Vendors Place Their Wagers

Oracle, eBay bet on acquisitions; Sun gambles on 'galaxy'.

Yesterday, today and tomorrow. Those were what some of the largest tech vendors were betting on last week with a combination of acquisitions and product introductions. Oracle continued its quest to prove CEO Larry Ellison correct in his prediction of a consolidating enterprise application market by acquiring CRM (customer relationship management) company Siebel. Meg Whitman and her eBay cohorts made a move not to be left behind in the Internet-based application business by acquiring Skype. And Sun Microsystems launched a product that addresses what has become a top-of-mind concern for tech professionals and corporate boardrooms.

In spending $5.85 billion, Oracle has continued its buying spree in the business application marketplace. During the past nine months, the company has spent more than $17.6 billion to acquire five companies, including PeopleSoft. In a prophecy that he is apparently fulfilling himself, Ellison said fewer business application vendors would be left standing in the coming years. The question is whether Oracle can turn yesterdays customers of PeopleSoft, Siebel and J.D. Edwards into customers that generate profits for Oracle. Acquisitions are fun and exciting and garner a lot of headlines. Integrating disparate applications into a cohesive database-driven Oracle platform without alienating the customer base is very difficult—because of the technical software aspects and because of the intense customer handholding required. There is no guarantee that yesterdays customers will be tomorrows revenue stream.

eBays acquisition of Skype was certainly very good news for a couple of Scandinavians, including founders Niklas Zennström and Janus Friis. I met Zennström at the CeBIT show in Germany earlier this year and was struck by his professionalism and business sense—hardly what you would expect from someone who also founded the Kazaa file-sharing service. Whitmans bet that tomorrows online auctions will take place using voice makes some sense but not enough to justify spending $2.6 billion. Is an eBay seller necessarily a Skype user? I dont think so. The biggest issues holding back further development of Web auctions and online commerce surround identity, trust and assured financial transactions—not whether you engage in an auction via e-mail or VOIP (voice over IP). Skype is a communications platform with the ability to disrupt the best-laid plans of the established telecom companies. Integrating the Skype and eBay platforms is as knotty a problem as Oracle integrating PeopleSoft and Siebel.

The company that I think recently made the best bet on the needs of today is a surprise. Sun always seemed to either overshoot the market too early (Java and Jini) or undershoot the market too late (x86-based computing and standards-based computing). Last weeks announcement of its "Galaxy" family of systems is right on in addressing todays server room requirements. The rise in energy costs is altering the corporate technology-buying landscape more quickly than most vendors realize. Whereas CFOs and corporate board members were often perplexed by the need to continue buying ever-higher-powered systems, they quickly understand how lower power consumption equals lower electricity, cooling and real estate costs. If you can get higher performance, lower maintenance and lower energy costs all at the same time, youve got a product much in demand. Dell, still tied to packaging only the current best efforts of Intel and Microsoft, seems to have been caught a bit flat-footed on this one.

September is the month when yearly technology budgets traditionally go into justification and approval rounds. The run-up in gasoline prices, the expected substantial increases in heating bills and the increasing cost of electricity are altering technology budgets in ways unforeseen at the start of this year. With the cost of oil and natural gas a basic factor not just in transportation but also in nearly all types of goods or services produced in the United States, business costs are being scrutinized to a degree unseen in many years. The funding is going to todays requirements rather than yesterdays needs or tomorrows expectations.

Editor in Chief Eric Lundquist can be reached at