The Software Circle of Life

"...But the sun rolling high through the sapphire sky
Keeps great and small on the endless round.."

- Elton John, from the theme song of Lion King.

The software industry is similar to a natural ecosystem. When CA was on a buying spree in the 90s, Larry Ellison commented something along the lines of "every ecosystem needs a scavenger". Oracle is now on a buying spree and has started a stampede called "industry consolidation", but probably prefers to be compared to a lion or a leopard. 

When you safari in Africa you look forward to its "Big 5" - lion, leopard, elephant, rhino and buffalo. But there are hundreds of other species which survive and thrive. Herds of gazelles and zebras are not the endangered species - efficient fighting machines like the gray wolf and the Asian tiger are the ones more threatened around the world. Software and animal ecosystems have their own checks and balances.

Every year, like clockwork, wildebeest put on a spectacular trek through the Serengeti - and not everyone in that herd survives. The software "consolidation" cycle is similarly cyclical and almost as predictable. SSA bought InterBiz - which was CA's collection of application acquisitions in the late 80s/early 90s. SSA also bought Baan, which acquired several companies in the late 90s. M&A is a healthy part of the software industry - fragmented as it is. But M&A has gone on for decades. Like solar flares - at times they are just more active but they happen on a continuous basis.

In the wild, lions which typically need 10 to 15 pounds of food a day, can gorge up to 100 pounds at one sitting - or 20 to 30% of their body weight.  But when they do, they fast for many days. They spend much of their time resting—often up to 20 hours per day. While they rest, lesser species prowl and the deer graze.

As the larger vendors rationalize their acquired architectures (Oracle trying to move PeopleSoft, JDE, Retek, its own products to Fusion; Microsoft its Great Plains, Axapta, Navision, and Solomon and other acquisitions) they rest and become inwardly focused and allow others in the ecosystem to survive and thrive. Oracle by paying 3X to 6X revenues for its recent acquisitions has raised the bar and potentially slowed down other deals in the industry which are priced lower.

"...There's more to be seen than can ever be seen
More to do than can ever be done.... "

There is a reason why the software industry supports over 2,000 companies...there are hundreds of vertical, geographic, process and other opportunities.  In 1995, SAP was telling every vertical it had "wall to wall" functionality. In the decade since it has had to add APO, BW, CRM, SRM and a number other modules. Even today it cannot service more than 25% of business process needs in banking, insurance and a wide variety of other verticals.  Niches and watering  holes abound. RSS, Predictive Analytics, visualization, security and so on.

"..But all are agreed as they join the stampede
You should never take more than you give..."

In their consolidation moves, Microsoft and other larger software companies are sowing the seeds of even more industry fragmentation.  Buyers know they can do better on software pricing, implementation, quality and support. This is opening up opportunities for open source, SaaS, BPO vendors, offshore vendors, third party maintenance vendors.  Evolution continues.

The software industry has whipped itself in to frenzy about consolidation. But we have seen earlier consolidations, and every wave of consolidation just opens new opportunities.

Time for the industry to relax to the Zulu lullaby -The Lion sleeps tonight. Tomorrow is a new day to explore a whole bunch of new pastures. As the song says the jungle - the industry - is the mighty one, not the lion.

Wimoweh..