Gartner warns of emerging 'super vendors'

Vendors using M&A to create integrated offerings that analysts say will likely lack long-term innovation

ORLANDO - Gartner Inc. analysts Monday warned that the tech industry is caught in a "vortex of insatiable mergers and acquisitions" that is creating a category of "super vendors" selling highly integrated offerings.

Peter Sondergaard, senior vice president of research, offered an audience at Gartner's annual Symposium ITxpo here a particularly blunt critique of the accelerating trend by tech firms to acquire innovation though mergers and acquisitions.

"Acquiring innovation is one thing, maintaining it is completely different," said Sondergaard. Integration across an entire stack by one IT provider "is impossible to maintain long term - users will not accept architectural mediocrity," he added.

Freddie Diaz, vice president of technology sourcing at an information and publishing company he asked not be named and one of about 7,000 conference attendees, called Gartner's criticism of such acquisition strategies by technology companies "a pretty bold statement to make, because that's where all these guys (vendors) are headed."

Sondergaard didn't offer a list of "super vendors," and probably didn't need to.

Many of the largest IT firms have recently been acquiring companies as well as buying new product lines. Oracle Corp. is now selling integrated hardware offerings thanks to its acquisition of Sun Microsystems; Hewlett-Packard broadly expanded its storage capabilities with the recent of purchase of 3Par, and IBM earlier this year announced plans to spend some $20 billion on acquisitions over the next five years -- twice the amount it spent to buy companies over the past 10 years. Meanwhile, Cisco Systems Inc. has added servers to its product mix.

"M&A as an innovation accelerator has firmly taken hold," wrote PricewaterhouseCoopers in its second quarter report on merger and acquisition activity.

Underpinning this shift by vendors is a series of trends that Gartner sees as dominating the technology business: cloud computing; social computing, particularly the building of IT architectures to support social networks; context aware system that tie location with user data; and pattern recognition that will bring in new models for gleaning insights.

Tony Moldovan, a lead technical specialist at a metals industry firm he asked not be named, said the idea of social computing has merit.

He said the approach, so far, in the enterprise has been focused on blocking social networking because of productivity issues. But "as we start to open up some of that we can start utilizing some of that information in ways that we might even thought not possible," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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