The Pieces Are Moving - InformationWeek
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07:07 PM

The Pieces Are Moving

What's that grinding sound? It's nothing less than strategic business applications shifting to a higher virtual plane.

Even as the dog days of summer approach and attention turns to vital concerns like sand-dribble castles and fish bait, groaning and grinding continues to emanate from the movement of the IT industry's tectonic plates. Touting utility computing, Hewlett-Packard, IBM, and other major infrastructure providers vie to become your one-stop shop. The ongoing drama of Oracle's attempt to acquire PeopleSoft has removed the veil over carnivorous machinations latent in a whole range of enterprise application vendors. Finally, as Internet computing matures through service-oriented architecture (SOA) — and as radio frequency identification (RFID) technology approaches mainstream — many user organizations are coming to realize that they must break free of older notions and move up to a new vision of business-IT alignment.

Consolidation Conundrums

Thanks to Oracle's PeopleSoft acquisition caper, we've learned that Oracle was also coveting J.D. Edwards, not to mention Lawson Software. Meanwhile, news came out that SAP and Microsoft had been in extensive merger and acquisition talks, even as Microsoft pumped funding into its current Microsoft Business Solutions portfolio, which the company created through earlier acquisitions. SAP's June earnings report showed impressive numbers, including a 45 percent rise in U.S. sales. Siebel Systems, on the other hand, gave investors a heads-up that it would miss its numbers by a fair amount in the second quarter, despite reporting success with its Analytics product over the past year.

Consolidation plus uncertain business prospects in the enterprise applications sector brought consternation to IBM, which views itself as the prime infrastructure partner to many of the vendors in play. News sources reported on internal IBM memos that expressed concern about the company's competitive position given the blending of infrastructure and applications anticipated by the technology directions of Microsoft, Oracle, and SAP.

In early July, determined to strengthen its "middleware" positioning, IBM announced its intention to acquire Alphablox Software. A regular at business intelligence (BI) and data warehousing trade shows, Alphablox always took a little while to understand; however, its distinctive view of BI as an application development problem made Alphablox one of the more innovative software providers out there. If the acquisition goes well, IBM could use Alphablox to move BI out of its "query and reporting" confines by giving a wider spectrum of developers and ISVs the tools with which to build applications focused on leveraging information resources.

Cost Versus Value

While the courts will have their say, further consolidation among application software vendors is bound to come. Incremental dips and turns in demand could trigger mergers and acquisitions, but the true causes are bigger. With packaged applications and services taking care of the meat and potatoes and reducing need for customization, businesses want to focus on development that will deliver competitive advantage. In the CRM arena, all you have to do is look at the success of to see why the Siebels and PeopleSofts of the world must move quickly to raise their portfolios above basic offerings and focus on what brings customers flexibility and innovation. That's why SOA is such a hot topic. SOA approaches promise to both preserve current investment and enable the addition of modular components.

Cost remains a key factor — and vendors often tout the potential of SOA to reduce the cost of both application management and development. The proof there will be in the pudding: with luck, a tasty pudding, not an uncongealed morass of conflicting standards and proprietary extensions.

However, cost is also about software pricing and licensing, which are in major flux. Embedded components inside business objects, deployment over the Web, and other distributed platform issues complicate how to calculate the bottom line. Wall Street and government regulators also have a say in how they would like to see software providers recognize new sales versus recurring maintenance revenues. Negotiations also must take into account services: New technology adoption depends on a strong business case, which makes business analysis services incredibly important in influencing new sales and licensing.

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