Forrester principal analyst Paul Hamerman, in the report "The State Of ERP 2009: Market Forces Drive Specialization, Consolidation and Innovation" (subscription required), is confident the consolidation trend will continue for Oracle and its peers. Here's why: To boost recurring revenues (from new customers and maintenance fee streams); to eliminate the competition (see Oracle's hostile PeopleSoft acquisition); to establish a presence in new markets (to get into new industries, vertical plays, customer segments or geographies); to complement platforms and services (in which IBM would buy ERP applications); and to find "technology gems" (that is, "undercapitalized software firms with valuable intellectual property"), Hamerman writes.
Are there still enough enterprise software firms out there to acquire? While the number has dwindled since the turn of the millennium, there are still more than a dozen targets available.
Acquisitions aside, how will the cadre of ERP vendors approach the future? Like those robots in the Transformer movies, the MISOH cartel, and other traditional ERP entities will have to change their "shapes," and alter their strategies to stay with the times (and already have, to some degree). That means embracing -- rather than resisting -- on-demand and SaaS-based computing software-delivery models. And you can bet you'll be seeing fewer and fewer "cloud computing" rants from big ERP execs, like this one that Oracle's Ellison gave in fall 2009.
For example, in an odd 2008 interview with ZDNet, Lawson Software CEO Harry Debes proclaimed that the SaaS industry would "collapse" in two years. In the interview, Debes also noted that Lawson was a happy Salesforce.com user. In fall 2009, during an interview with CIO.com, Debes stands by his comments, saying that the feedback from Lawson's customers at the time, which was that they did not want a SaaS solution, "was compelling." That's changed. And today, Debes says, "I'm a very big fan of cloud computing," though his on-premise business still has a bright future, he contends.
Industry leaders SAP and Oracle are feeling the heat -- from NetSuite, Workday, Salesforce.com and other vendors offering solid alternatives. SAP's on-demand Business ByDesign mid-market offering has, for all its technological promise, been a bit of an enigma. SAP stumbled out of the gate, at least from a marketing perspective -- execs either overpromised and underdelivered or did a poor job of managing customers and partner outsized expectations: limiting the service to a relative few of its customers. That said, SAP has added new features and enhancements (integrating tools from its Business Objects acquisition, for instance). If all goes according to plan, 2010 will be the coming-out party for Business ByDesign.