When Oracle announced its joint venture with Cisco this week, I initially did not consider this move as a particularly important development in the IT industry. Joint ventures happen all the time. Each company has its core competencies, and it follows that they will leverage off one another to deliver a best-of-breed solution to customers.
I will put my neck on the line and say that, in most cases, it is the enterprise application vendors that are initiating the joint ventures.
Jason Norwood-Young, technology editor, ITWeb
However, take this deal in the context of activities over the last month and the IT landscape takes on a distinct hue of change. First it was Siebel, the leading customer relationship management (CRM) software vendor. It recently partnered with Sprint, a major US backbone provider (which incidentally is up for sale), to combine CRM with wireless technology. There is also a three-way partnership developing between IBM`s AS/400 platform, enterprise resource planning (ERP) vendor JD Edwards, and Siebel.
IBM also announced a global partnership with another ERP company, IFS. Although a newcomer to the game, IFS does already have a local presence.
Staffware, the workflow management company, has also just signed a joint venture with Nokia to extend its reach to mobile phones.
These are all enterprise application software companies partnering with hardware technology companies. Is it just me, or could there be a definite pattern forming here? When such similar deals fall over such a small space of time, we can definitely start looking for a trend.
Following the trend
A trend in itself is not too important. It could be coincidental, or it could be one company imitating the actions of its peers to remain competitive. What is important is where that trend is leading us, and why the trend started in the first place.
The origins of a trend indicate a hole in the IT market. I will put my neck on the line and say that, in most cases, it is the enterprise application vendors that are initiating the joint ventures. This could be due to one of two reasons.
Firstly, it could be because top-tier enterprise is saturated with ERP software. Once an ERP system is installed, organisations are unlikely to move from it as it represents a huge investment in time, money and infrastructure changes. That is why e-business is receiving such a push from the IT software vendors - if they can sell a company a really good business reason as to why they should throw away millions of dollars worth of investment, they stand a much better chance of breaking into an account held by a five-year-old ERP system.
The business reason is a massive decrease in cost in the day-to-day operations of the business. To deliver on this e-business promise, however, software vendors have to extend their products to include networking and platform technologies.
The second possible reason for the move is customer trust. A solution with a stamp of approval from all vendors concerned puts a customer`s mind at ease. If you purchase an expensive hardware platform, an expensive network infrastructure, and more expensive software, you want to be very sure that it is all going to work together.
Delivering ideals
As to where the IT market is going, I have already mentioned e-business as a goal. Delivering on solutions as opposed to just product is another ideal held by the industry.
Margins on a full solution are typically much higher, and with box-dropping becoming less and less profitable, vendors have to offer full solutions to keep their channel members from straying too far from the flock.
At the same time they don`t want to force the channel to do all of the integration themselves - they don`t have the skill-set and the resources that the vendors posses, and a botched job from the channel reflects badly on all of the vendors concerned.
E-business is mostly about trust - trusting your business partners, trusting your customers, and trusting your suppliers. It is heartening to see the propagators of this strategy walk the walk, and not just talk the talk.
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