Microsoft and Yahoo potential merger is being billed as the largest tech merger. When such large software companies merge, it worries me.
There are many facets to the merger including markets, web presence, customers, communication tools, employees, work culture, among others. When financial companies that have money in their accounts merge they just become bigger institutions with larger capital to play with. When manufacturing companies (and others who make stuff) merge, they can optimize their making process and put together their product portfolio. However, when software companies merge it means they have figured out they are not able to complement their portfolio by building it themselves.
Most big software houses can afford to build a piece of software in terms of people and development cost. The harder part is stealing customers and mindshare away from products that already exist. You are effectively buying the other company to get the customers. Software companies do not really have any redundant operations to save on except the employees who work on duplicate efforts in both companies.
Everyone including Microsoft, Yahoo, Google, Facebook, Myspace are just fighting for the same crowd of people spending time on their pages for pretty much the same thing – mail, search, news, socializing – and hope to get the rest of the industry to pay for their eyeballs. Microsoft and Yahoo have a large pool of smart people in the house who have built many different technologies. But, they do not expect to put a few hundred people to a project on their own and create something that attracts and retains customers or eyeballs (to get the advertising money). There are not too many ways you can slice and dice and present those same features (at last that is what MSFT and YHOO think if they are merging).
You can hear them thinking: “We cannot really think of do anything else to create to get more customers, let us just put your customers and my customers together and see if we can hold on to all of them”