Big IT vendors turning to mergers to help take on cloud

More large acquisitions expected; users say they prefer fewer vendors but fear lock-in

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The real value that enterprise vendors can still offer is the ability to use software and services to do the complex job of tying different systems together for large users. For instance, an enterprise vendor could link GPS-enabled sensors on all the products inside a moving railway car to BI systems connected to handheld dashboards and internal social networks. To keep up with emerging technologies, though, enterprise vendors would have to constantly remain on a path to acquire a broad range of companies.

The major acquisitions by Oracle Corp. in recent years are examples of moves aimed at both consolidating the market and increasing product scope.

For example, Oracle took a major step in cutting ERP competition -- and consolidating the enterprise applications business -- in 2005 by acquiring PeopleSoft, which had previously acquired rival J.D. Edwards.

Then this year's acquisition of Sun Microsystems Inc. extended Oracle's enterprise reach into a new area -- hardware -- as the company sought to keep up with the integrated offerings available from HP and IBM.

Customers see positive and negative aspects to the acquisition strategies of the big vendors.

Sharon Gietl, vice president and CIO of IT at The Doe Run Co. in St. Louis, a privately held metals mining, refining and recycling company, complimented Oracle on its willingness to integrate strong features of acquired products into its own.

Gietl, whose company is a major user of Oracle ERP software, also noted that the vendor's customer service operation has improved its over the past six or nine months -- a change, she added, that may have been brought on by the recession. For example, if Doe Run has a specific need that the Oracle ERP products can't fulfill, the vendor now brings in third-party apps and integrates them. "I see that as a change," she said.

She said Oracle in earlier times could be described as distant.

Gietl did express concern that continued major acquisitions could eventually significantly limit customer choice, though she did note that that services offered by cloud and SaaS providers are fast emerging as strong alternatives. In fact, Doe Run already uses a a hosted performance management HR application, Gietl said.

"In order for [major vendors] to remain competitive, they are going to have to sharpen their pencils," she said.

The one-stop shops created by large vendors like IBM, Oracle and HP are now falling under labels like "unified computing" or "converged infrastructure."

IBM is set to invest heavily in its effort to be a one-stop tech shop, announcing last month that it plans to spend $20 billion on acquisitions over the next five years -- twice the amount it has spent to buy companies over the past 10 years.

Some large vendors are also forming partnerships to help get control of corporate IT operations. For instance, Cisco Systems Inc., VMware Inc. and EMC Corp. last November announced plans to join forces to sell private clouds.

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