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Systemx Inc. Withdraws Rs. 1 Billion Softguide Acquisition Offer Analysis

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  • Jan. 29, 2012
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Case 1
SystemX Inc. Withdraws Rs. 1 Billion SoftGuide Acquisition Offer

The following is an excerpt from a news article in the Daily Update, March 07, 2010.

“SystemX Inc.called off its acquisition of SoftGuide Knowledge Consultants, Friday, saying that 1 Billion was too high a price.” (SoftGuide has a considerable market share in Training and Development services and would therefore help SystemX to diversify and expand its range of services to customers.) “Although SystemX officials would not comment further, several observers said that problems discovered at SoftGuide probably lay behind the decision…. The article said that SystemX feared that SoftGuide’s data-processing system was inadequate to handle the new products planned for the SoftGuide sales staff. SystemX officials were also concerned about the 30 percent annual turnover among sales personnel… Tabrez A., SoftGuide CEO, responded that the SoftGuide’s data-processing was quite competent and has absorbed at least one new product a month for two years.”

Questions:

a. Why should SystemX be so concerned about the capabilities of SoftGuide’s data-processing?

SystemX requires an adequate data processing system to ensure high quality service. An insufficient data processing system would have detrimental effects on a company. First, it would not be able to cater to the needs of the SofGuide sales staff which would then result to loss of profits.

b. What competitive advantages to a Training and Consultancy services company may be provided by an information system?

An information system empowers its users to do their tasks more efficiently and effectively. Information systems take into account that different users (doing their own specific tasks) may need to see their information presented in various ways. For a Training and Consultancy business, information system can help create competitive advantages by:

❑ Enhancing its existing services—making it easy for the...