Consolidation: what does it mean for small players?
More choice, weirdly enough
Anyone interested in the enterprise applications market will have had their eyes focused recently on the potential mergers among some of the larger players - Oracle, PeopleSoft and J.D. Edwards. But, as uncertainty reigns, what is happening to the other players in the market, asks Fran Howarth of Bloor Research.
At the high end of the market, SAP is certainly emerging as a winner as it cashes in on the confusion. But the effect on smaller players is more mixed. Some of those that rely on those vendors embroiled in potential mergers and acquisitions are having a hard time - one company that sells products complementary to PeopleSoft's offering told me recently that it was seeing a 20% drop-off in business as a result of recent merger discussions, owing to the wait-and-see attitude of customers.
Yet that does not hold true for all market players. Mark Donkersley, managing director for the UK of AXSone - a vendor of supply chain management software - claims his firm's business has actually seen an uptick caused by uncertainties in the market. "We've started to see a difference in the attitude of the marketplace," claims Donkersley. He says that in tenders where such companies as SAP and PeopleSoft are the obvious choices for evaluation, best-of-breed vendors such as AXSone are now being invited to tender as well: "We are getting onto tender lists where we didn't expect to be invited."
According to Donkersley, this is because so many of the large IT implementations of the past few years have failed to yield the expected results: "Our customers have not accepted the approach of wallpapering a business with just one product." Roughly one quarter of AXSone's customers are Fortune 2000 companies - many of which have tried the approach of implementing solutions from just one large vendor, but have failed to achieve the results anticipated. According to Donkersley, what companies need is a mix of software from best-of-breed vendors.
There are two main reasons why businesses such as AXSone have seen more business coming their way: firstly, the depressed economic conditions of the past couple of years have meant that companies can no longer throw cash behind large-scale IT implementations where results are not assured; rather, they are looking at putting in place procedures and software to solve particular problems in order to achieve benefits in the short-term.
In such a market, the concept of implementing end-to-end software is too much of a strategic move for companies, owing to the time taken and the upheaval caused. According to Donkersley, businesses today must be so dynamic that they will have changed business processes by the time that large software implementations have been finished.
Secondly, the nature of technology has changed, largely owing to the advent of web services. Such web services are available immediately from specialist software vendors that offer services to address a particular point of pain, such as back-end financial management. Because such services are made available over the Internet, they can be accessed immediately without the pain involved in implementing software and making it work. And this is opening the door to best-of-breed vendors.
So what will be the outcome? According to Donkersley, the more Oracle postures and the more that SAP insists it is the only viable alternative, the more grateful the smaller players will be - as long as they don't rely on tagging onto the larger players to get their business.
The consolidation of the market is ramming home the message to the boards of companies that taking the decision to license products from just one vendor is not the secure, risk-averse decision that they thought. Best-of-breed vendors are proving to be a viable alternative - and this is giving the market a far wider choice.