Software industry consolidation to continue

6 Jan 2006

Strategic consolidation in the software sector in terms of mergers and acquisitions as well as enterprise-wide consolidation of data, servers and software that began in 2005 is set to continue into 2006, the new managing director of Oracle’s Irish operations Paul O’Riordan claimed.

O’Riordan has succeeded Nicky Sheridan in the role of managing director of Oracle’s Irish business. Sheridan has been appointed as managing director of Oracle South Africa. Prior to taking up his new role, O’Riordan was consulting director for Oracle Ireland for the past three years and before that he held senior roles in Fusion Business Services, Irish Distillers and Accenture.

According to O’Riordan, 2005 was a year of integration and consolidation – data consolidation, server consolidation and the consolidation of companies – in the global software industry. The level of mergers and acquisitions across many industries in Europe in 2005 was substantial, totalling more than US$1 trillion – the highest level in five year, data from Market Watch shows.

O’Riordan pointed out that this trend was typical in the computer hardware sector in the late Nineties. “Now, it’s the software industry. Why is software consolidation happening at this time? Well, over the past few years, particularly during the ‘dotcom’ explosion, we saw a dramatic increase in the number of new, often niche, software products brought to market.

“Many of these offered narrow point solutions, with hundreds of features, all using different data models,” O’Riordan explains. “The choice was confusing and sometimes choosing one product meant sacrificing some features that a customer really wanted. Many large organisations, governments included, who have to deal with dozens of software vendors are finding it difficult and expensive to maintain these different software products working together. These pressures have made customers request fewer strategic partners who can offer a richer portfolio of products and ensure those products work together from the get-go. As a result, we are seeing a period of consolidation of software solutions, as customers demand reduced complexity, less customisation and lower costs.”

Looking at the hot technologies for 2006 in the software sector, O’Riordan said that there would be a move towards common standards. “If one term could encapsulate the trend in 2006, it would be hot-pluggable. This is the answer to the CIO’s concerns that new implementations will be disruptive, as it promises to take out the pain of making things work together. Basically, a hot-pluggable architecture allows organisations to mix and match current and new technologies from a range of software vendors. This approach lets them connect and extend their existing heterogeneous systems and maximise current and future investments in IT. Hot-pluggable is part of the overall trend towards standards-based interoperability and in 2006, we should see increased adoption.”

Another key area for the next five years will be semantics technology, O’Riordan predicted. The semantic web aims to create a universal medium for information exchange among machines. Sometimes referred to as master data management (MDM), IDC predicts that this market will grow to US$10.4bn by 2009. “MDM aims to give businesses a single, accurate view of customers, partners or suppliers, by drawing data from separate stores of data scattered across an enterprise. Again, common standards-based technologies are key in making this happen.”

In conclusion, O’Riordan said that the key trend for this year is towards making enterprise IT simpler and cost-efficient through consolidated, integrated solutions, dynamic storage sharing and real-time information from sensor-based chips. “At the heart of this is interoperability – something that technologists have been striving to achieve for years.”

By John Kennedy