And then there were three

Opinion

The way things are going, there’ll be only three tech vendors left standing at the end of it all.

When it started is anyone’s guess. Maybe it was back when IBM bought Lotus for a couple of billion in the mid-90s. After that there was a bit of a lull as the dot-com era took off and the new focus was on making billions and furtively glancing over the corporate shoulder for fast rising competition. Then the bubble burst, and the weak and meek were ripe for the taking.

It jumpstarted again with HP enveloping Compaq. Today PeopleSoft is acquiring J.D. Edwards, and now maybe Oracle will buy them both. Even our very own Corel was bought by someone I’d never heard of, Vector Capital from San Francisco. When that one crossed the newswire, there was a fleeting moment when I wondered what the hell a cereal maker was doing grabbing the WordPerfect company.

Heck, I’ve been covering IT for a few years and only vaguely knew of Legato, which was recently bought by EMC. An analyst told me Legato didn’t have much of a Canadian presence, which might explain away some of my ignorance. But a US$1.3 billion price tag? Some serious coin is flying around.

Even when the takeover threat looks more like posturing (think Larry Ellison in Redwood Shores), it’s in the news. There is even talk of buying a company to remove it as an irritant (think SCO and Big Blue).

But in the end, is all of this consolidation going to give users a better product? Does three of anything constitute choice? I guess in politics it might, but I digress.

Historically, cartels and monopolies never have been – how do I say this politely? – customer focused.

The big three automotive companies used to have dozens of competitors years ago, and the products reflected it. When it was down to three, the products, by all accounts, were, well, crap – especially in the 1970s. Competition with the Japanese drove them to improve their products, and they did.

If this IT consolidation trend continues, which companies will likely be standing at the end?

Smart money never bets against IBM, even when it is down. And it has a solid corporate strategy: buy everybody you can; those you can’t buy, work with; and above all, don’t make enemies. But despite the TV ads, IBM has no public face, which may harm it in terms of battling for long-term world supremacy.

Microsoft – now there’s a face. Bill Gates is lambasted at half the conferences I go to. Competitors like making satiric video clips with geeky Bill look-alikes.

Microsoft originally missed the Internet revolution yet still managed to finagle its way out of what could have been a death knell by offering Explorer for free, and pretty much driving Netscape into oblivion.

And wasn’t there some comment from Bill years ago about a few kilobytes of RAM being all we’d ever need? Now that’s foresight.

But if there is a lesson to be learned here, it is to never underestimate the boys and girls from Redmond, even when it looks like their strategies are not well thought out. Analysts stifled laughs when the company said it was going after the enterprise market. Not so funny anymore as the Windows Server 2003 looks like the real deal.

And the third company, if in the end it is indeed a triumvirate we’re left with? Never a smart bet to predict Oracle’s corporate demise, but one analyst said he’d go out on a limb and say eBay will buy it one day. And anyway, outside of IT, who really knows what Oracle does? SAP also seems unlikely. Something Linux, perhaps? Can’t see it, since it has already been co-opted by most of the serious players. How about a service provider? eBay? Amazon? Yahoo? Could happen.

There is another alternative – U.S. style.

Down south the rule of thumb is to wait until things get so unbearable that the government has to step in. Standard Oil and AT&T both effectively created monopolies but finally met their match when they battled the U.S. government, and lost. Microsoft is still kind of fighting, but the case is mostly shades of grey, and both sides have claimed victory at one time or another.

But if the consolidation trend continues, the greys will turn to blacks and whites. Whether this will lead to worse service and less imaginative products, and the government stepping in, only time can tell.

But history does have a way of repeating itself.