The Perils of Software Vendor Consolidation

CIO Magazine has a solid article that should help get your day off to a roaring start by addressing the rapidly consolidating software vendor landscape. With the rash of acquisitions in 2007, and already more this year, the number of choices for companies is rapidly shrinking--in fact, the article cites a Forrester Research report that shows only 17 major software vendors left--which is almost hard to believe.

Now that doesn't mean that there are only 17 software vendors left in total--but that for enterprise and larger mid-sized organizations, their choices, based on the existing and future standards, are rapidly shrinking.

Now while there's a great case to be made for the "one throat to choke" strategy (that's mentioned in the article), increasingly we're seeing the power shift from customers to vendors as choices continue to be narrowed, and that's not always a good thing for companies and CIO's in particular right now. Once the dreaded "standardization" banner has been raised, it's harder and harder to switch away from that vendor's services--there's too much time and money invested, too much customization, too much hassle. And among the lesser-known switching costs are issues like credibility and politics, issues that never make it onto a Cap Ex proposal but are an inherent part of what leads you to pick a vendor and the "safe choice" in the first place.

A study that I haven't yet seen, but would be interesting either to see the results, or to grab it if it has been done, is to compare the costs of "inter" system integration, and "intra" system integration. Is it really less expensive to do everything within one system? Because often times you go with one of the big vendors due to the breadth of their offering, not necessarily the depth of their functionality. So you end up spending more money to get the less-functional, more "integrated" system to do what you actually need it to do, perhaps negating the cost savings of using the single vendor strategy in the first place.

Confused yet? It's still a jumble out there, and there's great technology and ideas that are most likely on the way--we always see talented people leave after an acquisition and go off and start their own company, focusing on a particular technology or vertical--and this year will be no different. And with the economy doing who-knows-what in the coming 12 months, CIO's may be looking for a more specialized, less costly alternative than their vendor standard, which on the whole, is a good thing for this industry.