December 16th, 2004
The days of consolidation
Oracle buys PeopleSoft. Symantec buys Veritas. Microsoft buys anti-spyware tools.The list goes on. Computing technology is reaching a kind of plateau, where the concepts that underly the base IT infrastructure are fairly mature. In this stage of IT evolution – which will last a few years — vendors and customers alike are focused on getting more out of IT investments with consolidation, virtualization, Web services, grids and integrated suites of products.
In some ways, it’s a return to the early days of computing. *
There were a few vertically integrated companies that provided everything from the raised floor and air conditioning to the behemoth computers and punch cards. Then, horizontal integration came along — in which enterprises built solutions out collections of hopefully best-of-breed products from different vendors.
Now we are entering a phase in which a few companies will rule enterprise computing, each with a suite of pre-integrated functionality that promises to dramatically reduce integration and administration costs. Cisco, IBM, HP, Oracle, SAP, Sun, and others, are leading the move toward more integration.
It’s not exactly horizontal or vertical. I talked to Joe Tucci, CEO of EMC (which acquired Documentum, Legato, VMware and Dantz Development over the last few years), who describes the current shifting landscape as a movement toward matrixed integration. "We’ve figured out some of the complexity," Tucci said. "It’s not vertical or horizontal stripes–it’s both. There is also the rule of "three"–the number one company gets the majority of the revenue. There will be big time winners and big losers."
In other words, if you don’t get big fast, you will be left behind. If you are swift, small and innovative, you’ll likely get scooped up by a big fish. Companies in the middle will have the hardest time surviving in the current consolidation phase.
Oracle wants to provide the application and data infrastructure stack. IBM, although it doesn’t have applications, offers everything else, but also profits from the complexity of IT with its consulting services. Computer Associates is everything management–systems, storage, security, business intelligence, lifecycle management and data management. Symantec recently spent about half a billion dollars to acquire a number of companies, including Brightmail, ON Technology and SafeWeb. Symantec and Veritas will (eventually, they hope) develop a comprehensive, integrated suite that knits together security, systems and storage management. And, the merged company is likely seeking other acquisitions to bring into the fold to fill out its stack.
For IT buyers, the rampant consolidation has a good and bad side. Fewer vendors mean fewer choices and possibly more lock-in and less price elasticity. On the other hand, a matrix of easily integrated IT infrastructure that you buy or apply pay-as-you-go pricing is a reflection of the commoditization of the data center. You have fewer vendors to deal with (how many phone companies do you work with?) and, theoretically, fewer integration headaches.
IT over the next decade is not about creating the most ideal, customized solution—it’s about delivering application services and meeting service levels. Any customization happens within the applications themselves or at the fringes, rather than in the infrastructure data center core. You shouldn’t have to care what servers or software stack are running. Not all of the standards-based hardware and software stacks that vendors are building will be the same, but the basic ingredients won’t differ much. They will address different IT problems depending on what they have in their stack. And, like any stack–a structure like a skyscraper that has different, integrated layers–the solution will only be as effective as its weakest parts. And, over the long term, it will only be effective if it is built to survive the next major tectonic plate shift in IT.
