Enterprise Software First Principles: What Google, IBM, Microsoft, Oracle and SAP Will Do Next Decade?

Dennis Byron

In a July 6 blog post, I said I was going to level set my research agenda to answer five questions. Those questions were (short version):

 

  1. What is middleware?
  2. What is an IT stack?
  3. What is the best way for you and your IT supplier to fund/pay for the development of middleware, enterprise software and the rest of the IT stack?
  4. What is the best way to do that development no matter how it is funded?
  5. What are Google, IBM, Microsoft, Oracle and SAP going to do in the next 10 years from a business and revenue model point of view in response to the likely answers to the above four questions?

 

If you are an IT staffer or manager starting to do your 2010-2011 planning, thinking about the answer to the fifth question is probably more important than the answers to the other four. Google, IBM, Microsoft, Oracle and SAP are the leading software providers based on revenue (listed in alphabetical order). They account for almost half of all your software spending (on average). This top five matters even if you are small or medium size enterprise that tends to think of Intuit or a similar IT company as your primary IT supplier. They matter even if you are a services-industry-specific enterprise - such as a government agency or financial services institution - that tends to think of a systems integrator, Fiserv or another service bureau as your primary IT supplier.

 

Each has a niche from which it derives its market power and from which it funds its software research and development (e.g., IBM in mainframes, Microsoft in collaboration software). Yet each receives most of its R&D funds from you in a different manner (e.g., Google via advertising, IBM via "rentals," etc.) But most important I think the five are dividing into two groups that will go in fundamentally different directions over the 2010-2019 decade. This last fact has major implications for your planning.

 

Some will become IT technology providers with business models similar to the ones already adopted by Cisco, EMC, Intel, and so forth. Most likely that will include Oracle. How SAP ends up - if it is not acquired - remains to be seen.

 


Others will move totally into the services mode similar to the approach already adopted by Accenture, HP EDS, Perot and companies such as Amazon that have moved even beyond IT service provision to simply be considered business services providers that use their technologies to deliver the service. The purpose of IT is simply to differentiate them in the marketplace. Some would say Google is already there, and I might agree if it didn't keep telling me it was a technology company. IBM might have already become a management consulting firm with a strong IT background.

 

By 2019, you will primarily deal only with the latter type of company directly for IT. Note that if IBM and Google have already moved through to a non-IT-centric model, you might not even deal with them (but your C-level execs will). Or the IT service level may disappear altogether as a market dynamic to consider in your planning.

 

To understand this bifurcation better, we still need to answer the first four questions. Look for future blog posts and send in any related questions you would like answered.

 

And all of this theory begs the question, what if you are one of the IT staffers or managers that looks to another enterprise software supplier as your preferred supplier, one of the hundreds of suppliers that account for the other half of worldwide software revenue? More to come on that subject as well but the easy answer is "Don't base your planning on that thinking."



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