A three-way perfect storm could well be brewing with results that will sharply recast the roles, capabilities, and categories of major IT vendors. While other factors are certainly at play, here are the three primary animating forces:
a) Conditioned by the mile-wide offerings from top IT suppliers, CIOs are now expecting their leading strategic partners to accelerate and expand the ways in which they can help those CIOs fundamentally transform their organizations and operations. In an age where Cisco sells servers and HP has become a networking powerhouse and IBM is resurgent in hardware and Oracle's keying on optimized systems and Microsoft stretches from Windows 7 deeply into the cloud, the same-old same-old from a year ago won't get IT vendors on the "A" list anymore. Go bigger or go home.
(For more analyses on top-tier IT vendors, please be sure to check out our "Recommended Reading" list at the end of this column.)
b) Integration and interoperability fatigue. Oracle president Charles Phillips nailed this one with his summation last week of the recognition among CIOs that little value is created and big opportunities are squandered when their teams are trapped in endless connectivity and compatibility and integration exercises. In an interview Thursday with Global CIO, Phillips said, "The entertainment value or intellectual stimulation you get from tweaking every little thing up and down that stack is not the same as what it once was—they're kind of bored with doing that. And the expense of doing that is apparent now" (see Global CIO: Oracle's Phillips Says Standardizing On Oracle Is The IT Cure).
As those CIOs slash the numbers of IT vendors with which they do business, the winners will be those with either extreme and unique specialization, or with sufficient breadth and depth to meet the new demand.
c) Cash is abundant: the big IT players have anywhere from "just" a few billion to more than $10 billion on hand and know that they can't afford to stand pat as their enterprise customers' expectations rise.
It all seems to point to what could be a rather lusty spring and summer for deal-making in the tech sector, and we at Global CIO would like to push the conversation forward with 10 suggestions for acquisitions that will not only continue to shake up the status quo in the tech business but also unleash new value for customer-side CIOs.
We'll count down our top 10 starting with #10 and working our way up to #1, with those rankings based on magnitude of impact each deal would have for customers and competitors.
#10: Salesforce.com should buy Sybase. Salesforce.com is closing in on an annual run rate of $1.5 billion, and the addition of Sybase would almost double that revenue total. But while additional market heft would be nice, the real gem in this deal is Sybase's strong penetration of the market for enabling and managing mobile apps, particularly for SAP. (See Mobile Apps For SAP Help Drive Sybase's Record Q1.)
#9: Dell should buy Extreme Networks. Dell's become a powerhouse in the data centers of some of the world's highest-volume website titans and is looking to parlay that high-performance skill more broadly across the enterprise. Extreme has the high-end technology that can make Dell a player in the market for sophisticated networks, and a customer set Dell would find most tempting.
#8: Cisco should buy BMC. As Cisco has transformed itself from network-centric specialist to a broad-based enterprise hardware player, it will need to be able to offer customers equally powerful management tools. BMC's got a very strong reputation, and such a deal would underscore for customers that Cisco's intensifying its efforts to become a full-line, full-capability enterprise systems supplier.
#7: Accenture should buy HCL. This would ruffle lots of feathers throughout the IT services business as it would represent one of the first serious attempts by a major player to meld the strengths of a traditional U.S.-based consulting, services, and systems-integration company with the massive development, maintenance, and innovation capabilities of a leading Indian software and services firm. The challenges of integrating equally strong cultures and fundamentally different business models would be daunting, but the ultimate combination would offer scale and potential that few if any other IT services companies could match.
Next comes IBM: