Many friends and colleagues ask the question – what will happen to companies such as Tibco, Informatica, etc., who are in the middleware space for many years. The biggest middleware player BEA is gone. In the old days, we used to joke that after death you go to CA (Computer Associates), because of CA’s acquisition of so many companies. Now we see such acquisitions happening all around, specially by Oracle. When Sun’s acquisition will be completed, Oracle will own the Java software platform and MySQL open source database product.
Look at the BI players. Business Objects is now part of SAP. Cognos, the Canadian BI company, is part of IBM. Hyperion Solutions (formerly Arbor Software) was acquired by Oracle. In that space, we see the good old SAS standing alone as a private company for almost 3 decades. Informatica, which started as a ETL (Extraction, Transformation, and Loading) company has transformed itself to do other stuff like data integration, data migration, data quality management, etc. The space looks sparse for smaller players. There are new companies in the data warehouse appliance space such as Netezza (an MPP Data Warehouse appliance) and Greenplum (based on PostgresSQL and also an MPP solution). All the big players have data warehousing and business analytics as core competencies. That includes HP with its new offering called Neoview (based on Tandem technology of non-stop SQL) and its Data Warehouse appliance with Oracle. IBM has done several acquisitions over last five years to strengthen its Information Analytics space.
In the middleware space, the landscape looks even more sparse. IBM claims to be the provider of enterprise infrastructure for middleware (DB2, WebSphere, Tivoli, Rational, ..). Its software business contributes over 50% of profit, althouh the revenue is only 20% of the total. HP wants to get to that space after acquiring Mercury Interactive and Opsware. Its sorrounding its flagship product Openview with other software tools. BEA was the big player with its success of Weblogic, but now its all in the all-pervasive Fusion world at Oracle.
So what do start-up companies in the infratsructure software business do? It will be hard to succeed independently unless the value is extremely critical and obvious. At the same time, it must co-exist in a broader ecosystem of the customers. Microsoft delivers the whole stack, so does IBM and Oracle. Its back to the good old days when each vendor supplied the entire stack – from chips to hardware to operating system to subsystems to applications. Starting in the 1980s, we saw that structure shifted to a more horizontal play, where each layer had many players. But customers became the default “systems integrators” and they did not like it. Of course, the systems integration business flourished. Now the customers prefer less number of vendors for ease of management and service.
Where we see a lot of activity is the data center management software (call it cloud if you want), be it in security, manageability, reliability, backup-recovery, data archiving, virtualization at various levels, and governance. Any innovation in these areas will see a good future, but focus and specificity are the catchwords.
Given the dismal IPO market, every start-up in the enterprise software infrastructure space should be pursuing a strong partnership strategy for market success.