Vendors drive IDC’s sale to Sondergaard & Lafond

[Note: IDC have asked me to point out that this piece was written as an April Fool’s joke, as is the linked April Fool’s post on the IIAR site: the events described have not actually happened, and the link at the end of the article is also a clue.]

This morning the IIAR reported that IBM, Oracle and SAP are lead partners in a consortium that will buy IDC. The plan is huge. The partners will contribute technology that will allow end-user organizations to interact with IDC’s research and analysts in a virtual environment driven by IBM Watson.

The news came out late last night when IDG Ventures was forced to admit the deal in quarter-end filings, submitted in Beijing by the IDG Ventures Pacific II Fund. The filings confirm that former Gartner CFO Chris Lafond will take up the same role at IDC, reporting to Pat Kenealy. The former IDG CEO will take the helm for a one-year transition. Gartner’s Peter Sondergaard, will succeed Kenealy at IDC after the expiry of his one-year non-compete agreement.

IDG Ventures is a major player in Asian markets and is now managing around $4bn of assets. Considering the size of the deal, and the choice to ink the deal in Beijing, other Chinese investors may be involved. End-of-quarter filing rules mean that IDG Ventures is forced to report material events to the Chinese regulatory authority. Beijing is an increasingly popular deal location for global firms struggling to bring profits out of China.

IDG Venture’s role in the sale points to the widely-rumoured place of Crawford Del Prete in bringing the deal together. Del Prete had a four-year stint at IDG Ventures, guiding the IDG Ventures Pacific II Fund which has structured the deal for the consortium. Kenealy, who was a general partner of the Pacific II Fund, played a central role in IDG’s two decades of successful Chinese tech investments, most notably device manufacturer Xiaomi and Devott, the outsourcing giant.

The use of a virtual environment suggests to some that Chinese firms might be involved as more than a stakeholder in IDG Ventures. While Oculus Rift is mentioned in the IIAR report as the tool used to access the new IDC virtual analysts, last year Xiaomi-backed firms invested $30m in DeePoonVR, a notable competitor. Both Oculus and DeePoonVR intend to focus on the B2B market. We expect that Xiaomi would try to use its leverage to ensure the IDC virtual environment is also compatible with DeePoonVR. Devott, where former IDC China boss Gao Xin serves on the board, is expected to play a role in developing the new virtual environment: Gao Xin is pictured above with IDC CEO Kirk Campbell and Antonio Fileri, a former IDC executive who now a Xiaomi CEO in its Americas business.

The timing of the filing also suggests that Del Prete’s ongoing interest in spinning out IDC has been brought to fruition by recent large stock awards at Gartner and the fretful struggle in the firm over whether or not to extend Gene Hall’s tenure by five years. The board has, once again, taken Hall’s side against those in the leadership of Gartner who have alluded to the benefit of fresh blood.

While Lafond can easily recreate at IDC the financial miracle he led over two decades at Gartner, pleasing the consortium of investors, Kenealy and Sondergaard have a more challenging task: to shift the IDC engine to generate interactive research, multimedia content and to gamify the consumption of analyst value in the virtual environment. Many IDC analysts will be uncomfortable with the shift, and many will move to other firms.

The transaction delays the final departure of Kirk Campbell, IDC’s CEO for the last quarter-century. Campbell, who was scheduled to leave IDC in September to return to Princeton as a fellow at its Center for Information Technology Policy, will become IDC’s non-executive chairman.

The IDG filing is online here.

PS A late comment from someone involved in due diligence on the deal gives more insight on why the deal was made in China. “Oracle, IBM and SAP are probably paying IDG with Chinese profits into IDG’s Pacific funds. This allows them to use up profits trapped inside China, and to allow them (and IDG) to avoid tax on the transaction. IDG can do more with that money in China than anywhere else. It’s also easy to see that IDG Ventures will share on the upside long-term if Xiaomi plays a role in manufacturing the DeePoonVR device and Devott builds its strategic partnership with IBM while building virtual environments. The upside would be huge.”