It's ridiculous to imagine software industry consolidation as an unstoppable rush of water down creeks and rivers, gushing onwards into giant ‘megavendor’ business suite reservoirs. There will always be opportunities for smallish specialists to fill various niches. Standards in development platforms and in testing methodologies will ensure their existence, and go a long way towards easing integration pain. Many of Computerworld’s readers do not buy into the consolidated megavendor view of the future either. In a recent Quickpoll, some 54 per cent of respondents agreed that consolidation was ‘bad for choice’ while only 7 per cent believed it was ‘long overdue’. Only 8 per cent believed the consolidation trend was ‘good for quality’ — perhaps reflecting some of their megavendor experiences.
Obviously consolidation has been going on for years and will continue, as agreed by 23 per cent of poll respondents who saw it as the ‘same old same old’. Mike Greenough, the turnaround president, chairman and CEO of the acquisitive SSA Global, is a player in industry consolidation. At a recent Ausmac 2003 user conference in Surfers Paradise, Greenough paraphrased Dr James Goodnight, CEO, SAS Institute, as saying that half the software companies don’t deserve to exist because they have never made a profit, and they’ve either got bad management, had a bad business model or had bad technology. Greenough sees this story from the inside. A former accountant and business analyst who is forever crunching the numbers on other software vendors, Greenough is adamant that there are many unprofitable rough diamonds out there now backed by ‘tired money’. He led the acquisition of Baan, which he said was ‘appallingly’ managed despite having a lot of very good people. Baan lacked the discipline of any activity-based costing, and was misled by a CEO who flip-flopped in direction every few months, he said. Greenough has also led acquisition of Infinium Software and InterBiz from Computer Associates, among others. His vision is to acquire ERP extension players and perhaps one other significant rival, invest in R&D to meet (mostly) mid-market needs, and eventually deliver a converged platform to his company’s customer base. He promises not to ‘sunset’ any of the old or acquired products and reckons that much technology now back by the ‘tired money’ would be lost in any case if not acquired by the likes of SSA Global.
Issues around industry consolidation and megavendor versus best-of-breed players was debated at last week’s Gartner Symposium & ITxpo in Sydney. One of the analysts pointed out that much of the industry is in the ridiculous state of having way too many players doing the same thing. As an example, the analyst noted that there are some 250 vendors offering BI tools. Greenough believes that many players see software development as like buying lottery tickets, and they beaver away in the hope that they will strike it rich if they can just get their next big thing to market.
I can’t see the megavendors soaking up the whole industry. Creativity and commerce don’t work that way. Some best-of-breed lottery tickets will always pay off. And this is very good for Australian companies such as health-sector specialist TrakHealth.
Is consolidation worrying you?