What's Enterprise Software Market Consolidation Really Mean to You?

Dennis Byron

On March 2, Vinnie Mirchandani interpreted some Forrester data to conclude that the enterprise software market isn't really that consolidated. I disagree with that interpretation because it leaves out the time-series relationship needed to really understand the data. Maybe Oracle and SAP "do not even make up 50%" of the total in 2008, as Vinnie says. But 10 years ago the two companies probably did not even make up 25 percent of the total. Just scan down the list in the Forrester blog post and remember that Oracle represents 10 or more former separate enterprise software providers, Sage a dozen, Microsoft five, SAP a few, and big-winner Infor almost 30. That's consolidation (more on the subject here).


But that's not really where Vinni was heading. His real point is that you still have many choices other than SAP and Oracle (many fewer than 10 years ago but still hundreds). He says:


"As I wrote last week, it's time to refocus our procurement folks away from the trend of vendor consolidation (and related lock-in) and have them rediscover the art of sourcing."

So that's the real choice, one many of you seem to be voting for with your pocketbooks. You do want to deal with only a few enterprsie software providers rather than dozens; it's not your purchasing agent. You decide a little lock-in is worth it to gain "one throat to choke." You believe a vendor you are consolidating on is saving you substantially on license fees even as that vendor jacks up maintenance fees (which you could get from third parties)? You can't afford the in-house development talent or expense of systems integrators to tie together many different brands of enterprise software. (Of course, Oracle and Infor have a ways to go on that issue even if the invoices come with one logo on the top.)


The real issue is which is better for your enterprise and IT shop: point products or stacks. What do you think?

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Mar 4, 2009 5:24 PM vinnie mirchandani vinnie mirchandani  says:

Dennis, vice versa look at how many new vendors have been created in the last decade - just about every SaaS and open source, web 2.0 etc.

Most analysts do not want to include vertical players. Many of them like SunGard and McKesson are bigger than most ERP players

If you include only new licenses Oracle and SAP are even lower market share...

Mar 9, 2009 2:50 PM Dennis Byron Dennis Byron  says: in response to vinnie mirchandani

Thanks for the comment, Vinni.

But you're never going to win the anti-software-market consolidation argument. It's a share issue, not a number of vendors issue. (However for the sake of debate Netsuite, Concur, Taleo, salesforce.com, and many other leaders in the SaaS space have been around for more than a decade as have most of the break-through open source guys I think of off the top of my head--Red Hat, MySQL, Mozilla, openoffice.)

And I'm the analyst that started counting "verticals" such as HBOC (McKesson), Shared Medical, Sungard, Fiserv, Retek, JDA, and so forth as ERP suppliers 15 years ago when you Gartner guys were still equating ERP with manufacturing

But I thought your original point was different. Even if there are only 500 choices now instead of 1000 (or whatever the scale of difference is if you count Windows Solutions providers), corporate purchasing agents should look at those choices. Ok by me but I think it's the IT guys (and to a lesser extent line of business guys) that want a narrower set of suppliers to deal with, not the purchasing agents.


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