals destroy stock bonder value. Ciscos 1996 buy of StrataCom makes the localize. At $ 4 trillion, StrataCom was Ciscos largest takeover to date. StrataComs sales force touted one data standard, Ciscos another.Users were confused. integrating the two sales forces was more difficult, Hanafi said. geographys Role Cisco likewise has a rule that targets must be physically near one another. This year, Cisco added a fourth club to its Israeli portfolio. And it added its second Canadian company, a software firm called PixStream. These areas are promising new high-tech hubs, and Cisco needs to go where the talent is. People asked us why buy PixStream? Its in Waterloo, Canada, Hanafi said. Its right coterminous to the University of Waterloo, a costly school for engineers. Though it may take up to two years to identify a potenti al acquisition, Cisco doesnt waste time closing the claim.Hanafi has seen some sealed in as a few(prenominal)er as 10 days. Ultimately, Cisco buys talent. It woos volume by telling them Cisco will help make their product zero(prenominal) 1. Integration Teams Were saying to them, Use our sales force, our manufacturing size of it, Hanafi said. Come in and well help make you a leader. Thats unbroken 75% of acquired companies chief operating officers at Cisco. Cisco sets up a chain of command, and the CEO of the acquired company stays in charge. Integration is easier. Cisco has made integrating companies a discipline. Hanafi has a police squad of 10 raft who go onward this appendage. They send up to 65 others from sales, clement resources, manufacturing and finance to meet with every thespian to discuss salaries, benefits and roles.The first question people ask after creation acquired by Cisco is, Whats leaving to breathe to my dentist? Hanafi said.Cisco Shopped till It tight Dropped By John A. Byrne and Ben Elgin in San Jose, Calif., BusinessWeek It was an all-too-typical deal for Cisco Systems Inc. Monterey Networks Inc., an opticalrouting startup in which Cisco held a minority stake, was a objective with no revenue, no products, and no customers practiced millions in losses it had racked up since its establishment in 1997. Despite those deficits, Cisco plunked humble a half- one thousand million dollars in stock to buy the rest of the company in 1999. But within days of closing the deal, all three of Montereys founders, including its engineering guru and nous systems architect, walked out the door, victorious with them millions of dollars in gains from the sale. I came to the realization I wasnt going to have any meaningful meeting on the product by staying, says H. Michael Zadikian, a Monterey founder.Eighteen months later, Cisco shut dismantle the business altogether, sacking the rest of the circumspection team and victorious a $ 108 million write-off. That dismal tale hardly jibes with Ciscos widespread reputation as an acquisitions whiz. Not since the conglomerate era has a company relied so heavily on its ability to identify, acquire, and integrate other companies for proceeds. CEO John T. Chambers believed that if Cisco lacked the interior resources to develop new products in six months, it had to buy its way into the market or miss the window of opportunity. Some put a new name on it acquisitions and development, a way for the company to shortcut the usual research cycle. Its belief in the strategy has led Cisco to bolt out up more than 70 companies in the past eight years. Analysts and academics heaped praise on Ciscos acquisitions prowess in articles, books, and business-school case studies.In the early days, some of this praise was deserved, as Cisco morphed from a router company to a networking powerhouse. Its first acquisition, Crescendo Communications Inc., guided Cisco into the duty period business, which generated $ 10 zillion in sales last year. every told, acquisitions have hardened the nucleotide for about 50% of Ciscos business. But in early 1999, with exuberant investors enticing a ripening number of unproven companies to go public, Cisco suddenly had to acquire companies at a much earlier stage. Cisco had long claimed an unprecedented success rate of 80% with its acquisitions. Chambers now says it fell to something like 50% during the net craze alleviate above the industry average.We bet on products 12 to 18 months out, concedes Chambers. We took dramatically higher(prenominal) risks. Chambers often maintained that his acquisition strategy was aimed at acquiring mind-set more than products. But an analysis of the 18 acquisitions Cisco made in 1999 shows that Monterey was no fluke. Many of the most valuable employees, the passing driven founders and chief executives of these acquired companies, have sincebolted, taking with them a good deal of the exp ertness and experience for which Cisco paid crystalise dollar. The two founders of StratumOne Communications Inc., a nobleman of opticalsemiconductors purchased for $ 435 million, left Cisco. The chief exec of GeoTel Communications Corp., a call-routing outfit acquired for $ 2 billion, walked out after nine months. So did the CEOs or founders of Sentient Networks, MaxComm Technologies, WebLine Communications, Tasmania Network Systems, Aironet Wireless Communications, V-Bits, and planetary Data Systems all high-priced acquisitions in 1999. Some simply felt Cisco had become too lifesize and too slow. People who crave risk dont do so well at Cisco, says Narad Networks CEO Dev Gupta, who sold Dagaz and MaxComm Technologies Inc. to Cisco in 1997 and 1999, respectively.Cisco focuses much more on immediate customer needs, less on high-wire technology development that customers may want two to three years out. Chambers maintains that Ciscos swage rates are the best in high technology. In our industry, 40% to 80% of the top management team and top engineers are gone within two years, he says. Our voluntary attrition rate is about 12% over two years. Difficulty holding on to top talent was not the only geological fault in the Cisco acquisition machine. Cisco often paid outrageous sums for these deceitful startups a total of $ 15 billion in 1999 alone. Even some of the deals that Cisco considers successful look pretty appalling using simple math. Its 1999 acquisition of Cerent Corp., a maker of opticalnetworking gear, is a good example. Cisco paid $ 6.9 billion for the company, or $ 24 million for each of Cerents 285 employees, even though the company had never acquire a penny of profit and had an store deficit of $ 60 million.Even if win bounce back to 2000 trains of roughly $ 335 million, it would take Cisco about 20 years to recoup the purchase price. Of course, deals such as Cerent found their rationale in paries Street math. If investors were willing to pay 100 times earnings for Ciscos stock in 1999, past a Cerent profit of, say, $ 300 million could efficaciously increase the market cap of Cisco by some $ 30 billion. shoot the breeze it bubble economics. Besides, some(prenominal) of these deals were do for highly inflated Cisco stock kinda ofcash. Even so, that wampum could have been used to buy other assets that could have delivered greater returns. Only in the months since the bubble come apart has it become evident mediocre how baffled Ciscos mergers-and-acquisitions strategy became. In its haste to do deals, Cisco often purchased companies it didnt need or couldnt use.In some cases, the buying crack led to overlapping, duplicative technologies, political infighting, and just plain wasted resources, as Monterey shows. M&A works to some extent, but at Cisco, it got out of hand, says Iqbal Husain, a power engineering executive at Cisco. After losing umteen of the leaders of these businesses, product delays and othe r mishaps were not uncommon. When Cisco closed down Monterey, for example, the company keep mum hadnt put a product out for testing, which alone would take as long as a full year.By the time the product was there to test, the market wasnt, says Joseph Bass, former CEO of Monterey. Chambers says he has moved to even up the f fairnesss. Its acquisition binge has slowed from 41 companies from 1999 through with(predicate) 2000 to just two purchases in 2001. plot of ground Chambers expects to do 8 to 12 acquisitions this year, he insists that market conditions will let Cisco wait at least(prenominal) until a target company has a proven product, customers, and management team before cutting a deal. Were making the decisions to acquire a company based on a later point in time, which dramatically lowers the risk, Chambers says. Anything more ambitious, Cisco now beds, may be foolhardy.A Costly Acquisition Strategy Often lauded for its buyout successes, Cisco has purchased more than 7 0 companies in the past eight years. In 1999 alone, it paid $15 billion for 18 startups, many of which never delivered on their early promise. Here are the most celebrated COMPANY PRICE STATUS weedy CERENT $6.9 Alive and Although Cerent has generated $1 billion well billion in estimated sales for Cisco, two decades could be needed to recoup the proud price.PIRELLI $2.2 Alive but A let down attempt to bolster OPTICAL billion struggling Ciscos long-haul optical networking. SYSTEMS But Pirellis technology still trails that of rivals. MONTEREY $500 Dumped Thisupstart optical company never NETWORKS million in April produced a viable product, and Cisco cut its losses with a $108 million write-off in April. AMTEVA $170 Sold at a Lackluster revenue forced Cisco to million loss in July denounce this unified-messaging business. MAXCOMM $143 Part of their Founders and key technologists walked TECHNOLOGIES million digital subscriber line strategy out soon after the deal closed. Data Busines sWeekThe Toronto Star April 28, 2006 Friday piece BUSINESS Pg. F01 LENGTH 631 words publicize Starbucks develops taste for independent films BYLINE Sharda Prashad, Toronto Star torsoFirst it was coffee, then CDs, now its ikons. Today, the independent flick Akeelah and the Bee will make its debut in theatres, with a merchandising boost from Starbucks. The java giant is publicizing the Lionsgate Entertainment Corp. film about spell out bees, starring Laurence Fishburne and Angela Bassett, by using promotional coffee sleeves, coasters and displays in stores. Neither political party has disclosed the amount of cash thats changing hands in this deal, other than divulging Starbucks will be receiving a cut of the films profits for its market efforts. And when the DVD goes on sale, it will get a share of those profits the DVD, by the way, will be available at Starbucks.Akeelahs soundtrack will also be flogged at the coffee house. Our customer is the demographic that Hollywood needs as it is face up a double-digit decline in the box office and slowing DVD sales, Howard Schultz, Starbucks chairman, told Business Week earlier this year. We have a unique cross-section of assets a foundation of trust and confidence in Starbucks that can promote a move that our customers know is relevant. But is the purveyor of java risking its strong steel appeal by moving away from its coffee core with this latest adventure? Starbucks, named for a character in the literary classic Moby Dick, currently has 11,000 outlets in 37 countries and is planning to open 1,800 this year. Its long-term plan is to have 30,000 outlets around the world. Starbucks doesnt sell coffee, it sells a retail environment thats chic, urban andauthentic, says Jay Handelman, marketing professor at Queens University School of Business.If they were just change coffee, why would they (customers) pay $4? Since Starbucks is in the business of selling an urban experience, the professor says, the foray into a characterization such as Akeelah and the Bee is consistent with that post since the film is an urban, intellectual tale. If the movies and coffee were selling different experiences, the brand strategy wouldnt work since customers would be confused about what Starbucks stood for, adds Andrea Wojnicki, marketing professor at University of Torontos Rotman School of Management. Should the movie do distressing box office sales, it wont necessarily affect the Starbucks brand, she says. Starbucks is about connoisseurship, she argues. It introduced people to the subtleties of coffee and its attempting to do the homogeneous with its CDs, which it started selling in 1995. The CD venture has also involved an urban experience.In 2004, for example, it coproduced Ray Charles Genius Loves beau monde and last year it held exclusive distribution for Alanis Morissettes Jagged Little Pill Acoustic. Should the movie become a box office flop, Starbucks isnt necessarily in trouble, says Wojnicki. It could hold up its connoisseur flag and say its campaign is about appreciating art and not about flogging blockbusters. It could also be argued that Starbucks took a growth opportunity that has stretched its brand too far, argues Mary Crossan, business insurance professor at the University of Western Ontario. When they start to move into movies, theyre not supplement their resources or capabilities (in coffee).Starbucks has stated that it is not implicated in producing movies, just promoting them, but Crossan warns that companies need be careful about taking focus away from the core business. And Starbucks has made some poor business choices. It has failed in previous ventures, including an attempt to get into the Internet business in the 1990s and an in-house time called Joe that folded after three issues. But Akeelah star Angela Bassett commends the movie business is a good move for Starbucks. Everybodys got something to sell, she told saucilysweek. You just have to be sur e of what youre difficult to sell.Copyright New York Times Company May 19, 2006 I was on my way from downtown Budapest to the airport the other day when my driver, Jozsef Bako, mentioned that if I had any friends who were planning to come to Hungary, they should just contact him through his Web situation www.fclimo.hu. He explained that he could show people online all the different cars he has to offer and they could choose what they wanted. How much business do you get online? I asked him. About 20 to 25 percent, the Communist-eraengineer-turned-limo-proprietor said. The former secretary of state James baker III used to say that you know youre out of office when your limousine is yellow and your driver speaks Farsi. I would say, You know that the planetary economic system is spinning off all kinds of new business models when your Hungarian driver has his own Web site in English, Magyar and German with punctuate music.Jozsefs online Hungarian limo company is one of many new business models Ive come across of late that are clearly expanding the global economy in ways that are not visible to the naked eye. I was tardily interviewing Ramalinga Raju, chairman of Indias Satyam Computer Services. Satyam is one of Indias top firms doing outsourced work from America, and Mr. Raju told me how Satyam had just started outsourcing some of its American work to Indian villages. The outsourcee has become the outsourcer. Mr. Raju said We told ourselves if business process outsourcing can be done from cities in India to support cities in the developed world, why cant it be done by villages in India to support cities in India. Things like processing employee records can be done from anywhere, so there is no reason it cant be done from a village. Satyam began with two villages a year ago and plans to scale up to 150.There is enough bandwidth now, even grasp bad Indian villages, to parcel out this work, and the villagers are very eager. The attrition level is low, and the commitment levels high, Mr. Raju said. It is a way of ventilation system economic life into villages. It gives educated villagers a chance to stay on the land, he said, and not have to migrate to the cities. A short time later I was interviewing Katie Jacobs Stanton, a ripened productmanager at Google, and Krishna Bharat, founder of Googles India lab. They told me that Google had just launched Google Finance, but what was interesting was that Google Finance was all told conceived by the Google team in India and then Google engineers from around the world fed into that team kind of than the projects being driven by Google headquarters in Silicon Valley.Its called around sourcing instead of outsourcing, because there is no more out anymore. Out is over. We dont have the idea of two kinds of engineers ones who think of things and others who implement them, Ms. Stanton said. We just told the team in India to think big, and what they came back with was Google Finance. Mr. Bha rat added We have entered the generation of the practical(prenominal) office. Product development happens across the global campus now. know story. Im in gray Newark speaking to local businessmen. I meet Andy Astor, chief executive of EnterpriseDB, which provides finicky features for the open-source database called PostgreSQL. His simple development team, he tells me, consists of 60 Pakistani engineers in Islamabad, who interact with the New Jersey headquarters via Internet-based videoconferencing.The New Jersey team software architects, product managers and executives comes to work a couple of hours early, eon the Islamabad team comes in late, and we have at least five to six hours per day of overlap, Mr. Astor said. We therefore have quaternary face-to-face meetings every day, which makes a huge difference for communication quality. We treat videoconference meetings as if we were all in the same room. What all these stories tell me is that we are seeing the issue of colla borative business models that were simply inconceivable a decade ago.Today, there are so many more tools, so many more ideas, so many more people able to put these ideas and tools together to discover new things, and so much better communications to interpenetrate these new ideas across the globe. If more countries can get just a few basic things right enough telecom and bandwidth so their people can get connected steadily improving culture decent, corruption-free economic governance and the rule of law and we can find more sources of great energy, there is every reason foroptimism that we could see even faster global growth in this century, with many more people lifted out of poverty.GMs Landmark in IT Outsourcing By Steve Hamm BusinessWeek 2/2/2006 A huge package of outsourcing contracts announced Feb. 2 by universal Motors seems to signal shifting fortunes in the $600 billion-a-year information-technology operate industry. EDS, GMs longtime primary supplier, lost groun d, while Hewlett-Packards sometimes-overlooked operate unit got a big lift. The visibleness of Indias tech industry ruddiness when GM named one of the countrys leading companies, Wipro, as a tier-one supplier. All told, about $7.5 billion in five-year contracts were awarded. another(prenominal) $7.5 billion in contracts are pass judgment to be parceled out as new projects come up over the next couple of years. EDS, which formerly had about two-thirds of GMs outsourcing business, still has the biggest share. It got contracts worth $3.8 billion or about half of the business. HPs contracts totaled $700 million, and GM called it out as one of the major gainers.IBM got $500 million in contracts. FINANCIAL SHADOW. The package is significant beyond its sheer size because its an indication of how GM foreman Information Officer Ralph Szygenda is reshaping the way the company handles tech outsourcing. He handed contracts in large chunks to companies that will handle them on a global bas is alternatively than country by country. Also, GM and the tech suppliers worked together to create new standards for managing technology, which heart all suppliers will do things in a uniform way. Szygenda says the new strategy will allow GM to mend global collaboration while ensure reliability of its computing systems and cutting costs. It lets GM focus on innovation rather than spending a lot of time on managing its suppliers, he said at a press conference. GMs financial woes cast a buns over the announcement, besides. The carmaker reported a $4.8 billion quarterly loss on Jan. 26.While Szygenda said low prices were only a secondary impetus behind the way he structured the outsourcing contracts, some suppliers didnt even participate in the bidding, most notably, Accenture. Others said they didnt bid on all of the pieces because they were concerned they wouldnt make enough money on them. A BIG KICK. Yetthose who did win contracts were jubilant. HP selectively bid on areas wh ere we know we can do a great job and where focus was on core areas of importance to HP and GM, says Steve Smith, senior vice-president of HP Services. His business is often overshadowed by IBM and Accenture, but it has been gaining momentum lately.Its revenues grew 6% in HPs fourth quarter, to $3.9 billion. Last quarter, IBMs services revenues were in the doldrums, declining 5%, to $12 billion. Wipro had already been doing some work for GM, but the new package gives it a credibility lift. Its contracts were worth $300 million over five years. Wipro Executive Vice-President Girish Paranjpe says the company is delighted to be picked. Its a huge morale booster for us to be able to play with the big boys, he says. Also, because were the only tier-one shammer GM picked from India, its a big kick for us.If GMs new strategy for managing outsourcing works well, it could become a model for other large corporations. The package has five-year contracts instead of the more traditional 10-year pacts and splits the work up among several suppliers instead of relying preponderantly on one. This is a tipping point for IT, says Robert McNeill, wizard analyst at Forrester Research. Organizations will have to add skills to their vendor management function and make transition management a key for success when moving to a more flexible services model. another(prenominal) lesson from the contract Even financially luxuriant companies are spending big on IT. Thats great news for the tech titans that got a bigger piece of the GM pie. It should even provide solace to EDS, however diminished its share.