The enterprise software market is dead, dead, dead....
By Tom Foremski - September 13, 2005
A few weeks ago I was engaged in a debate with John Gallant, Editorial Director of Network World, via our respective blogs, about my assertion that enterprise software markets have become dead boring.
I'd like to change my argument. Enterprise software markets are not dead boring. They are just dead.
Larry Ellison has killed the enterprise applications software industry. It's dead, dead, dead, dead, dead, dead. The Siebel acquisition was the final blow, the stake in the heart.
The losers include the print media, as yet another large tech advertiser disappears.
The other loser is innovation in the enterprise software industry itself. With such a small number of big companies at the top (Oracle, SAP, Microsoft, IBM) there won't be much of a bidding war for promising startups. Valuations will be "reasonable" -- and "reasonable" never fires up the blood of a venture capitalist.
VCs need promising "ten-baggers" -- the one-in-ten winners that cover the bets on the nine losers. But with IPO markets gone, and the top companies controlling valuations, there is no decent exit strategy for investors.
That means innovation won't be funded. And the big software makers won't be innovating much, as per usual.
Larry gets all the maintenance revenues, and corporate customers have to lump it.
Here comes the cavalry?
Or, can the software-as-a-service generation of software companies-- such as Salesforce.com and RightNow Technologies--lead a cavalry charge to provide enterprises with choice and Oracle with significant competition?
That remains to be seen. One question is whether those applications can be be scaled up to carry large enterprises. We'll be watching with some interest. After all, that's one of the few areas of the enterprise software industry that is still worth watching.
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Comments (6)
Here's a suggestion to spice up the enterprise software world: Have Oracle open source their Siebel aquisition! Sure, its as likely as a snowball in hell, but it would be different. http://www.recursivetechnology.com/monitoringnews/
Posted: September 14, 2005 1:02 AM
Hi Tom! Hope you've been well. This consolidation trend certainly does not bode well for me. There is one less company that can potentially hire me for a summer internship! :-(
Posted: September 15, 2005 9:13 PM
Annie, I don't think you'll have any trouble finding a place at any company you choose! I hope you are having fun with your MBA at MIT...
-Tom
Posted: September 20, 2005 4:51 PM
Tom,
I've read a couple of comments on your site that the enterprise software market is dead. Does that mean enterprises are no longer going to be the drivers of buying more software/technology? And that the companies to be a part of are consumer-oriented? From both a valuation perspective and actual spending, how have those two fared historically (corporate versus consumer)? Thank you.
(Is there a way I can get a notification of the answer...although I do read your blog, you never know).
Posted: December 31, 2005 7:16 PM
Tom
Should not we leave it to the market and customer ( I assume they are same) to decide what is good for enterprise software ? Finally, it is the customer's problem that enterprise software trying to solve. Not that of the VC or an innovator.
Looking forward more insights in your column.
thanks
Suvendu
Posted: June 23, 2007 8:48 AM
Suvendu, I wrote this piece September 2005 and since then I have changed my mind (and written about it...)
Enterpise software is certainly not dead but it is different this time around. The on demand revolution is going to disrupt quite a few well established companies.
BTW, it is interesting that sometimes people will tell me "You once said that ..." Yes, I might have said something that I don't agree with anymore...fortunately we can all change our minds (nearly all :-)
Posted: June 24, 2007 6:14 PM