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Wednesday, March 30, 2005

A Perspective On Software Market Consolidation

This is an abstract of a brief note that I wrote for sandhill on Software Market Consolidation.The new economy software startups measured on different parameters are beginning to realize that earnings have replaced revenue growth as the new measure of success on Wall Street. This shift in outlook and measurements are creating pressures – these shall trigger a powerful wave of consolidation throughout the industry over the next few years.
The grouping may be along the patterns of:
- Platform Players Forcing Consolidation:
- Basket of Best Of Breed Players:
The general trend toward consolidation is already felt. Big time acquisitions are already happening. This phase of growth may be stepped up in the coming days:
- Acquisitions across the segments including application, systems, infrastructure players ;
- The maturity lifecycle of the industry and the more mature players ready to leverage acquisition opportunities to improve their future standing;
- Slow pace of innovation facilitates the identification of acquisition players and acts of acquisition.
In general, consolidation needs to be driven with the objectives:
- To grow market share (limited value to customers)
- Technology upgradation (Short term attractive – over a period competition may catch-up)
- To expand domain expertise- Offers long-term benefits to the vendor and customer.
Every vendor needs to choose what’s most important depending on the state of its business and the industry. Smaller vendors shall become part of ecosystems centered around key players and to survive. please read the full article at Sandhill.

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