2007 proved to be another year of consolidation. In the area of Business Intelligence, SAP acquired Business Objects, IBM bought Cognos, and Oracle got Hyperion. There were also at least 20 security-related companies that were purchased, including Verizon’s purchase of Cybertrust, IBM buying WatchFire, and Google buying Postini. In collaboration, Cisco bought WebEx and Microsoft acquired TellMe.
The acquisitions in 2007 followup large numbers of purchases in 2006 and 2005. This first decade of the 2000’s is shaping up to be one of software consolidation.
Acquisitions are a quick way to inorganic growth and help companies fill gaps in their software lineup, increase their customer base, gain a foothold in new and different markets, and achieve economies of scale. There’s no doubt that major software companies will continue their buying spree into 2008 — with likely buyers including Microsoft, Oracle, CA, IBM, HP, EMC, Cisco, and Sun.
But the problem is that the list of potential companies that can be acquired is getting smaller, and many of the attractive companies in the low multi-billion dollar range have already been snapped up, leaving a split between many very small software companies and those much bigger companies that typically are the buyers. But there are some exceptions. In the area of Business Intelligence, SAS, MicroStrategy and Teradata remain as independent players. Other potential acquisition candidates include Informatica, a data integration and warehousing company, and i2, a supply-chain management company.
Multi-million dollar purchases may seem like a big deal, but to an Oracle, it is the larger acquisitions, while riskier, that can provide the quickest fix for them to be able to enter new markets and sign up new customers. Achieving robust inorganic growth that can have a visible effect on the bottom line of an Oracle can’t easily be done with acquiring many small companies. And organic growth usually comes at a much slower and more deliberate speed, and usually is not as impressive to the markets. This increases the chance for mega-mergers in 2008. Deals like Microsoft buying SAP, Oracle snagging BEA, or Apple buying Sun are becoming ever more likely.
