Is the market going towards a quadropoly?Posted: 29/11/2011
The Big 4, being Microsoft, Oracle, SAP and IBM, have speeded up their acquisitions in the recent years. They are great companies which I like and try to follow. But there is one thing that really disturbs me. Almost every magic quadrant vendor that showed a great success is either purchased and became a business line of one of these companies or somehow they have ceased to exist after the purchase. I can understand if it was only for two or three or even tens of purchases but we are talking about hundreds of purchases. I used to think that this would only happen in the Hollywood movies but it is real and it is going to have a serious impact on the market soon.
What is up with HP?
While big 4 is running around like sharks and having a bite from everyone, why are we leaving HP out of this? Because HP couldn’t become a services company over the past years and they have a bad reputation when it comes to acquisitions. Think of what happened to “Palm”. The recent news about HP is that they are buying the European software company Autonomy for 10 billion $. Wow, they must be serious. I hope they can work this out and make something useful out of it. Just because of this purchase, many people are also saying that HP is pulling out of PC industry. I really do not want to believe this, but if this is the fact, this would send not only HP PCs but also the good old Compaq brand to the trash too.
A Salute to Steve Jobs
Steve Jobs was a real innovator which the world will miss a lot. Steve Jobs didn’t save Apple by rethinking the company or purchasing everyone he sees but he took Apple back to its roots and focused on what it did best. Of course they also made some acquisitions but if you look at the list they are focused and not so far away from Apple’s focus. Maybe they also realized some of these purchases were wrong. But we can easily see that success comes from specialization. Specialization brings richness and richness brings quality.
Thumbs up for Microsoft
I also find it as an obligation to mention about Microsoft. Beloved development partner of all developers. Another success story everyone including myself admires. Even though Microsoft is the king of acquisitions, their last move is worth a mention. Latest news indicate that Microsoft is pulling out of e-Commerce software market and selling his Microsoft Commerce Server to another company. Maybe Microsoft would make a big surprise, follow the foot-steps of Steve Jobs and get back to its roots providing OS, server technology, office and development tools, rather than expanding its business to different line of businesses which I really think that it is not their business. They are already one of the biggest powers in the world today. What more power or wealth than this can someone want? Even if commerce server operations were not profitable and really missed the point but in any case this last move from Microsoft earns my respect and my 2 cents go to them. Thumbs Up. For a change, they are selling a business line just before it completely goes to trash.
Secrets of Big 4
I think that what Big 4 is really achieving to do with all these acquisitions is their desire to preserve their position and not let too many player to play in the same market. Even if it is %1, there is a good chance that a smaller player can take some part of their market share. So the main idea is “hit them before they hit you”.
Even though I think it is apparent and not a secret but a recent article from a Gartner analyst perfectly summarizes the “secrets” that big 4 is not sharing with their customers. And beneath all lies some truth about the outcome of all these acquisitions:
- Microsoft mainly wants to protect its Windows and Office franchises.
- Oracle products don’t really work well together.
- IBM wants to take over your IT strategy.
- SAP confuses customers with pricing.
List of important acquisitions
Now I would like to continue from where I left off and list some of the important acquisitions that I see will have a significant effect on the software market in the years to come. But the list is very long, I think it is not a good idea to include it directly in this article. I will rather give you some links. Those who are interested can check out.
|Vendor||Years||#Acquisitions||List of acquisitions|
|Microsoft||1987 – 2011||147||List of mergers and acquisitions by Microsoft (source:Wikipedia)|
|Oracle + Sun||1994 – 2011||81||List of acquisitions by Oracle (source:Wikipedia)|
|SAP||28+||List of acquisitions by SAP (source:SAP)|
|IBM||1984 – 2011||126||List of mergers and acquisitions by IBM (source:Wikipedia)|
|HP||1989 – 2011||101||List of acquisitions by Hewlett-Packard (source:Wikipedia)|
|Apple||1988 – 2011||33||List of mergers and acquisitions by Apple (source:Wikipedia)|
516 companies were purchased over the 37 years. I wonder how many survived. IBM and HP are old companies, especially IBM dates back to 1880s. So, I have just used the start date for acquisitions as 1980s for all companies. Sources are listed next to each company. I have not been able to get the complete list of SAP acquisitions so the number is taken from their website which shows only a few of these acquisitions.
What is the logic?
Let us try to question the logic of these purchases.
As I pointed out earlier, they may have wanted to increase their market share by these purchases. There are also examples of each company purchasing companies that are in the same line of business. They end up to have more than one product with the same purpose. Here I would ask a question: What will you do with all these similar softwares, are you going to form a single solution or have you been able to do that until now? How long would that take? What will the partners and customers of these brands do until you figure out a way?
They may have wanted to take down a major competitor and indirectly protect or increase their market share. Again, What will the partners and customers of these solutions do until you figure out a way?
They may have wanted to have more expert and specialty solutions than they currently have. This is the worst case. Here, I would ask one question: why did you sell your own solutions to your customers for all these years if you knew they were not good enough?
They may have wanted to enter a new line of business where they see lies the big bucks and start having a taste of that market as well. Here I would say, Everyone must do what they are best at. Specialization brings richness, richness brings quality. Take a look again at Apple example.
The more we start to ask or analyse, the more questions will start popping up.
Of course, these acquisitions are also an advantage for the remaining competitors, they have the chance to increase their market shares until the big 4 make a noticeable move with their new businesses. So I would say to the remaining companies to act fast and take it seriously and take every possible action to move forward in the competition.
“Big fish eats little fish” but until when? What will happen when there are no more little fish around?
But Let us not forget that there are very good companies out there that are still proudly standing up. Another thumbs up for them.