Surviving the Software Vendor Shuffle

By Larry Dignan  |  Posted 2005-12-05 Email Print this article Print
 
 
 
 
 
 
 

Consolidation was the big trend among software vendors this year, throwing off development road maps and leaving customers with little choice but to go along with the new owners. Even so, there are ways to keep your options open.

Software vendors were wheeling and dealing this year. Oracle Corp. announced or closed nine acquisitions, led by Siebel Systems Inc. and Retek. Microsoft Corp. purchased nine companies, including collaboration software firm Groove Networks Inc.

And SAP AG brought up the rear with one acquisition—point-of-sale software maker Triversity Inc.—although it could have been two if Oracle hadn't outbid SAP for Retek.

So far this year, there have been 952 software mergers and acquisitions, with a total value of $48.7 billion, according to Jefferies Broadview's Global Mergers and Acquisitions Database.

This is a jump over last year, which saw 844 deals with a value of $40.8 billion.

Consolidation might be seen as a positive development for software buyers; a recent Merrill Lynch & Co. Inc. survey of 100 CIOs found that 61 percent planned on buying an integrated stack of database, middleware, tools and systems management software from one vendor.

However, having so much riding on a single vendor means that information chiefs are going to have to be careful with their vendor selections—not to mention cut through a lot of noise.

SAP is offering customers of PeopleSoft and JD Edwards, which Oracle acquired in 2004, a safe-passage program to allow for a slow migration from PeopleSoft or JD Edwards products to SAP software.

Oracle countered with a special offer for SAP R/3 customers to migrate to Oracle, and started pitching lifetime support to SAP customers. Both parties are duking it out over code bases.

Bill Wohl, head of SAP's product and solution public relations, said it's questionable whether Oracle can merge the code of PeopleSoft, JD Edwards, Retek and Siebel Systems into one suite called Project Fusion.

Jesper Andersen, senior vice president of application strategy at Oracle, acknowledged that his company has to merge code bases, but added that moving from one generation of SAP to the next still requires another implementation. "SAP would lead you to believe their world is safe," Andersen said. "But it's not."

As SAP and Oracle fight it out, Microsoft is increasingly moving into enterprise applications; on Oct. 23, it said it will build business intelligence features such as corporate scorecards into its Office suite. And then there's IBM, which focuses on middleware, the glue that binds different applications. So how do you navigate this? Here's a playbook for the year ahead.

Make sure all purchase decisions are based on business requirements, not deals.

Robert Fort, director of information technology at Virgin Entertainment Group, a unit that operates the company's retail stores, knows something about software industry consolidation. His financial and enterprise planning software supplier, JD Edwards, has been acquired twice, first in 2003 by PeopleSoft, which was then acquired by Oracle in 2004. Virgin is currently implementing its point-of-sale system from Triversity, which was acquired by SAP in September.

Now Fort is plotting out what his business will need in the next two to three years. He could standardize on SAP or Oracle, or keep a mix of applications as he does today. But Fort is concentrating on business needs, as opposed to any product pitch.

Next page: Virgin's new products mean new needs.



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Business Editor
ldignan@ziffdavisenterprise.com
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
 
 
 
 
 
 

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