The Game is Changing, Yet Again

In a span of less than two weeks, the IT industry has seen three major
acquisitions. By major, I do not just refer to their sizes but their game
changing nature. A hypothetical acquisition of Salesforce.com by an IBM or an
Oracle would probably be much bigger but not as industry defining as these ones
are. Going by history, this is not exactly an entirely new phenomenon. Most of
the upturns are marked by some industry changing mergers. So, even if you are
not too delighted by the possible fallout of the mergers, there is something to
take heart: it marks the definite end of a very long recessionary phase.

The smallest and arguably the least surprising is the acquisition of Omniture
by Adobe for $1.8 bn. The time of acquisition did take a few financial analysts
by surpriseconsidering the not-so-great performance of Adobe in recent
quarters. But that is about it. The acquisition is definitely an industry
defining stepof combining the left brain and right brain of the Internet. Adobe
is all about creativity of the web. Omniture is all about measuring the impact
of that creativity. Their combination, if done rightly, would change how design
has been looked at traditionally. Hopefully, creativity would be more
intelligent now.

The other two are, of course, bigger, and represent a definite trend. Two of
worlds most innovative and respected technology companieswhich had had a soft
entry into services alreadyhave made their intention more loud and clear. The
$3.9 bn acquisition of Perot by Dell announced on 21 September (on the day of
Eid) and the $6.4 bn acquisition of Affiliated Computer Services by Xerox,
announced exactly a week later (on the day of Dussera in India), may have well
be termed as just consolidation by the analysts. But I think these
acquisitions represent much more than that.

I see three major defining trends of these mergers.

One, these two, together with the Oracle-Sun merger, mark the beginning of a
phase where the traditional line between products and services are no more
getting blurred; they are getting erased. It means different thing to different
people. To users, it means, on the face of it, a more end-to-end solution and as
some analysts have pointed out, a possible return to an era when over-dependence
on your IT vendor was the norm. To the players on both sidesproducts and
servicesit means life is not going to be same again. To the guys at Palo
Altocompetition notwithstandingthey would not have to defend their positioning
so hard.

The second is what one can term as beginning of another chapter in a story
that started some time back: the rise and rise of services in enterprise IT.
Today, the message from the IT fraternity is: services is too important to be
left to the services companies. A very likely fallout of the integrated
products-services companies may also mean the possibility of the users
preferring a variable cost model in IT becoming more prevalent than ever before.
The jury is still out on that one, but that represents the quickest way for
services firms to grow the services business.

The third is the implications for India from all of these. In both these
acquisitions, the offshore presence of the target companies did play a major
role. That is because, at the end of the day, whether you are provide strategy
consulting or the lowest value BPO, services business is all about people. And
that is something that India has plenty ofand in the working age group. The
shift towards services will have significant opportunity and challenges for
India.

As one reader commented in response to a story in our website: we Indians
think we are the reason behind everything that happens in the world. And like it
or not, in IT, it is true.

I guess that says it all.

Shyamanuja Das

The author is Editor of Dataquest.
shyamanujad@cybermedia.co.in