The week saw a lot of merger activities in the technology space. we shall cover that separately. Ray Lane in a businessweek interview says, the enterprise market is a tough place. Enterprises have consumed a lot of technology and want to consolidate a lot of the technology they've bought. They want a few platform players - and innovation. The challenge is how do large enterprises hear about innovation? They used to have entire staffs who would spend thousands of hours listening to thousands of startups and trying to figure out which ones are the most innovative. They don't do that anymore. If they can put out a fire by having one of the big vendors add a feature, they'll do that. If it's going to take a new company to come in, they'd like to hear how innovative it is and why the current vendor couldn't supply that feature. Then, they'll listen. If that new vendor has to turn their environment upside down, that's hard to do. It's not an easy environment.
Consolidation is probably long overdue. We had this renaissance period in the late 1990s driven by the Internet, where some enterprise-software companies really built big businesses. Once you come back to reality, if you're a $100 million software company trying to do what a $1 billion software company does, you're probably going to get consolidated out. The top 15 software companies are 84% of the revenues in the industry. The top three generate 75% of the profit, and the top one generates 57% of the profit. [Underneath that] it's becoming a wasteland. Some of the more interesting ones are BEA Systems and Siebel Systems. Do these companies have a value proposition that's interesting in the future, or do you just say, "I'll buy it all from SAP or Oracle"? Without a time frame on it, there’s no way they will stay independent.
My Take: While Ray Lane’s view looks logical – fact remains that there shall be several smaller companies that would co-exist as part of the larger enterprise ecosystem.I do not see how the large platform players can do away super special players( there are many of them - some have existed for decades - though a majority of them for just under a decade) or provide justice with specalised smaller companies like rules engines, collabaration systems, content management systems, document management sytems, procurement solutions, business intelligence - even CRM, SCM solutions from so called platform players fail to excel – after all companies like Oracle & SAP tried and could not so far make good success in content management,portal,collabaration systems,middleware solutions,PLM solutions etc. Similarly till about recently even SAP(leaving aside oracle) was not seen to be providing the best solution in CRM or SCM.There is near unanimity that procurement solutions are better addressed by standalone players – For example even Ray Lane’s future hope – Visible Path is expected to work with the so called dominating platform players – SAP, Oracle, Siebel, Peoplesoft CRM etc. It is paradoxical of the space – innovation and genuine requirements would demand a place for smaller players – albeit playing the role of being a small but important players in the enterprise ecosystem
Category : Software Consolidation