Consolidating Industries & Critical Infrastructure Platforms

Stephen DeAngelis

January 12, 2007

In June 2006, I wrote and was interviewed in an article for U.S. News & World Report about a letter to the editor of the Financial Times written by chairman and CEO of IBM, Samuel Palmisano [Globalization and Resilient Enterprises and Mutinationals 2.0]. Palmisano was describing what he calls “globally integrated enterprises.” Although he was talking primarily about how multinational corporations must reshape themselves, the trend of global integration goes far beyond internal corporate structure. This current wave of globalization is fostering transnational industry consolidation as a natural outgrowth of increased connectivity. The globalizing and consolidating of industries requires an approach similar to the one Palmisano was promoting for multinationals.

At Enterra, the marketplace for what we call Global Resilience™ is predicted to grow at a rapid rate largely as a result of such a global consolidation of industries. For globalization and consolidation of industries to be successful, appropriate standardized rule sets are required in critical infrastructure industry platforms that can handle the increased transactional throughput that increased connectivity is driving. Critical industries include sectors like financial services, pharmaceuticals, energy, telecommunications, etc. The latest indication that consolidation continues to occur is happening in the financial services sector. Euronext NV shareholders overwhelmingly approved a New York Stock Exchange offer that, if approved by NYSE stockholders and the Netherlands government, would create the first trans-Atlantic equities market [“Euronext Shareholders Approve NYSE Offer,” Associated Press, New York Times, 19 December 2006].

“The NYSE’s cash-and-stock acquisition of Euronext — which runs the Paris, Amsterdam, Brussels and Lisbon stock exchanges — comes amid a rush for consolidation among global exchange operators. The Nasdaq Stock Market Inc. has amassed a 29 percent stake in the London Stock Exchange Group PLC and launched a hostile bid for the rest earlier this month.”

Although corporate consolidations in critical infrastructure industries will face stiff opposition and justifiable concerns, I predict they will continue to occur. As they do, Enterra’s Global Resilience approach will help create the appropriate platform from which they can successfully operate. Why? First, Global Resilience begins with best practices and internationally-accepted standards; hence, it begins with a solid and proven foundation. Second, Global Resilience encourages communities of practice (that include all shareholders) to get involved. Since we are talking about industry consolidations, more players than the consolidating interests need to be included as platforms are developed. Finally, the Global Resilience approach is inherently flexible and adaptable. Local concerns and conditions can be accounted for using this approach. Such concerns and conditions were readily apparent in the Euronext/NYSE deal.

“Euronext broke off talks with Deutsche Boerse earlier this year, blaming the Frankfurt exchange operator’s refusal to spin off its clearing and settlement units or accommodate Euronext’s ‘federal’ model — under which the rules of each market are governed by its local regulator. Deutsche Boerse also rejected a proposal by Paris Europlace that it merge its cash equities arm with Euronext prior to any trans-Atlantic deal.”

The fact that the Netherlands government wanted “guarantees that there will be no ‘spillover of U.S. laws, legislation and regulations’ onto European markets,” highlights the need for standard rule sets that can accommodate and deconflict the myriad of laws, policies, and regulations that are bound to affect consolidating industries. I conceived Global Resilience to address these kinds of complex and challenging situations.