I've been reading Vinnie Mirchandani's blog Deal Architect quite a bit of late. For those who don't know about it, the blog is essential reading on major happenings and musings on the software and professional services world. Vinnie's most recent post on industry consolidation caught my attention. While he did not refer to the Spend Management sector, in particular, the blog did address many arguments which one can apply in a fractal way to the providers in the market that this blog covers.
I believe, like Vinnie, that just as "the Big 4 [IBM, SAP, Oracle, and Microsoft] have clear roles as tier 1 vendors, so do many other software and services vendors as we move to more of an auto and aerospace industry model." This model which Vinnie refers to is becoming a complex and extended supply network -- a metaphor for the increasingly maturing and consolidating enterprise software and services market.
A mature market like this always has room for new providers with a differentiated value proposition, but it also weeds out those who do not. Some will fail. Many will be consolidated by vendors like Oracle, SSA and Computer Associates, who prey upon companies with attractive multiples and installed bases. Already, companies like Ariba, Emptoris, Verticalnet and Perfect have played the role as consolidator in the Spend Management market, albeit in a more targeted fashion to date than their ERP and systems management brethren.
This consolidation is a positive, and should not stifle innovation in the Spend Management sector. Yet, like Vinnie, I agree in part -- though not entirely -- that "Too many people are writing the software market off as "consolidated". Such talk just discourages software entrepreneurs ... Yes, the Big 4 grew big because they once had some innovative products -- but look at their lack of innovation over the last few years. From CRM to Web services to Blogging software they have mostly been followers."
Want evidence that innovation and the entrepreneurial spirit is still alive in the Spend Management sector? Look no further than vendors and start-ups like Apexon, Akoya, Austin Tetra, and Open Ratings.