Verified Document

IBM To Acquire Netsol: An Economic Analysis Term Paper

IBM to Acquire NetSol: An Economic Analysis Classical economic theory would support recent news of IBM's acquisition of NetSol as a complementary agent in its journey toward servicing global customers. In the article IBM to Acquire NetSol the author discusses the recent acquisition of Bangladore-based company Network Solutions (NetSol for short) by IBM corporation. NetSol offers infrastructure services to corporations around the world. The company NetSol currently employees more than 1,400 people and services multiple major clients including Cisco, Microsoft, Oracle and more, with revenues quite stable during the 2004 through 2005 fiscal year. The company was expecting growth exceeding 25% in the upcoming fiscal year.

Why the decision to acquire NetSol? IBM is taking advantage of multiple economic principles to expand and strengthen its ability to service multiple enterprises. The acquisition will enable the IBM to service multiple in-market businesses by providing infrastructure capabilities; examples of these services include on-demand computing and data-centered service (Economic Times, 2005). The move shows that IBM recognizes the importance of infrastructure to economic activity on a macro and global level.

Acquisition of this small company will enable consolidation of domestic services and enable IBM to leverage its ability to build a "world class infrastructure" (Economic Times, 2005). As a merged entity both organization can offer...

The move will also allow IBM to expand its customer base and brand name in India.
Multiple economic theories support this decision including absolute advantage theory developed from Adam Smith, suggesting that nations may benefit by exporting gods for which they posses absolute advantage of and import others for which other nations may posses expertise (Economy Professor, 2005). In this case goods are not traded by knowledge is shared and utilized by both through the acquisition. IBM benefits by taking advantage of NetSol's superiority related to infrastructure services, and NetSol benefits by trading knowledge and sharing in IBM's technological and economic expertise.

Harrison, Hitt & Ireland (2001) present a contrary viewpoint, noting that many times acquisitions fail because they don't produce the financial benefits expected of companies or those desired for the firm being acquired. Typically the acquired firm in this case NetSol will early above average returns but shareholders tend to earn minimal returns (Harrison, Hitt & Ireland, 2001).

Other studies suggest that acquired firms often demonstrate performance problems after acquisition, failing to earn returns necessary to meet annual capital cost requirements (Harrison, Hitt & Ireland, 2001). Still others show that many acquisitions are…

Sources used in this document:
References:

"Economic Theory." (2005). Retrieved Nov. 8, 2005:



Economic Times. (2005). "IBM to acquire NETSol." Times News Network. (2005).

Available: <http://economictimes.indiatimes.com/articleshow/1288937.cms>
Available:
Cite this Document:
Copy Bibliography Citation

Related Documents

IBM DB2 Express - C Installing and
Words: 1080 Length: 3 Document Type: Essay

IBM DB2 Express - C Installing and Analyzing IBM DB2 Express -- C IBM DB2 Express-C database for Microsoft Windows was downloaded, installed and used as the basis of analysis in this paper. What differentiates UBM DB2 Express-C from the many comparable low-end enterprise-level databases is support for XML integration, dual core processors and 2GB of memory. IBM has been selling their DB2 databases for decades to enterprises globally, and has created

IBM Case Study Compare and Contrast the
Words: 940 Length: 3 Document Type: Case Study

IBM Case Study Compare and contrast the project portfolio management approaches that IBM and Deloitte Consulting used to rank and select the projects for their respective portfolios. IBM uses the Q-sort approach to manage their project portfolio. This approach enables them to analyze opinions raised by groups based on rankings given by each group member. The company embraced this strategy as a way of measuring the relationship between opinions of different employees.

IBM Culture IBM -- Maintaining Culture IBM
Words: 646 Length: 2 Document Type: Essay

IBM Culture IBM -- Maintaining Culture IBM was able to maintain its corporate culture for many years in the midst of an every changing environment. This paper explores how IBM was able to do so. IBM serves as a prime example for many organizations who wish for create a corporate culture that endures. The organization was able to embed a corporate culture that was able to withstand the pressures that are created by

IBM International Business Machines International
Words: 2542 Length: 10 Document Type: Term Paper

Also, IBM neglected gaining a more dominant position in the nascent industry in that period by allowing another corporation to take over the business of programming the new computers. Therefore, IBM missed this incredible opportunity which might have granted the company a dominant position on the market at that time. IBM has shown its innovation capabilities not only in technological areas, but in strategy models also. The company's negotiation strategy

IBM Case Study What Is the Key
Words: 1160 Length: 4 Document Type: Essay

IBM Case Study What is the key problem facing IBM Europe managers (at the end of the case)? It is a complex problem of recruiting more resellers for the new B2B initiative based on order capture, distributed order management, and minicomputer product configuration and customization workflows running RosettaNet PIPs over an XML network. This problem was made more complex by the fact that for any reseller to participate in the new B2B

IBM New UNIX Computer P690
Words: 915 Length: 3 Document Type: Term Paper

IBM New UNIX Computer Over the past years, Sun has managed to take the lion's share of the market for servers running the UNIX operating system. By putting mainframe-style features such as partitioning into its servers, and building hardware for its own Solaris operating system, Sun managed to take the lead with their UNIX systems (Vance). With the release of its p690 server, however, IBM is giving Sun some heavy competition and

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now