OK, that has got to be the best post title I’ve had since starting this blog – it’s a well known saying, its on the topic of the post AND it works in the name of the company that provided the impetus for this post: The news coming out last Friday that the European commission will likely clear the last hurdle for Oracle’s acquisition of Sun. This got me to thinking about the state of the software and technology market today as compared to almost 15 years ago when I first got out of school and landed a job as a tech support engineer in a small software company outside of Detroit.
“Back then” netscape was just finding its way out of the NAISC, most businesses did not have internet connectivity and you could purchase IT infrastructure for the enterprise from an array of vendors (which didn’t include Dell). The picture seems much different today: the IT market seems to be consolidating. Whether its HP buying Compaq, SAP gobbling up Business Objects, the acquisition of UGS (the company I worked for) by Siemens, or the regular cadence of IBM buying something every 6 months – the market seems to be getting rolled up.
Its sort of like what happened to the US auto industry between the 20s and the 50s. According to Automotive History online:
There were over 1800 automobile manufacturers in the United States from 1896 to 1930. Very few survived and only a few new ones were started after that period.
1800 car companies! Can you imagine? I grew up in the era of the big 3…which eventually became the Detroit 3…and now with Fiat owning Chrysler, I’m not sure what to call them. But flashing back to the 50s, there were still more than 30 independent car manufacturers. You could still get a Checker (even if you weren’t a cab company), a Packard or a Continental. So from the 30s to the 50s we went from 1800 to 30 (a choice reduction of 98%) and then from the 50s to the 00s we went from 30 to 2 (a measly 93% reduction in choice). So clearly the diversity of choice was greatly reduced in the past 80 years in the US auto industry (don’t even get me started on badge engineering), but was there any good that came form this consolidation?
I would say overall, the reliability bar was raised. Sure, there are plenty of stories about problems with certain vehicles and how “nothing ran like a Tucker”. But the overall reliability of the average vehicle was better the mid -60s than it was in the mid-40s. The average level of technology in the average vehicle also increased. It was only through the massive scale of the Big three than things like anit-lock disc brakes and airbags became standard features on even the most basic vehicles at basic vehicle prices. Did the consumer overall win or lose? I’ll leave that to smarter people than I…but I sure wish I could still buy a Sunbeam!
Back to the IT market. Will the same things happen here? Are we on the verge or even in the middle of a massive rollup that will only leave 2 or 3 players? Briefly the answer is no. To expand on that a bit, there is one major difference between the auto industry and the IT industry: we didn’t stop having new companies enter the market 20 years ago. There is a new IT company born at least every day (probably way more than that). It’s true that the fate of majority of them is the trash heap, and most of the rest will be eaten up by the existing big players before (or sometimes after) their peak. However, even if just a small few catch on and evade capture by the established players, the IT market will be able to continue to renew itself. That’s why although I’ll always be a car guy, I think I’ll stay with IT as the way to pay for them.