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Wednesday, September 21, 2005

Bruteforce Consolidation : Ominous Signals

Ephraim Schwartz writes that Salesforce.com would have us believe that his company will become a major platform for enterprise application integration. This is not going to happen and adds that while Oracle is building an impressive software portfolio, neither Oracle nor its CEO Larry Ellison has enough time or money to buy every single enterprise software vendor. We may be left with SAP NetWeaver as a business process platform; Oracle's boast that it can offer everything from accounting to fulfillment, logistics, and more; Salesforce.com's Web services platform for third-party components; Microsoft Dynamics; and possibly IBM's Workplace middleware, which offers everything but the applications.It will take many years for the market to figure out who's right and who's wrong.He rightly concludes, pure-play on demand solutions will gain only limited acceptance in the enterprise. SOA will become a popular internal solution but, along with the so-called extended enterprise that drives it, will never quite get off the ground.
M.R.Rangaswami points out that broader awareness of big software mergers is important in and of itself. The sense that young companies cannot make a go of it alone any longer, that they must find a "Big Brother" to take them under their wing, dampens enthusiasm of many software executives and investors. Adding this is the wrong reaction, he argues that innovation and opportunity continue to drive the software industry today - even in the face of these megadeals. Consolidation is most certainly accelerating. But still there are many small markets which continue to innovate and thrive. From a customer perspeective, once a single software vendor manages everything, the customer is beholden to that vendor. Smart CIOs know this-and are hedging their bets. They are balancing the right amount of business they give one vendor with the need to keep that vendor honest and serving them well. This fact ensures that small and mid-sized best-of-breed vendors will always have a place in the enterprise technology lineup.
Steve Martin points out, “It's common knowledge that most high-tech acquisitions fail to live up to their promises and that most technology megamergers are made at the wrong time for the wrong reasons. In fact, very few actually create any real value; they actually increase the potential for company failure. In the end, each of these mergers can be labeled as either a destroyer, a loser or a winner”. Despite several rational reasons, it is a fact that the stories of failed mergers in the tech industry are far too innumerable to be ignored.

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