IT procurment needs a rethink - industry consolidation changes the game

Oracle’s acquisition of Sun shows that everything is up for grabs Oracle has spent $35 billion since 2005 on major software acquisitions including Peoplesoft, Hyperion and Siebel. In 2008 HP bought EDS for $13.9 billion. Last year IBM acquired BI specialist Cognos for $5 billion. Symantec now owns Veritas, paying $13.5 billion for it and EMC has quietly been building a portfolio of strategic technologies by acquiring companies like VMWare, RSA and Documentum.

 

If anything, chief information officers and IT directors can expect more acquisitions this years. Even well established brands, are not immune. Poor financial results and weak share prices make even the bigger IT companies targets for acquisition.

 

Further consolidation leads to less choice, but this is not necessarily a bad thing. One could argue Oracle is a better home for Java even if Sun did invent it. Who can doubt Oracle’s track record on M&As? It has already integrated Hyperion, Peopesoft and Siebel. Ronan Miles, chairman of the UK Oracle User Group is confident Oracle will be a safe bet for Java.

 

Consolidation is also an opportunity. First, the new owner can integrate products and services, simplifying IT purchasing and deployment. Second, it can potentially offer attractive licensing across its product portfolio.

 

There are now four major suppliers of IT, namely HP, IBM, Microsoft and Oracle. Through their acquisitions, these four take up a large chunk of the major IT purchases businesses make. CIOs have relied on a diverse procurement strategy to lower risks and obtain better pricing through competitive tendering. Now, due to industry consolidation, there is less competition and the CIO is spending more with a smaller group of suppliers.

 

IT procurement teams need to take into account how the industry has changed and what this means in terms of purchasing.

 

This is an opportunity for CIOs to simplify procurement and negotiate better licensing terms and conditions and even an enterprise-wide licensing agreement, covering a diverse range of products from the same supplier

 

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