Why Companies Buy (Rather than Build) New Technology

It’s typically much quicker to acquire rather than build your own solution. When it comes to technology, acquiring can help you leapfrog the research and development cycle to purchase a solution that has already been developed, tested and not only proven to be superior, but is already widely used.

Large tech companies like Google, Amazon, and Facebook, often acquire tech startups for a number of reasons including:

  1. Talented employees – Often you’ll see the engineering team being folded into the firm’s existing divisions.
  2. Stamp out the competition – Not only will the buyer prevent the startup from drawing away its own customers, an acquisition also prevents a larger competitor from purchasing the startup.
  3. Instantaneously gain access to new technology – Knowledge is power and an acquisition allow the buyer to gain it immediately.
  4. Rapidly gain market share – Facebook purchased Instagram in a large part to gain access to its growing user base. Facebook’s audience at the time was declining so they turned to Instagram.
  5. Pick a winner – The first tech solution to market isn’t always the winner. Think about Betamax vs. VHS. VHS became the dominant player. Think about MySpace, which came out earlier than Facebook, losing out to other social networking sites. Acquiring lets you pick the winning technology.

While you might not be a huge tech company these same reasons may still resonate. If technology is a critical component to your growth plan, consider if an acquisition rather than developing your own solution makes sense.

A version of this post was originally published on Quora

Photo credit: Negative Space via Pexels.com, Public Domain

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