Straight Angle™: My life line!
Wednesday, September 14, 2005

My life line! 

The news that Oracle bought Seibel shouldn't surprise me. After all, the Enterprise Solutions business is a maturing business and consolidation should be name of the game. A casual look at the speed with which Oracel is buying out firms(willingly and sometimes, forcibly) is rather amazing. Oracle had been acquiring companies like ProfitLogic, PeopleSoft, Seibel etc, and still it is not the number one Enterprise Solution Provider in the world. That title goes to SAP.

Larry Ellison, had just made a point that, he would not acquire a company that would deliver less than 20% annual earning growth to Oracle. But, would Seibel be able to deliver it?..I guess, it might be able to do that...

  1. With the market being a mature one, and not many big corporations left to implement a ES package, all that would be left for the vendors would be the Small and Medium segment, where the deal size would be small, and the margins less. This would nevertheless means more business in terms of Volume(there are much more SMEs than there are MNCs)..
  2. Also, the major revenue generator(rather- the high margin business) is not implementation, but upgrade and maintanence! This means that the vendor should not only be great in it's product, but also in maintainence and support!
  3. There are also cases of cross migration- though this doesn't happen too frquently and in large numbers.
  4. This being the case, it becomes absolutely necessary for vendors to drive down costs, while maintaining the operating margin(which is a rather tough call).
Now, with the acquisitions, Oracle has a ready made customer base, with the package implemented already...All it needs to do is to provide support and upgrade to them...alternatively it can also lure them to migrate to it's own solution rather than the acquired company's solution. Project Fusion, launched by Oracle for integrating, or rather merging the best of the three product lines- Oracle E-Business Suite, PeopleSoft Enterprise, and EnterpriseOne, would be running till 2013. This is very large time frame for migrating and establishing stability in an enterprise system application.

SAP had been clever to jump on the opportunity provided by the acquisitions and the uncertainity created by it. The customers of the erstwhile companies would definitely feel jittery to suddenly deal with a behemoth and would be worried whether they would get the same sort of bargain that they used to get with the smaller vendors. Also, they would be worried about the continued support to their systems. These are natural concerns and SAP had played to them very well. It's SafePassage, offered the worried Peoplesoft's customers, migration to SAP at discounted rates!

With just 3 major players left in the market space,(Micros**t, SAP and Oracle), the Enterprise Applications space is a rather fiercely competitive one. Ofcourse, MS is a new entrant, but not an inconsequential one. SAP byfar is the dominant player. Now, where does this leave the service companies like IBM, Accenture, Infosys, Wipro etc??..IBM has its own applications- notable among them are the hoards of the middleware apps that it has under its sleeves. So, it can remain in the fray for long. Accenture- it had positioned itself as process cnsultant and so, inrespective of the package, it too can remain in the fray. Now, that leaves the Indian companies hot and dry. Similarly, companies like IDS, EDS,

Till now, our companies had been concentrating on the lower end support/maintenance side of the enterprise applications space and so, they dont seem to have extensive process knowledge/process consulting experinces. Infosys had been alert enough to create a seperate company called Infosys Consulting to deal with that issue. Now, they might be seen as Process Consultants, rather than just an outsourcing stop. Also, the big companies, that had been concentrating on the development side of the Enterprise solutions, might now want to offer end-end services for their clients- right from development -> sales -> implementation -> support ->maintenance. The first three functions, the vendors already do(Implementation is not done as vigourously as it should be). Does this mean that the companies like Infy might be a good target for acquisition?..I leave this to time!


Blogger Cogito said...

With the acquisition binge that Oracle is on, I wonder how they are going to integrate all these diverse firms. The consultants are bound to make tons of money :-)

9/14/2005 10:31 PM  
Blogger Krish said...

@Cogito: True Cogito!.But Larry doesnt seem to mind that integration part of it..to say the truth, I was hoping for such a scenario..atleast I can make good money as an HR Consultant!!...Also, with many erstwhile PS, Seibel cleints might move on to SAP, which is a good sign for any SAP Consultant, which I am one!..So, I am happy!!:)

9/15/2005 1:08 AM  

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