The high-tech industry is in the midst of dramatic changes as hardware products commoditize, software vendors experience pricing pressure from smarter customers and competition, and hardware/software players consolidate to increase share and scale. Traditional high-tech vendors are looking for ways to grow sales. One answer pursued by several vendors is to move into services, which can be bundled with existing products.

A leading high-tech player with strong hardware and software businesses and an emerging services group decided to invest heavily in building out their services capability. The preferred path was through acquisition given the strength of their balance sheet. However, the question was where to invest and whom to buy.

Our client engaged McKinsey to develop their services acquisition strategy. A key part of identifying where to focus was to develop a deep understanding of customer demand. In addition, when screening companies it was vital to understand the “real” capabilities the acquired companies would bring.

The impact of the work was an expanded acquisition pipeline, acceleration in time to acquisition by identifying and prioritizing 50+ firms for immediate consideration and establishment of a process to screen future opportunities.