In the IT industry rumours of acquisition and consolidation are an everyday occurrence and nine times out of ten, just rumours. So having heard separately in different corners of the world within 24-48 hours that IBM might be looking at merging or acquiring Oracle, one thinks twice but leaves it on the intriguing rumour part of a highly compartmentalised brain. However, if it does happen you heard it hear first!
Clearly this would be a game changer for the industry of unprecendented scale. The impact would be greater then any acquisition that we have seen in the IT industry to date.
If I may speculate for a few minutes, if it did happen it would trigger a wave of consolidation and scrambling in our industry that would keep Wall St M&A corporate types buying Maseratis and houses in the Hamptons for years to come.
Firstly lets quickly consider the impact on IBM and Oracle.
If they were to merge, clearly the following would be key challenges
- Regulatory issues with Database, Server and Storage competitive environments. At the very least some of the Database products would not make the cut
- Culturally it gets even harder than the regulatory side. Oracle is still led by its founder and is a very personality driven machine. IBM is much more corporate and less personality driven management style.
- There would clearly be a US East Coast vs West Coast cultural clash. This is in personalities, sales approaches and several other areas.
- Convincing clients that the firm could provide intimate and customer focused outcomes would be a significant challenge. Both firms struggle to provide an integrated view to customers because of their size at the present time, an even larger firm would make this even more difficult.
Clearly the benefits of such a merger/acquisition are the following
- IBM/Oracle would have an unprecedented end to end enterprise stack. The application depth around middleware and information management would be virtually complete.
- IBM services team could even more significantly provide the Oracle services requirements. As a services legacy analyst, to me, this is the most profound change that would occur. It would set off a wave of related consolidation.
- From a cloud enablement point of view, depending on how regulatory authorities looked at the hardware capabilities of Sun and IBM Systems group, it would allow for a very dynamic and scalable build out of cloud capabilities with the apps benefit literally icing on the cake if executed.
Impacts on the overall industry would be immense. Once everyone picked themself up off the floor, the response by vendors would be significant. To say that it could unleash a wave of consolidation would be an understatement. I would anticipate the following potential moves.
- HP would buy SAP in a heartbeat. This is perhaps even too obvious to say. Having said that, I do not think that HP will acquire SAP unless there is a major event like IBM acquiring Oracle. So more for the speculation pile.
- Cisco may look to formalise its relationships with VMware and EMC to provide a full infrastructure stack. The challenge for that would be that it would challenged for apps built on HP or IBM infrastructure, and for services capability
- Microsoft – This is a tough one, it is hard to see where they would go. They could buy major services capability, perhaps Accenture, but again, they are left short
- Accenture – Unless it too was acquired by HP it would be potentially marginalised from its Oracle and SAP services business with the impact of ownership of those firms by IBM and HP with their resultant services capabilities
- Niche Providers – Winners in this sort of consolidation will be firms like Infor, Sage, NetSuite who provide more niche software capabilities and some services providers. Enterprise intimacy would be difficult for IBM/Oracle and HP/SAP and will lead to several cracks of opportunity in which to provide applications and services in particular.
This note has only touched the surface. I could write several pages of implications of such a deal between IBM and Oracle and if it happens, I probably will. If it does happen it is overall not for the greater good of the industry where more providers and vendors result in more competition, more innovation and greater price transparency. Furthermore, mergers are difficult and execution in the IT industry of major mergers has not been that brilliant. IBM and Oracle have had their share of merger challenges over the years to say the least.
Again, I want to reiterate that this is a speculative post. I tend to just store rumours in the back of my mind. Multiple comments in a short time from credible people caught my interest. Waking up at 5.00am on a Saturday morning with a churning brain did the rest. I do not expect IBM to buy Oracle, but if it did, it would be a truly game changing moment for our industry.