IBM (NYSE: IBM) was about to buy Sun (NASDAQ: JAVA), then the deal fell through, and then Oracle (NASDAQ: ORCL) stepped out of the shadows and snapped up Sun instead. It’s not the first such takeover drama in the computer industry and it likely won’t be the last. And in one way, which company won Sun in the end doesn’t matter so much – the Oracle-Sun deal has much the same significance that an IBM-Sun deal would have.
It’s another signal of the way the industry is moving toward big, full-service vendors. And not the only one. Cisco‘s (NASDAQ: CSCO) move to expand its data centre offerings with the Unifed Computing System announcement in March was another.
Here’s a company traditionally known for providing network plumbing, now aiming to play in the broader data centre marketplace. In fact, Cisco wants to offer a complete architecture of products built to work together, says Alex Thurber, Cisco’s senior director of worldwide channels.
And the Oracle-Sun deal, meanwhile, brings together a software provider (one that has already built itself up on the software side through multiple acquisitions) with a company that has both hardware and software.
These are the latest developments in a process that has seen, for example, IBM add software and services strength through the acquisition of companies like Lotus, Cognos and DMR (while shedding some hardware businesses). “The market is moving toward leviathans,” says Carmi Levy, an independent technology analyst in London, Ont., “and to the largest shall go the spoils.”
Now there’s speculation that, in response to the Oracle-Sun deal, IBM might decide to acquire Oracle-rival SAP (NYSE: SAP). That idea is being met with a good deal of skepticism. It’s too big a mouthful even for IBM, it wouldn’t deliver enough value to make it worthwhile, and anyway IBM decided long ago that it doesn’t want to be in the applications business.
Nigel Fortlage, vice-president of information technology at Winnipeg-based GHY International, suggests IBM might want to look at a Linux vendor.
Still, not everyone’s a skeptic. “SAP would be very complementary to where IBM is going in the market today,” Levy says.
Meanwhile, Cisco, which has done some modest acquisitions such as the takeover earlier this year of Pure Digital, could also be on the hunt. A very large application software company, Levy suggests, might be a logical target for Cisco.
But who would that be? Not Microsoft (NASDAQ: MSFT), certainly – it’s too big, and by the same token Cisco is probably too big for Microsoft to swallow — though a partnership of some sort might make sense.
Ultimately, trying to predict exactly who will buy whom is a mug’s game. But it is safe to predict that consolidation will continue, as the major players race to put together across-the-board offerings.
What does that mean to customers and the channel?
For customers, the news is mixed. “Yes, there’s an advantage to having a one-stop shop,” Levy says, “but when you can’t go across the street for an alternative … where does that leave you as a buyer?” And if you’re a small customer, how well are these increasingly large companies going to look after you?
That’s where the channel comes in. The more the market moves toward a few large suppliers, the more opportunities there are for resellers to act as the intermediaries helping small and mid-sized customers get what they need.
