It is not difficult to detect this pattern – smaller companies build, larger companies buy. There is a reason why this happens. Invariably, the smaller companies demonstrate signs of what my friend colorfully called HTML (hand-to-mouth-living) and are over zealous to solve a user-problem so they can sell quickly. This is the true reason why smaller companies are quicker to market, innovative and closer to customers. Product Development in these organizations are rapid and success happens even in nebulously defined teams. Over time these companies become successful, profitable and attract a lot of interest from the larger sharks. The pressure to monetize the investment (especially if a Private Equity firm has invested in the venture) gets progressively higher and then the sell-out happens.
The problem thereafter shifts to the larger acquiring company. It has already blown up good multiples in the acquisition so it needs to fix that. Precisely at this juncture the focus shifts, for the large company, from solving customers’ problems to the organization’s problems (Joel Spolsky writes about this). Hundred of thousands Dollars get spent on heavy duty architecture to rationalize internal plumbings and soon resourcing such projects draws traction away from teams who were perhaps making an honest attempt to solve the outside-world problem. More acquisitive a company is the more accentuated is this phenomena.
So is this phenomena bad? I don’t know. What I do know however is that this phenomena is for real and needs to be managed. The trick is to go back to the start-up mode for the outside-world projects and pick only those you’d invest your own money in. If you are in a large organization, the plumbing projects will always attract more resources – at least initially – so don’t expend energy fighting the battle on that front if you want to keep solving the customer’s problem.