The emergence of the mega-tech vendor economy

May 5, 2009
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The event that brought this line of thinking out is the announcement today from IBM and Hubspan have formed a partnership and are jointly selling a new cloud-based integration platform called WebSpan.

In the IDC Top Ten Predictions publications over a year ago I started talking about the economies that were growing up around the major software vendors and their platforms. I could see that the consolidations in the market had changed the dynamics of the industry,that the consolidation cycle was continuing and that partners were growing into more of an ecosystem around those larger mega-vendors. 

What I didn’t envision though was to what extent that consolidation would extend and that in technology as a whole there would be a change to this model of mega-vendor and ecosystems.
OK, the Oracle Sun acquisition brought on this concept of the new hybrid mega-vendor, but the signs were already there before, I just didn’t think big enough.
I’ve already posted on the Oracle-Sun deal so I won’t go back through that for now, even though I will most probably do more when more details come out…

The event that brought this line of thinking out is the announcement today from IBM and Hubspan have formed a partnership and are jointly selling a new cloud-based integration platform called WebSpan.

In the IDC Top Ten Predictions publications over a year ago I started talking about the economies that were growing up around the major software vendors and their platforms. I could see that the consolidations in the market had changed the dynamics of the industry,that the consolidation cycle was continuing and that partners were growing into more of an ecosystem around those larger mega-vendors. 

What I didn’t envision though was to what extent that consolidation would extend and that in technology as a whole there would be a change to this model of mega-vendor and ecosystems.
OK, the Oracle Sun acquisition brought on this concept of the new hybrid mega-vendor, but the signs were already there before, I just didn’t think big enough.
I’ve already posted on the Oracle-Sun deal so I won’t go back through that for now, even though I will most probably do more when more details come out. 
The one point I want to make is that Oracle, post close, will not look anything like it did before, from database / middleware / application software company add hardware, storage, infrastructure software + the #1 slot in open source software. Also the competitive landscape shifts even more, Oracle would then be a hybrid conglomerate like IBM, Microsoft, HP,Google and Cisco. 
SAP would only be seen as a competitor in the apps business, a medium piece of the whole. And as for other software companies, they would only compete with Oracle in distinct markets. The focus of Oracle as a whole changes.

The event that brought this line of thinking out is the announcement today from IBM and Hubspan have formed a partnership and are jointly selling a new cloud-based integration platform called WebSpan. WebSpan is a SaaS integration platform that combines IBM’s Websphere integration software with WebSpan’s on demand integration platform into a single integration platform providing process automation and information integration in one package. The new product offering will be sold by both sales organizations. This is a clear example of the evolving ecosystem and a new way of bringing products to market together. Not that the details of the deal are particularly different from any number of joint go-to-market announcements but what is interesting is the number of and the density of these types of announcements as well as the much stronger joint go-to-market approach. Don’t be surprised to see more of these closely tied partnerships converge around those few mega-vendors this year.

With all the consolidation and the emergence of the mega-vendors there’s a lot of talk about innovation in the tech space and specifically how the new mega-vendor environment stifles innovation in tech. There are two types of innovation, continuous and discontinuous and in understanding where our industry is moving it’s important to note the difference. Continuous innovation happens in a steady path of improvements to existing product lines over time.

This is the most common form of innovation and is evidenced by the “roadmaps” of all the tech companies. It is also the easiest for customers to adopt and implement as it does not radically change their infrastructure,environment and processes (there is of course incremental process change and improvement but it is in small doses). The game changing innovation is discontinuous.

 Discontinuous innovation is the radical leap-frogging of a current industry norms, things like client/server over mainframe and SOA are good examples in the enterprise space. The mega-vendor model feeds off of continuous innovation while start-ups often feeds off of discontinuous innovation. I think both of these types of innovation are important in a maturing industry like tech and in fact they seem to continue in a healthy way today. 

What I think is different is that we have three (and only three) classes of vendors today… the mega-vendor (who will compete and partner amongst themselves as it suites their business), the midsize (and often slow growth) vendor that competes with the mega-vendor in one or a few segments (and over time maybe pulled into the mega-economy by being acquired by one of the mega-vendors, or if niche enough, continues on in a healthy way) and start ups.

 The start ups will drive discontinuous innovation and, if successful (most are not), be acquired by the mega-vendor when the innovation is proven (will there be another Google,maybe but personally I don’t think so, they would be acquired before that could happen). Outside of this core there is a large partner ecosystem that grows up around each of the mega-vendors.

What this means for partners? I think it means that more than ever it’s critical to tie yourself to one of these mega-vendors, use their platforms and go-to-market together. I also see quite a bit of partner consolidation and certainly there will emerge a set of thriving and potentially larger and more complete partners in each ecosystem. Pick the right mega-vendor for your business and leverage what they bring to market, that’s the key.