Global CIO: Are Oracle, HP, Cisco & IBM Too Big To Innovate?
They're great at acquiring aggressively and generating huge cash positions—but do those translate into customer-focused innovation? We hand out report cards for each.
If customer-centric innovation can be measured by sheer volume of acquisitions, then Oracle, Cisco, IBM, and Hewlett-Packard are the top innovators in the IT industry.
But is the level of an IT vendor's acquisition activity necessarily a direct indicator of its ability to deliver customer-centered innovation? No, it's certainly not.
From the customer side, CIOs have long said that while they love the concept of IT partners being big enough to be one-stop shops, those CIOs rigorously avoid the reality of forging such relationships because the early-stage convenience inevitably leads to the uncomfortable questions of who's really calling the shots, where'd my flexibility go, and how did I lock myself into this cage?
So let's take a look at each of those companies and offer some opinions—and some good old-fashioned letter grades—on how well we think each has done in terms of leveraging their respective cash-rich positions and hyperactive M&A teams into new ideas, new alternatives, new approaches, and greater levels of choice for CIOs.
As a starting point, I got to thinking about this the other day after reading a great Wall Street Journal piece about how a small number of tech companies have distanced themselves by a huge measure from all other tech companies in terms of their cash positions. And rather than being just a nice but fairly abstract items on a balance sheets, those cash positions are being wielded aggressively by those companies to fund competitive efforts into new areas, extend product lines, and buy up real or would-be competitors.
The Journal piece breaks out a colorful chart showing how the tech sector's five cash-richest companies expanded their cash reserves during the recession from 2007 to 2009:
Top 5 Cash-Rich Tech Vendors
1) Cisco: to $39.6 billion from $22.7 billion
2) Microsoft: to $36.1 billion from $21.1 billion
3) Apple: to $24.8 billion to $18.4 billion
4) Google: to $24.5 billion from $14.2 billion
5) Oracle: to $20.8 billion from $8.4 billion
For the purposes of this analysis, I've dropped Apple and Google since the enterprise is only a sidelight for them, and I've added HP and IBM into the mix because not only do they wield enormous clout among CIOs, but they also possess huge stashes of cash: for HP, $13.3 billion as of the end of its fiscal 2009 on Oct. 31, 2009; and for IBM, $12.2 billion as of Dec. 31, 2009.
So here's a report card for each of those five, with letter grades and some commentary for key initiatives they're pursuing, along with an overall letter grade for each company. We'll start with Oracle and move to IBM, Microsoft, HP, and Cisco: