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 consol
As mentioned above multiple factors can affect the success or failure of an acquisition. Fortunately IBM has taken a modest and well planned approach to acquiring NetSol, and will likely realize strong market gains as a result of the acquisition. 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. "Due diligence" will be necessary to ensure the success of both companies (Harrison, Hitt & Ireland 8). IBM can also maintain economic stability by ensuring that the resources available within NetSol are mutually supportive or complementary, hence increasing the probability of market equilibrium and ensuring the businesses are operating in markets that will feed off of one another and thus facilitate on another's suc
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Approximate Word count = 849
Approximate Pages = 3 (250 words per page double spaced)
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