Monday, October 21, 2013
Integrated Best of Breed
Big fish gobbling up the smaller ones has been a natural way of life. Recent times have seen many startup and small-medium technology companies being acquired by their larger brethren as the biggies try to fill voids in their enterprise solution offering or expand their footprint in corporate IT. Innovative ideas and niche solutions have found it easier to expand their market aligning with the big companies while in many cases it was also about survival or the investors cashing out too.
Meeting up with few large enterprise and conglomerate CIOs the discussion veered towards how they are staying ahead of the pressures to continuously adapt to changing paradigms and ensure that the IT architecture stays agile and in sync with business. Everyone had gone down the path of implementing the monolithic ERP, CRM, SCM, … solutions more than a decade back. With (in)organic and global growth the footprint continued to expand moving from single instance to multiple and then back to consolidated deployment.
Depending on the evolution of solutions and enterprise need many CIOs took a call to implement the complete suite of functionality from one vendor; then there were few who decided that they will not compromise on business requirements and find the best fit for what their business needs. Integration as required was addressed using Enterprise Application Integration (EAI) tools which had evolved to allow coexistence of legacy and new systems. The resultant technology diversity did pose challenges for IT which was deemed acceptable.
Staying with one solution provider did have advantages of better integration over the other though not by a huge margin as most large vendors had acquired other companies to fill in gaps in their offerings. Some of the best of breed now became offerings from the same large vendor with support prices almost always going north busting budgets and taking away fiscal benefit which the smaller vendors had offered. CIOs had little choice but to fight tooth and nail to get marginal benefit eventually accepting the new terms.
M&A in the IT solutions industry keeps changing the landscape. While the acquirer in most cases buys to add missing functionality or to get ahead of competitors, there have also been a few to kill a smaller or dominant player in a specific segment. There have been many such acquisitions over the last decade where the solution became irrelevant and by the time it revived itself, the market had changed. This is very evident in customer management and supply chain solutions in which earlier leaders failed to regain their market leading positions.
With new technology and disruptive paradigms driven by consumerization and services on demand being touted as nemesis of conventional IT organizations, solution providers are joining the bandwagon in an attempt to brick-wall their customers. We can offer you the option of cloud, stay with us; list prices are only for small customers, we will give you good ROI on either stack. CIO buying from startups soon discovers that the solution is now with a vendor who they may have rejected in their larger evaluation.
With integration becoming easier over the years across “commercial off the shelf” and cloud solutions, the new wave belongs to point solutions for specific tasks and functions. Almost all of them provide ready connectors to legacy ERP solutions thus eliminating the earlier pain of integration. Today CIOs can exercise a choice along with business to find the best fit for which there are alternatives as compared to the past. And the discussions between best of breed and integrated is no longer relevant.
Predictions about the demise of the larger solutions have been around for a while now; I do not believe that they are going away in a hurry, rather many have adapted to the new situation quite well. The momentum from new and micro solutions will keep everyone on their toes. Acquisitions will continue to change the landscape and the CIO will have to continuously adapt. Business will want agility and legacy will remain entrenched. The future will be uncertain, that is certain. All in a days’ job for the CIO !