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One of the upsides of a weak economy is that it forces vendors to identify new revenue (re: profitable) opportunities, which translates into additional product options for buyers. This includes efforts by software heavyweights such as IBM, SAP, Oracle and Microsoft to scour the market for niche products they can add to their cache. Buy versus build has increasingly become the expansion strategy for most enterprise software companies, including SAP, which until recently had historically relied upon organic growth.
For instance, Microsoft yesterday announced that it has snapped up industry-specific applications from four smaller ERP vendors which it intends to add to its Microsoft Dynamics AX suite. The products include process manufacturing software from Fullscope Inc., retail software from LS Retail EHF and To-Retail Denmark A/S plus professional services software from Computer Generated Solutions Inc.
Meanwhile, an organization which provides emergency medical services to hospitals and health systems in New York, New Jersey and Pennsylvania is using SAP’s BusinessObjects business intelligence software to track swine flu cases and outbreak patterns, according to InformationWeek. The application is a reflection of how enterprise software providers such as SAP, which acquired Business Objects in Oct. 2007, are increasingly leaning on acquisitions, even from smaller niche vendors like the ones that Microsoft bought, to help differentiate themselves and their industry-specific product offerings from one another in the battle for customer market share.
It also makes you wonder which software companies might be prime acquisition targets for Oracle and SAP, as The 451 Group has done in a recent report. As suggested by 451 Group analyst China Martens in an article published yesterday, Oracle may have an interest in eliminating some of the competition while adding to its own human capital management offerings by acquiring SuccessFactors or Taleo.
Meanwhile, SAP executive board member John Schwartz told Bloomberg Television that the company plans to pursue additional acquisitions in a “more significant, more assertive way.” It has to if for no other reason than to make its product offerings more attractive than rival Oracle. That’s good news for SAP customers who are looking for one-stop shopping to add new functionality. But it’s also bad news for CIOs overall as the enterprise software market is increasingly being controlled by a handful of titans.
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