Industry Update

By Geoffrey James

Computer Associates. CA continues to struggle with its corporate image as the result of a massive accounting scandal involving its former management. The latest foray into image changing involves offering free legal services to nonprofit organizations and low-income community members, mostly on Long Island, many of which cannot afford to pay for legal services. Presumably the company now has so many lawyers working on saving its reputation, that the management figured offering some free services would be just a drop in the bucket. Our take: CA continues to remain vulnerable to competitive pressure. Competitors should continue to emphasize fear and doubt of CA’s long-term viability.

IBM. IBM sold its PC business to Lenova, China’s largest PC manufacturer. (One can almost hear Michael Dell and HP’s Carly Fiorina dancing a fandango in the distance.) IBM’s retreat from a market segment that was an essential part of IBM’s “one-stop-shop” strategy signals that the firm is truly serious about becoming a services company that sells some high margin hardware products, rather than a builder of complete solutions including hardware, software and services. IBM also continues to purchase services companies, making a multibillion dollar purchase of a couple of Dutch firms in early January. Our take: The main danger for software vendors is the assumption that because IBM is going heavily into services, it is a good strategy for everyone. Most of IBM’s margins still come from product sales. In other words, software sales must drive services, not the other way around.

Oracle. Oracle continues to focus on business as usual, which for Oracle means expanding its database infrastructure into an applications platform. The company released some new products in the business intelligence segment, including functions for information access, analysis and reporting, data integration and management. The company’s services group is looking to help customers achieve enterprise grid computing, which Oracle defines as “low-cost, high-density hardware, consolidated information sources, dynamic workload management and automated systems management.” Based on that definition, enterprise grid computing was known formerly as computing. Our take: Buzzwords aside, Oracle is strengthening its infrastructure products and trying to position itself as the large-scale application integration platform of choice. Smaller vendors wishing to sell alongside Oracle should emphasize compatibility and flexibility, such as support of additional platforms, just in case Oracle can’t deliver.

Microsoft. After 10 years, it’s finally over. Well, almost over. Microsoft Corporation announced it reached an agreement with Novell, Inc. to resolve all antitrust claims relating to Novell’s NetWare product. Microsoft will pay Novell $536 million under the agreement – not quite small change for Microsoft, but big bucks for Novell, which books about $1 billion in annual revenue. The two firms have not been able to reach agreement concerning Novell’s antitrust claims related to its ownership in the mid-1990s of WordPerfect, however. So, despite the settlement we may be seeing these guys in court in the future assuming, of course, Novell is still around to put up a fight after losing money for years. Our take: Microsoft will continue to be as aggressive and predatory as ever. Software sales reps selling with Microsoft must continue to be aware that the company’s culture does not allow for any sacrificing of Microsoft’s interests, regardless of partnership agreements.

PeopleSoft. It can’t be much fun being a PeopleSoft executive these days. After fighting against a hostile takeover by Oracle, PeopleSoft finally caved and will merge with Oracle. It’s been a long and bitter battle. A good illustration of how obsessed PeopleSoft’s management had become is that almost half of the twenty PeopleSoft press releases in November were about Oracle – a sure sign that the merger was probably going to go through. Based upon the aggrieved tone of some of these press releases, PeopleSoft seemingly saw itself as a corporate Jedi Knight fighting off the evil Galactic Empire. One sympathizes. After all, if anybody in the software industry resembles Darth Vader, it would probably be Oracle CEO, Larry Ellison. Our take: For the next year, both Peoplesoft and Oracle will be massively non-productive as the management of both firms struggles with turf wars. Oracle’s product groups will win (of course) but the turf wars will go on just the same. Software vendors competing against Peoplesoft should be visiting Peoplesoft accounts and securing future business. Vendors with products based upon Peoplesoft should reexamine their platform strategy. Sales managers needing good software sales talent should be prospecting among PeopleSoft’s sales groups.