The UK software industry is slowly disappearing and it's only a matter of time until Microsoft moves in to fill in the void, says Simon Moores.
When Microsoft bought business software companies Great Plains Software and Navision last year, I predicted that Sage, one of the UK’s few software success stories, was about to join a growing list of endangered species, leaving me uncertain whether the company would outlive my daughter’s hamster, Eric.
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
Both Sage and, of course Eric, are still alive and well and a recent meeting with Microsoft’s Simon Edwards convinced me that Sage may survive Eric by a couple of years at least.
There’s no doubt that Microsoft is serious about its plans for a web services business platform on which a host of third-party "biz apps" can "add value".
The best analogy that came into my mind was the Lotus 1-2-3 "add-in" manager in the 1980s.
Lotus 1-2-3 was the de-facto industry standard before Microsoft started experimenting with its own applications. Having edited the Lotus buyers guide at the time, I vaguely recall some 200 or more applications that could be attached to what was, after all, "the" PC platform at the time.
Last week, Sage announced pre-tax profits up 14% to £74.3m on revenues - up 4% to £281.1m.
Bearing in mind that a healthy proportion of Sage’s revenue is service revenue, demonstrating double-digit profitability at all in this economic climate, has to be seen as a good result, particularly if the competition on the radar happens to be Microsoft.
Microsoft is, however, biding its time. Buying Navision and Great Plains Software was only the first step in a bid to dominate the next generation of small business applications.
Microsoft, which is, reportedly, spending $2bn a year on developing this market, can afford to wait until the time and the technology are right for it to strike.
When it does, it will be the software equivalent of parking an aircraft carrier across Sage’s doorstep.
Let’s be honest. The UK software industry is disappearing fast. Last year, I was an advisor to a company that tried to sell itself to both Sage and Microsoft. It had undeniably better software than both, but that didn’t prevent the company disappearing and being sold for a fraction of its true intellectual property value.
Like the light bulb that runs forever, or the car that runs on water, there was no place for it and the venture capitalists took one look at the competition and were never seen again.
Sage are rather larger and more successful than most, but these two qualities have never been enough to save British companies over the past 20 years.
After all, if Microsoft shows an interest in your market, whether it be flight simulation software or accountancy software the inevitable is only a matter of time, a hamster’s lifetime even.
What do you think?
Is it healthy for the IT industry to be dominated by just a handful of powerful suppliers? Tell us in an e-mail >> ComputerWeekly.com reserves the right to edit and publish answers on the website. Please state if your answer is not for publication.
Setting the world to rights with the collected thoughts and opinions of leading industry analyst Dr Simon Moores of Zentelligence.
Acting globally, Zentelligence (Research) advises governments, suppliers, business and the media on the evolution, application and delivery of leading-edge technologies and specialises in the areas of eGovernment and information security.
For further information on Zentelligence and its research, presentation and analyst services visit www.zentelligence.com