Like a balloon that’s been inflated to the limit, the software industry is on the verge of bursting.
News that the U.S. Department of Justice has cleared the way for enterprise software maker Oracle to continue its hostile bid to acquire rival PeopleSoft only serves notice that the breaking point is drawing ever closer.
Sales of ERP software packages are less than brisk — earlier this year research firm IDC said overall market revenues were on track to grow less than seven per cent in 2004, and none of the big three players (add SAP to the aforementioned companies) appear to be making any significant gains in market share. When they talk, it’s mainly about services or integration efforts.
It remains unclear if an Oracle/PeopleSoft marriage could ever be arranged, as the bad blood between the two companies and the “poison-pill” clause that the latter has in place seem to make for formidable barriers. But even if this saga ends with the two companies proceeding as independent entities, market forces will usher in big changes, in other ways.
First is Microsoft — word earlier this year that it was in talks that came close to seeing it acquire SAP AG, the world’s biggest enterprise software company (and using cash to do so) demonstrates how badly Microsoft wants to solidify its enterprise presence.
An analyst I spoke to several months ago said customer relationship management software maker Siebel is another contender to come under Microsoft’s acquisitive gaze and, potentially, even PeopleSoft.
Second is that fact the consolidation in software has been happening for some time. According to our U.S. affiliate publication, Bank of America Securities LLC researcher Robert Stimson says a PeopleSoft-Oracle union is now “not a matter of if but when,” but he also sees the case sparking a buying spree.
“We view this as the first step in a major consolidation wave within software,” Stimson wrote.
Software is slowly becoming a commodity, and commodity markets typically see a few big players ferociously dickering with each other over small price differences and lots of marketing. The number of companies you’ll be able to call will be reduced, but there’s comfort to be had knowing the software monolith you opt for is likely to be there to stay.
The next few years are sure to be entertaining for industry watchers. Enjoy it while you can — it will be the final fireworks before the industry enters its final but lasting state of calm.
