Reality Check | Ephraim Schwartz » Reading between the lines of the Oracle bid for BEA

October 12, 2007 | Comments: (0)

Reading between the lines of the Oracle bid for BEA

TAGS: Business

It is the end of an era.

Oracle's take over of BEA, be it imminent or eventual, along with last week's acquisition of Business Objects by SAP tells us that we will see a major change in how the enterprise buys software.

Let's leave software as a service [SaaS] out of the picture, for the moment at least, and look at what is happening just among the giant on premise application vendors.

For better or worse, the battle for survival between these major vendors who offer a single, all encompassing solution, from database to middleware on up through applications versus the point solution vendors is ending.

The single solution vendors have won. At least for now.

This is for better or worse because point solutions offer a number of benefits to a large company.

For one it gives them a vendor with domain expertise who can help them use technology as a competitive differentiator.

Secondly, it allows a company to remain flexible. Because they are not dependent on a single vendor, they can pick and choose best of breed solutions.

It also puts the buyer in the driver's seat, at least to some extent.

If you're Nestle and you just spent $100 million deploying an all SAP solution, if dissatisfied a CIO's threat to go elsewhere would ring somewhat hollow, wouldn't you say?

On the other hand, if your company spent $100,000 or even $500,000on a point solution, it would be somewhat easier to admit a mistake and correct it when the software doesn't do what you ask of it.

Unfortunately, it looks like all of those point solution benefits are going, going gone.

Last week's Reality Check said "what we will probably see now is an accelerated pace in acquisitions and consolidation among software vendors as each major company vies for what remains of the pure-play vertical solution ISVs."

Oracle's latest acquisition attempt makes the point. But don’t discount the importance of SAP's acquisition of Business Objects for what it means, either.

It means, one of the very largest software vendors is no longer sitting on the fence, making only small, strategic acquisitions. For the most part SAP preferred to build rather than buy technology.

That will now change. SAP has decided to join the fray directly. If it wants to scale and compete with the likes of Oracle, Microsoft and maybe EMC it has no choice.

On a more positive note, what enterprise users will lose in vendor independence, flexibility and domain expertise, they will gain in ease of integration, deployment and support. Of course, that will happen as soon as the software vendors figure out how to integrate their latest acquisitions.

The wild card in all of this are the SaaS vendors. The fact that the big vendors are getting even bigger may actually push companies towards SaaS.

There appears to be benefits to SaaS both on the business and technology side.

The fact that it becomes an operational expenditure on the books rather than a capital expense, shouldn't be discounted.

Or the fact that a company can try a solution without investing a great deal of time or money. Plus the low cost of deployment, and the sheer number of choices now available, among other things, may in fact make SaaS an appealing option when put up against a giant on premise vendor who basically will own your IT department.

It is a jungle out there. The big on premise vendors are fighting among themselves for prey and hunting down the smaller pure play vendors. But as SaaS continues to evolve and grow in size,the hunters may become the hunted.

Posted by Ephraim Schwartz on October 12, 2007 12:48 PM

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