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The IT industry’s largest suppliers are returning to the old model of selling pre-integrated system stacks. But this time it may help their customers, not hinder them

Even by the standards of a business that reinvents itself as routinely as the computing industry does, the last year has been an unusually momentous time for the global IT sector.

Since last April, corporate IT buyers have been obliged to stand by and watch as their key suppliers have been swept up in a wave of major alliances and mergers. For many, it is fair to say that it has not been an entirely reassuring spectacle.

First, the Unix and Java community was jolted into life by Oracle’s $5.6 billion capture of Sun Microsystems – which finally achieved regulatory approval earlier this year. Then in November 2009, Cisco Systems, EMC and VMware announced their intention to take on their long-standing server manufacturing partners with their own VCE (virtual computing environment) Alliance.

This move may well have provided Hewlett-Packard and Microsoft with the impetus to announce in January 2010 that they planned to spend three years and $250 million tightening the integration of their respective hardware and software products.

If IBM’s recent announcement of its own Smart Analytics Cloud initiative – effectively a co-development agreement between one of the world’s biggest business intelligence software organisations and a giant server systems group that both happen to be owned by the same company – is also taken into the reckoning, it is clear that is not just business as usual in the global IT market.

Indeed, although they may not all agree on the detail of what is going on, the industry analyst community seems united in the view that the IT industry is entering a period of profound change.

Fundamental shift

“The tectonic plates of the industry are shifting, and the rules of engagement that have governed its relationship with its customers are being transformed,” says Dr Stefan Reid, Forrester Research’s senior analyst for vendor strategies.
According to Mark Bowker, senior virtualisation and cloud technologies analyst at the Enterprise Strategy Group, “There is no question that big changes are happening. There is a major realignment of the industry under way that is affecting Oracle, IBM, Cisco, Microsoft and everyone that does business with them. And that means everyone.”

Nor are the companies themselves shy of talking up the significance of what they are doing. At the announcement of his company’s acquisition by Oracle, the then (but recently resigned) president and CEO of Sun, Jonathan Schwartz, called the deal “an industry phase change” – a merger that would create a new kind of unified IT supplier capable of meeting the demands of the fast-emerging market for seamless IT systems and services.

Portentous remarks like Schwartz’s are commonplace when industry giants are justifying multibillion-dollar deals. In this case, though, as subsequent events have shown, the IT industry really is being redefined and the boundaries that have defined the relationship between its major players really are being radically redrawn.

Certainly, as demonstrated by Oracle’s conversion from database-oriented business software vendor to supplier of enterprise systems stretching from the underlying microprocessor to desktop application space, the days of being able to categorise the major vendors in terms of their most well-known product lines – as database suppliers, router vendors or server manufacturers – are fading fast.

Instead, say analysts such as Freeform Dynamics research director Dale Vile, the industry is revisiting a former age: a time when IT systems were built from the ground up by a single vendor, and when manufacturers such as IBM were capable of supplying the entire ‘stack’ of technology components required to deliver a working business system.

This is not to say that there is about to be a mainframe or minicomputer renaissance, nor is a “vendor land grab” going on, says Vile. For once, he says, “the industry is actually responding to its customers. They have noticed that customers are tired of complexity, and they are trying to make things simpler for them,” he says.

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