Last year was a big one for mergers and acquisitions. Many market forecasters point to an equally robust 2019.

And who knows — maybe some of the deals will be big category-spanning moves like such recent ones as Amazon leaping into gourmet grocery stores through Whole Foods and AT&T striding deeper into content by buying Time Warner.

David Jordan

But do you know what’s easier to predict? Many — maybe most — of the deals will involve companies seeking to expand their digital expertise and skills through acquisition, rather than trying to develop those capabilities in-house.

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I see this as a positive, even necessary trend — assuming the buyers carefully choose their targets to fill missing pieces in their digital puzzle.

We’re long past the days when old-line brick-and-mortar or heavy-industry companies first realized they needed to join the digital age and then began their long marches into the future. We’re now in the era of digital transformation, leading to the virtuous harnessing of the Internet of Things, artificial intelligence, the cloud, and data analytics to future-proof companies and achieve breakthrough business success.

In fact, the digitalization of 21st-century commerce is now advancing at such speed and with such complexity that even the most technologically sophisticated companies know they may sometimes need to buy specialized capabilities they don’t have time to build in-house.

Consider Cisco’s bold acquisition of Duo Security.

There’s no doubt Cisco is one of the most technologically advanced networking companies on earth. And yet it was willing to pay $2.35 billion for Duo, a savvy start-up in cloud security whose technology can enable a user on any device to securely connect to any application on any network.

Duo, in other words, had an elegant, scalable product that could meet an immediate need for Cisco and its customers.

Then there’s enterprise software giant SAP’s recently completed acquisition of Qualtrics for $8 billion. Qualtrics’ specialty is “experience software” that surveys customers and employees for feedback on products, services, and other “experiences.” The resulting data can provide insights that enable enterprises to continually monitor and improve their offerings.

As a leader in operations software, SAP added Qualtrics’ capabilities to enable its enterprise customers to capture data on end-user experience and provide it — often in real time — to managers throughout the enterprise. In announcing the deal as a “transformational” opportunity, SAP chief executive Bill McDermott made clear how Qualtrics would complement and expand his company’s already powerful arsenal of offerings.

“SAP already touches 77% of the world’s transactions,” McDermott said. “When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM [experience management] category with an end-to-end solution with immediate global scale.”

The Cisco and SAP deals were based on the above-mentioned, crucial digital transformation fact: Sometimes it is smarter to buy digital expertise and capabilities than build them.

Many global enterprises are reaching this same realization. McDonalds’ acquisition of Dynamic Yield to create AI-powered customized drive-through experiences for customers is another indicator of the changing times.

Whatever the industry, the forward-thinking companies know there are many nimble players out there, integrating the pieces for completing digital transformation puzzles. I predict that if this year’s M&A market is as robust as forecasted, much of the smart money will be spent on deals devoted to accelerating the digital transformation journey.

David Jordan is vice president and global head of consulting and  services integration for Tata Consultancy Services.

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