Continued ..the offshoring angle on Enterprise Applciations, M&A
I blogged about the Merger and Acquisitions in the enterprise software space last week, and almost as a follow-up came the big news of Oracle bidding for BEA. How this deal will play out is anybody’s guess: Analysts are already speculating: Oracle bid too low says BEA, Wall Street Journal’s The Business Technology Blog sums up the implications, which tech analyst and blogger Om Malik seems agree with:
The only obvious losers in this deal are other midsize software companies and their customers. Between SAP’s acquisition of Business Objects earlier this week and the potential BEA deal, it’s clear that the era of the midsize software company is over. The big guys need to grow, and the only way they can continue to do so is by buying smaller companies. This should cause uncertainty at mid-size software companies, which is never good for customers.
Going back to my earlier blog and the interesting points made by Michael about M and A among enterprise software vendors and the increasing role of offshore players in the segment:
“Apply this phenomenon to offshoring and it careens into the reality that offshoring customers still trust the 'bigger is better' mantra for vendor selection, and thus this would seem to align with other market realities and give the "packaged software" idea more legs. To me, it reeks of absorbing innovation and specialization (ala Microsoft in the 90's) in favor of market control. Real solutions do not promise to span the entire enterprise and delve into every nook and cranny of conducting business without admitting openly that the REAL work of such massive alignment is years of process analysis, custom development and very often pushing through multiple failures. Now, once the Big 4 and there Indian challengers get fully on board we'll have the same collusive consulting (where software decisions are made before engagements even begin) that got us to where we are today with bulky systems underachieving and slowing the true digitization of the enterprise.”
He warns of the possible risks of “collusive consulting,” especially as offshoring is added to the complex equation of product selection and enterprise platform roadmap definition. This is a topic that is highly subjective; one which I am hard pressed to speculate on. of course, to his credit, Michael concedes
“I am also humanist, and know many who navigate these potential conflicts of interest with great professionalism and a genuine desire to provide tangible business value to clients. I also know it’s tough to move mountains, and I am writing from an idealistic perspective in light of the current market picture. Nevertheless, my comments are directed at the structural problems and the lack of sound market based incentives when a company (for example) buys ERP, BI and consulting from a single behemoth. A salesman will tell you this will reduce “integration” issues, but I would urge savvy IT decision makers to heed the durable latin warning: caveat emptor (buyer beware).”
In addition to the points I made in my earlier blog, the fact remains that offshoring players, especially tier-1 firms are in the ‘strategic mix’ of technology consulting, product selection and technology roadmap definition. The flip side of being in the consulting space is risk of advising on or participating in deals that inadvertently may have dimensions of “collusive consulting” that Michael alludes to. Addressing such risks is challenging at best of times for client organizations: sourcing managers and technology leaders have the responsibility of ensuring due diligence and enforcing a robust governance, and to build the right checks-and-balances. Goes without saying, when due diligence slips through the cracks… don’t just blame the consultants. :-)
Here I would agree with Michael: I too would urge savvy IT decision makers to heed the durable latin warning: caveat emptor (buyer beware).
