Enrique Dans. Proffesor. Instituto de Empresa
17 September 2003
Restructuring is going on in a big way in many sectors today, as the big fish swallow the little fish. This is particularly true in information technology.
Technology is a highly entertaining field. Can you imagine any other sector where, overnight, one of the most important competitors could announce purchase of another major player, then - just days later - reveal that it, in turn, is to be bought up by another, even bigger, fish?
The purchase bid for J. D. Edwards by PeopleSoft, followed two days later by a hostile offer from Oracle for PeopleSoft, is one of those moves people love; it’s enough to make strategists the world over devote time to speculation and observations of all kinds. When the waters are troubled, everyone wants to fish.
SAP counterattacked by addressing its clients who had implemented products from J. D. Edwards and PeopleSoft. It told them that, given the imbroglio that had been created, they would do well to move to its products. To ease the process, SAP presented them with an aggressive offer.
You don’t know whether to read the specialized trade magazines or the gossip columns anymore.
But if the analysts are right, we are witnessing a frenzied race to grab a larger share of the market. Though there are predictions of a future where these products will be common and implemented out of necessity in companies of all sizes, they are still typically associated with major corporations.
PeopleSoft, J. D. Edwards and Oracle are elephant hunters. The current struggle, therefore, can be seen as a fight to see who can hunt the most elephants, especially now that there are increasingly fewer of these giant beasts around. Yet in practice, no matter how much industry observers – so obsessed with their graphs, 2x2 matrices and market shares – keep insisting, that is not the way it really is. I see it more of a race in pursuit of another quota, one little measured to date: the client quota.
Product lines of the companies mentioned above have numerous interdependences among them. It is not enough to sell a firm a database, because that firm could use another’s applications on top of it, or even combine modules from different competitors. Everything depends on how much you wish to spend on integration, and on whether you opt for one of the two most famous theories: the “all-in-one” (one manufacturer gives me the lot), or the “best of breed” (the best solution in each case, the leading product from each manufacturer).
It is not clear which of these strategies is better. We spend on one for integration, consultants and interface development, while spending on the other leads some to say we lose out on functionality. The bottom line is that since elephants are no longer abundant, each time we catch sight of one, we want it whole, from trunk to tail. If we hunt it properly, the animal is more likely to stay with us in future, implement our forthcoming versions and not be tempted to get in the sights of any other stalker who might happen by.
[*D If anyone is capable of popularizing management applications and putting them within reach of small and medium-sized enterprises, it is Bill Gates and his boys *]
Who is smaller than an elephant, but still hunts everything that moves? Some of the hunters we have mentioned are attempting it, with varying degrees of success. The tussle promises to be an interesting one. Meanwhile however, rumors are afoot about a hunter, specializing in simplifying matters, who has just landed in Africa. The last few times this hunter moved into a territory, rumors say, he left no other shooter standing and fired at all the animals in the jungle.
We are talking, of course, about Microsoft. If anyone is capable of popularizing management applications and putting them within reach of small and medium-sized enterprises, it is Bill Gates and his boys. Their moves to control the world of corporate applications began some time ago, with purchase of Great Plains, in the North American market, and of Navision in Europe. This already represented an advance warning of the company’s market-positioning plans.
It is now rounding off the move by backing CRM applications, through collaboration with the market leader, Siebel. At this stage of the game, we still do not know whether this collaboration will be a simple “hunting party” – a jungle adventure where one shoots at elephants while the other aims at rabbits and gazelles – or whether it will represent something more. We call from previous experience that when Microsoft wanted to learn about B2B, it went hunting with CommerceOne, from whom it absorbed all it needed to know to incorporate simple solutions for accessing e-marketplaces into Microsoft BCentral. After the hunt however, it told them, “Nice meeting you, we learned a lot. Bye!” and went on its way. We can’t say yet if Siebel will suffer the same fate, or if a time will come when Microsoft will decide to simply purchase the company - something that would turn the sector’s competitive panorama on its head.
The scenario is interesting. On one hand, financial analysts punish technological companies for a series of sins they say were committed in the past (though at the same time, other analysts are punished for having recommended technological companies they knew were disastrous, to make money on transactions originated - something that doesn’t exactly make one want to trust financial analysts). Yet on the other hand, some of these technological companies, with successful product lines even in these tough times, are capitalizing themselves sufficiently into positions where they can consider acquisition operations. What is more, this fight is going on in a marketplace where quotas are crucial, because the issue is to hunt elephants, and, as we said, there are fewer and fewer of them left. The result? In this sector nothing is certain, nothing sacred, everything can move around.
At dawn, in Africa, the gazelle knows it must be swifter than the lion if it wants to survive. At dawn, the lion too knows it must be swifter than the gazelle if it is to survive. The moral? It doesn’t matter whether you are a lion or a gazelle, whether you live in Africa or any other place. As soon as you see the dawn rising… RUN!!