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Software Companies - Merge or Die? 278

Posted by michael from the skate-or-die dept.
pillageplunder writes "This article in Businessweek points out that large software companies like Siebel, BMC and Veritas are all warning that 2nd quarter results would be lower, and predicts a shakeout. According to the article, 'Investment bankers say half of the sector's 600 publicly traded companies are likely to be eliminated.' Ouch!"
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Software Companies - Merge or Die? More

Software Companies - Merge or Die?

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  • Great! (Score:2, Insightful)

    by I_Love_Pocky! ( 751171 )
    Now less companies will be offering software jobs to non-Indians. This is great news.
    • My god this man can Spin! Sirrah, have you ever considered a career in political campaign management?

      • Re:Great! (Score:3, Insightful)

        by I_Love_Pocky! ( 751171 )
        I realize I was being rather flipant, but that is just the first thing I thought of when I read the post. It looks as though the domestic software industry is colapsing, and that doesn't make me very happy. With so many jobs moving overseas, this kind of article sadens me even more.

        Maybe the mergers will lead to more jobs, but my guess is that most mergers will be followed by layoffs (and possibly more overseas outsourcing).

        • Re:Great! (Score:5, Insightful)

          by cynic10508 ( 785816 ) on Friday July 09, 2004 @05:57PM (#9656805) Journal

          Maybe the mergers will lead to more jobs, but my guess is that most mergers will be followed by layoffs (and possibly more overseas outsourcing).

          The hemorraging of outsourced jobs will stop once the first big security problem arises. Be it, proprietary code stolen, trojan horse inserted (perhaps by a foreign government), etc. Unfortunately, it'll take something of this magnitude to make companies realize that the short-term dollars saved in outsourcing will cose them long-term when the real problems arise.

          • Re:Great! (Score:3, Insightful)

            by Fred_A ( 10934 )
            Since when has long term cost ever stood in the way of short term savings ?

            That would be a first.
            • I REALLY REALLY fear that software companies all end up like auto companies 10 years from now. When you buy cars, you buy from a big name Ford, Mazda, Nissan, Honda etc. There are not thousands of car dealers like there is software companies.

              So it's possible in the future to have companies screw you with a $20,000 home operating system if competition isn't fierce and tight. That or linux.

              • I think this may be true to an extent, but mainly concerning out of the box generic software. I've been saying that Microsoft will be the last company to make billions selling software to the masses. Certain things (operating systems, accounting packages, office suites) will become commoditized, but there will still be a market for custom solutions which I don't see dying out anytime soon. With a car, you buy from a major manufacturer but there are still many companies that make auto accessories and that se

          • Re:Great! (Score:4, Insightful)

            by vsprintf ( 579676 ) on Friday July 09, 2004 @07:34PM (#9657570)

            The hemorraging of outsourced jobs will stop once the first big security problem arises.

            Ha. Cisco already had their code stolen via their Chinese coders, and they aren't the only company with problems. If you read the trade rags like InfoWorld and ComputerWorld, you know that the CxOs say that the danger to security and IP in offshoring IT work is just another cost of doing business. Then they say they can't do anything about it because all their competitors are doing the same thing. It's just hollow talk, and it's all about the short-term money. Never overestimate the intelligence of a CEO.

            Expect large coverups and wild finger pointing to protect the management's butts when the stuff hits the fan, nothing more. When B of A gets 0wned, I expect to hear the CEO say, "But our IT workers never warned us about this, so I'm firing every American IT worker we still have." The financial pundits will love it, tout it on TV as new cost savings, and the stock will go up some more. The management will get bonuses. The B of A customers will be screwed. Same old stuff.

    • Blame the guys who wrote first compilers! And 'make' and 'yacc' and 'lex' and all other time-saving tools! Imagine how many programmers would be employed if they would have to code Office XP in pure assembly! ;-)

      Or, consider the whole sub-continent of India as a super-duper server farm implementing 6th generation programming language: it takes program specs in human readable form (and some little $$) and generates executable ready to run. All you have to do is to have an IDEA of what you want to code, and
      • Good point, but I'm not blaming India. I'm just expressing dismay about my withering job prospects. I am about to complete a Masters in Computer Science this winter, and I'm really afraid there wont be any jobs out there when I graduate. Articles like this are just depressing.

        I'm certainly not blaming India for the lack of jobs, but it is undeniable that a great deal of jobs that used to be done in the US are now being outsourced there. I don't blame the Indians at all. Everyone has a right to try to

  • Microsoft (Score:5, Funny)

    by mboverload ( 657893 ) on Friday July 09, 2004 @05:15PM (#9656417) Journal
    So that means Microsoft has a 1 out of 2 chance of being eliminated.

    Oh...wait....

    • Re:Microsoft (Score:3, Insightful)

      by Anonymous Coward
      Or, Microsoft has a 1 out of 2 chance of eliminating their competition... depends how you look at it.

  • So... (Score:3, Funny)

    by chill ( 34294 ) on Friday July 09, 2004 @05:15PM (#9656418) Journal
    It is more than just BSD who is dying!
  • ...I thought it already burst.

    Well there goes my retirement! Oh well, they say the minute you stop working, you are on the fast lane to fertilizer :D

  • Half? (Score:5, Interesting)

    by Neil Blender ( 555885 ) <neilblender@gmail.com> on Friday July 09, 2004 @05:18PM (#9656461)
    Once that happens, won't that mean about 75% of publicly traded companies will be gone since the dot com bust? A second round, I guess.

    I hope the company I work for never goes public. I'd rather stay small and slightly profitable than get a whole bunch of money and blow it.

    • Re:Half? (Score:4, Insightful)

      by jallison ( 693397 ) on Friday July 09, 2004 @07:36PM (#9657582) Journal
      I hope the company I work for never goes public. I'd rather stay small and slightly profitable than get a whole bunch of money and blow it.
      This is an interesting and totally understandable point of view. But it is really hard to do this in the software industry. Things change so fast that small companies that are providing a niche service just can't hang around for years and years unless they reinvent themselves. And successful reinvention is hard.

      Given this, the successful (read, profitable) small software company has three choices: 1) Get acquired by someone like MS, Sun, Oracle, or whomever; 2) go public and grow, grow, grow; or 3) stay small and play the reinvention game. It's tough.

      I thoroughly empathize with the poster, though, because a small, profitable, private software company is a great place to work. If you are at one now, congratulations! Enjoy it.

  • Stock Analysts (Score:4, Insightful)

    by Baldrson ( 78598 ) on Friday July 09, 2004 @05:18PM (#9656464) Homepage Journal
    Since stock analysts are the guys who really run the show with publicly traded companies, one has to wonder why anyone listens to them when it comes to software anymore?
    • Like you said, because they call the shots. The market ebbs and flows based on what these guys say. They don't so much report on reality as they create it. If they say something about software, people listen because people listen.

    • Re:Stock Analysts (Score:4, Insightful)

      by pileated ( 53605 ) on Friday July 09, 2004 @06:31PM (#9657118)
      Why limit yourself to "software?" You have to wonder why anyone listens to them at all when any company can drop 33% because it's a few cents off in it's expected earnings. That IS and HAS BEEN ridiculous for quite awhile. It drives companies to continue to cut costs, regardless of quality diminshment, in order to meet analysts expecatations for earnings. But no one seems to have learned and so we all stay on this suicidal treadmill. As long as this continues we'd all be best off working for companies that aren't publicly traded. And investing our money as best we can in the same.

      • Re:Stock Analysts (Score:3, Informative)

        by God! Awful 2 ( 631283 )
        You have to wonder why anyone listens to them at all when any company can drop 33% because it's a few cents off in it's expected earnings.
        That only happens when the market is expecting them to beat the official expected earnings figures.

        -a

  • still too many (Score:5, Insightful)

    by xlyz ( 695304 ) on Friday July 09, 2004 @05:19PM (#9656468) Journal
    in mature industries you can count members with the fingers of your hands
    • Depends on the industry. It's not like automaking (for instance) which requires huge investments in raw materials and other resources. It's possible for small software shops to have just as good products as the big players. And, small shops are more agile than an 800lb behemoth.
    • Right, I wish software finally became mature and we all switched to Windows.

      Who needs to think after all...

  • Well... (Score:5, Funny)

    by graveyhead ( 210996 ) <fletchNO@SPAMfletchtronics.net> on Friday July 09, 2004 @05:20PM (#9656480)
    At least we're keeping Pud [fuckedcompany.com] busy... ;)

  • No Competition (Score:5, Insightful)

    by LeoDavinci578 ( 795523 ) on Friday July 09, 2004 @05:20PM (#9656485)
    Without competition software will just get worse, with no need to improve.

  • One argument (Score:5, Insightful)

    by Unnngh! ( 731758 ) on Friday July 09, 2004 @05:20PM (#9656488)
    The one compelling argument the article mentioned as to why this may happen is that larger companies' only means of expanding their customer base is through acquiring smaller companies. From what I've seen, however, a lot of businesses/individuals go with smaller companies because they have a personal contact there, and the people are local or have some other affiliation with the customer. This can be really nice for custom development and support, even on a medium scale.

    Large companies have a tendency to acquire smaller companies and keep them as a separate department, but they inevitably get phased out over time and absorbed into the larger entity. How many people really want to deal with the software giants past a point?

    • Re:One argument (Score:5, Informative)

      by TopShelf ( 92521 ) on Friday July 09, 2004 @05:33PM (#9656601) Homepage Journal
      An excellent point. I was part of a vendor selection process for a WMS (Warehouse Management System) a couple years ago, and the largest vendor we met with obviously just expected the business - they did very little preparation for our scripted demo, and showed us all the myriad ways their software could work, instead of demonstrating how we wanted it to work.

      By comparison, a smaller player [manh.com] (at the time) did a great job. Their demo showed us how our desired processes would flow, with our data used in the presentations. Any questions we had were researched and demonstrated thoroughly before we left. They, of course, got the bid and did a great job all the way through implementation.

      There will always be a market for the small- to medium-sized player in business software, but there's no question that a good number of companies are going to continue to get bought up over the next year or so.

  • Another Field (Score:2, Interesting)

    by roccothegreat ( 578663 )
    I am a programmer for a medium sized private company. We have recenlty had 3 of our 12 IT staff leave in the past 2 years. Problem is, we have not replaced them. Even though we are not a "software" company, our IT staff seems to be on a downward spiral. I doubt we will be bought out, however, it worries me that our owners are all in there SIXTIES! I am taking realestate classes in the fall, to try and get into some part-time appraisal position. Good luck to the rest of you that stick it out. I still

  • Why don't some companys just change their values? (Score:5, Interesting)

    by Cyberhwk ( 778308 ) on Friday July 09, 2004 @05:25PM (#9656535)
    Why don't companys just change their values instead of trying to screw people? There was an article about bad customers on slashdot earlier and I think a bigger problem is poor treatment of customers. Seriously look at all the marketing where there are large rebates instead of just marking the product down to a more reasonable rate. All the rebates done hoping the people won't be able to collect on them later. This isn't exactly friendly business. Large companies who's values are supposed to be integrity and people are firing their workers and trying to cut every corner just to raise their own stock options. Wouldn't it be better business to make better products and hire people from the countries that you are selling to instead of making products that break and sending your money to other countries. Aren't large companies in effect draining the economy that they are trying to tap with their current business plans? I think business should just try to do a few things to improve their products. 1)Make things right the first time. I can't tell you how many companies I've stopped buying from cause their products are flawed. 2) Value people. Give friendly customer support and stop trying to give every excuse in the book not to work. If you offer a warrenty you should honor it for everyone and not just big business.
    • the business owners are stockholders who are 100 levels removed from actual customers. You expect them to care about anything but money?

      The problem is not with the companies themselves, but with not holding at least the majority shareholders accountable for the actions of the company even if they're not Enron-level evil.
    • Sigh. Time for business 101...

      Giving out rebates that customers don't cash increases your profit.

      Large companies market themselves as valuing integrity because it plays well with sucker^H^H^H^Hcustomers and increases your profit.

      Making better products is expensive. It lowers your profit. Especially since people will buy pretty much anything anyway.

      Hiring people from countries where you market your products is expensive and therefore lowers your profit. What's more some of them are educated and troublesome and have silly ideas like unions and workplace security.

      Draining the economy is ok because this is long term, long term is in the future, the future doesn't exist. What is important is maximising your profit.

      Making things right the first time means spending on R&D. R&D is expensive and may not yield results. A dubious business move.

      Friendly customer support is expensive. It requires qualified support people who are expensive. This is not acceptable. It hurts profits.

      Warranties are not good for business. They hurt profit. They cost money and divert customers from buying a new product.

      That's it for today class, for next week, please write a business plan to privatize a major world religion. Consider going public after two years and buying your two major competitors after four.
      Please leave in an orderly fashion.

  • Car industry (Score:5, Insightful)

    by Ars-Fartsica ( 166957 ) on Friday July 09, 2004 @05:26PM (#9656544)
    Went from 400 firms in the 20s to less than ten major conglomerates. And this is in an industry that can be "open sourced"...

    Its going to be ugly in software. 75% of firms are on borrowed time.

    • True but irrelevant (Score:3, Insightful)

      by vondo ( 303621 ) *
      There are also just two manufacturers of commercial aircraft in the world, but that doesn't have anything to do with the number of software firms we can support.

      The barriers to producing software are very low; a single person can do it (not something like an office suite, but something simpler). The don't need a huge factory floor, etc. Besides, software is often a service, not a product.

      A more appropriate example might be restaurants. Sure, you've got the big conglomerates like McDonalds, Pepsi/Pizza H

      • Of all the little mom and pop restaurants, they still buy their supplies from a very small number of large commercial suppliers. How many large meat producers are there? Poultry? Vegetable shippers? It doesn't take many trips up the food chain (no pun intended) to get to a point where economies of scale rule.

        Software will be the same. There may be a thousand websites, but they will all use Apache and MySQL.

        • Software will be the same. There may be a thousand websites, but they will all use Apache and MySQL.

          That's a great analogy, but to me, it proves my point. :-)

          Delivering 50 chickens and some brocolli to a restaurant doesn't put a meal on the table for a customer. In the same way, if I bring up a computer with Apache and MySQL, what do I have? A computer that says "Welcome to localhost. This computer is running Apache." A lot more is required if I want to get the computer to do something specific for me a

      • There are also just two manufacturers of commercial aircraft in the world,

        Boeing
        Airbus
        Antanov
        Dornier
        Bombardier
        Embraer
        Beechcraft

        Which 2 did you mean ? All of this list is currently manufacturing aircraft for commercial markets, and most of them are producing passenger jets. I'm sure there's more, these are just off the top of my head. In terms of number of aircraft delivered, Bombardier probably produces as many airframes as all the rest put together, even if we discount the executive jets, and

    • Re:Car industry (Score:4, Interesting)

      by Saeger ( 456549 ) <farrellj@g m a il.com> on Friday July 09, 2004 @06:26PM (#9657076) Homepage
      Went from 400 firms in the 20s to less than ten major conglomerates. And this is in an industry that can be "open sourced"...

      Hardware, too, will be "open sourced" when molecular manufacturing [foresight.org] "replicators" are as common as the computer-on-every-desktop (in less than 20 years). And this nano-revolution will be just sliiiiiightly more disruptive than the info-revolution.

      e.g. Nobody'll need Gillette's expensive razors when you can make your own carbon-blades at home using recycled molecules + solar energy + nano-bootstrap-assembly-process + GNU-carbon-blades-v1.1-blueprint.tgz, just as nobody'll need ADM, Monsanto, or CocaCola when they can recycle their old garbage matter into fresh food (that was previously scanned with atomic precision or designed virtually from scratch).

      Unless Microsoft and the rest of the megacorps succeed in cementing their monopoly power with the help of fascist government, we'll be waving goodbye to them soon enough; in their place will be thousands of self-sufficient open source hackers.

      --

      • Hardware, too, will be "open sourced" when molecular manufacturing "replicators" are as common as the computer-on-every-desktop (in less than 20 years).
        Molecular manufacturing replicators... sounds cool! I'll go out and buy one as soon as my robot servant comes back with my flying car.

        -a

  • Evolution in action... (Score:5, Interesting)

    by Gordonjcp ( 186804 ) on Friday July 09, 2004 @05:26PM (#9656552) Homepage
    The way we use software is changing, so the companies that produce software must change. It's like the British motorcycle industry. Right up until the 1960s, you could buy one of a broad range of British bikes, or little scooters from Italy. When the Japanese motorcycles started to be imported, people realised that they could own a motorbike that was fun, cheap, went round corners, stopped, didn't piss oil everywhere and didn't need near-continuous maintenance.


    Open-source is the Japanese motorcycle industry. At the moment, we're about where motorcycles were in the late 1970s - they're pretty good, and they work and work well. But we haven't reached the Honda CG125 (a million pizza-delivery boys can't be wrong), or the mighty mighty Fireblade, yet...

    • The Japanese are opposite to the OS crowd (Score:4, Interesting)

      by tentimestwenty ( 693290 ) on Friday July 09, 2004 @05:39PM (#9656665)
      It's an interesting comparison between Japanese innovation and quality control in motorcycles and open source in software but aren't you missing one huge disconnect? The Japanese approached innovation with a single-minded, extremely rigourous and well thought out approach to making quality affordable. Linux currently has no focus, no rigour and isn't well thought out. Where the Japanese found the set of qualities that made their products universally accepted, Linux is busy finding the qualities that make it accepted for infinite variety. The two examples might end up with the same market results but it won't be through the same process. In fact, the first Linux company that acts like the Japanese will likely have more success than all the other OS developers together.

  • Wonder why... (Score:4, Informative)

    by bannerman ( 60282 ) <curdie@gmail.com> on Friday July 09, 2004 @05:29PM (#9656573)
    Funny that Veritas would be one of those mentioned. Their software is overly cumbersome, they have a poor selection of information online, the cost of support has increased every year. Unfortunately, there isn't much in the way of competition- they have a lot of features that nobody else offers.
    • Maybe because Microsoft built in all those tools, and Linux & friends have good or good-enough tools to do all the things Veritas does?

  • Blame Open Source. (Score:3, Insightful)

    by TheBoostedBrain ( 622439 ) on Friday July 09, 2004 @05:33PM (#9656599) Homepage Journal
    Blame all than open source/free software out there.
    If a software company want to survive, it must try with a different business model. Maybe based on service/support and not just licences.
    • so you won't blame MS who when releases a small product wipes out all other existing competition of similar products?

      my claim is as firmly based on fact as yours.
    • One possible solution: customized software. I'd bet theres a market for people who can take GPLed software and tailor it to individual buisnesses. The new additions can even further improve the base code.
    • Sure you could blame open source.

      But if you do, you're assuming that companies never would look around the corner for cheaper solutions. That kind of assumption implies that nobody would make software faster, cheaper, better.

      Even without open source (which started the whole computer revolution far before there were these things call Software Companies) companies would STILL be cost cutting, looking for better solutions, etc.

      The reason most of these companies were wildly successful is because after they

  • And the lesson is ... (Score:5, Insightful)

    by goatstuffer ( 794548 ) on Friday July 09, 2004 @05:36PM (#9656637)
    Don't ever make your company public. Once you do, it stops being a company and instead a money-collector. Instead of a commercial entity which produces (hopefully) a superior product, you are controlled by people who more than likely don't give a rat's ass about what is made, unless it's money. This is the problem, they don't care how the money is made, so they'll press for cutting corners at every opportunity, and make a prime target for "mergers". Mergers are just an excuse to cut even more corners, by taking advantage of economy of scale. However, once one player in the field does this, the others must follow or be eaten up. Thus is perpetuates until we reach a number of large companies which are too large and bloated to react to demand and conditions, and fudge the books, or stifle innovation in order to keep what rightfully should be a corpse alive. True innovation will always be carried out by dedicated individuals or small groups, possibly in a private company, but these large ones are just disasters waiting to happen.
    • Mod parent up, this is sooo true. I used to work for a private company and left to join the dot com roller coaster for 5 years. Well, I am now back at that private company and it is the most stable company I have ever worked for. In fact most of the people I used to work with are still here. I think a key component is that upper management is planning for 3-4 years from now. You don't get that with a board of directors whose only concern is the end of the quarter.

    • Don't ever make your company public. Once you do, it stops being a company and instead a money-collector.

      I think thats the point. Or do you really believe the feel-good post-capitalistic claptrap CEOs spout, about being in it to make the world a better place?

      You'll catch a whiff of this when you see how fast Google insiders liquidate.

  • stupid execs (Score:5, Insightful)

    by gphinch ( 722686 ) on Friday July 09, 2004 @05:37PM (#9656645) Homepage
    I really have a tough time relating to an article that has to explain that IT is an accronym for info-tech. Stupid analysts are just guessing anyway, half of software companies being gobbled up seems a bit overstated.
  • You don't need hundreds of companies to sustain competition. A handful of good companies competing for the same customers will do fine. Most industries are like this. Cars, electronics, game consoles, computer manufacturers, etc. The good companies will stay afloat because they produce quality products and/or have good management. The software engineers from these failing companies will have to go somewhere. The good ones can go to a larger company and prosper and the ones that aren't good can find an
    • The problem with this comes from the basic ideas of capitalism. In a totally free market, there's a large number of suppliers supplying identical goods. Due to this, the sellers do not have market power- they can't effect market price.

      When you have a few companies selling non-identical goods, those companies all have some market power. This means they can manipulate the amount supplied and the sales price to maximize their profits, but doing so reduces the total consumer+producer surplus of the good. I
  • We just threw their "Patrol" Unix system agent out, replacing it with a lightweight SNMP agent. Their agent is 4 binaries, from 4 separate product lines, with different life cycles, and no cross-compatibility testing.
    I hope they die a screaming, flaming death.

  • Maybe a good thing (Score:5, Insightful)

    by mysterious_mark ( 577643 ) on Friday July 09, 2004 @05:38PM (#9656657)
    In general large software companies are, for lack of a better word evil. They produce inferior products at criminally high prices, industry rates for ASP development are still at $200 - $300 / hr, MS spends 300k per year per employee. The developers are certainly not getting most of this money and the clients certainly not getting good work or code for these horrendous rates. The large software companies produce the poor products and rely on slick marketing to the sell their products to ill technically informed clients/managers. These companies seems to use the strategy of charge the client as much as possible, pay the developers as little as possible, both client and developer get screwed, managemeent gets rich for nothing. I think its a good thing many of these companies are going away, its just their scam is over. Its not that people don't need software, its that the're tired of getting ripped off for it. I believe that these companies are just being replaced or put out of business by small companies and individual developers working directly for non-tech clients. Its the big US companies that have been the most enthusiastic about replacing US workers with H1-B's outsourcing etc, small companies tend to use better quality, long term local talent. Anyhow this seems like the trend I've seen. Due the large availibilty of developers, cheap bandwidth, cheap hardware, and free development tools/platforms, its seems like the large companies are going to have ahard time, but I think this will be better in the long run for both developers and clients/users. M
  • Maybe some take it a bit hard, but the days you can "type yourself to a fortune" are aparently gone. Since supporting hardware is about the only purpose of any software, it should be completely open. (as well as the hardware) People want something to show and a new gadget is just the thing.

    From my perspective: "Software is a necessary evil". Even if the software costs 10x more to develop, people buy the hardware and the software is "free". It works for me and presumably this is also the prevailing opinion
    • If you're selling stuff to casemodders and gamers, hardware is a great business to be in, but in business... except for a few areas like the art department... it's impossible to buy a computer that isn't much much faster than you really need. I've got a 2.something GHz PC in my desk, and all I run on it locally is a browser, Lotus Notes, a word processor, and source code editors. All the shiny new hardware is back in the dinosaur pen... oh, they're smaller and faster dinosaurs, but from the point of view of the user or the developer it's not that far from writing SQL to run on a mainframe to display data on a 3270 and writing SQL to run on a webserver to display data on a web browser.

      And nobody sees the shiny new hardware in the dinosaur pen, it's just there. You'll be able to sell people desktop upgrades for a while yet, but pretty soon the days of coming up with new bloated software to force hardware sales will be over.

      So, from my perspective, "hardware is a necessary evil". New hardware means new platforms to support, new incompatible sets of drivers to deal with. Even if the hardware's cheaper upgrading costs enough you might was well stick with the hardware you already have that's paid off... it's "free". And this is increasingly becoming the prevailing opinion... our desktop replacement rate is way down.

      The days when hardware was exciting are essentially gone. One computer is much like another, back in the server room, and one PC on the desktop is pretty much like another... even if it's faster, it's hard to tell because the newtork and the server are the real bottlenecks. The only reason people around here care much about PC upgrades these days is they're handing out nice flat panel displays when you get a new PC.

    • Since supporting hardware is about the only purpose of any software, it should be completely open.

      Let me guess... you're a sysadmin, right?

      I don't mean to be harsh, but to anybody who actually produces something for a living, your attitude sounds totally bizarre. I use Microsoft Word to and Adobe Photoshop to create documents. I use databases to store information. I use spreadsheets to calculate numbers. On the enterprise level -- the companies this article talks about -- the software is used to power

  • Nobody is buying (Score:4, Informative)

    by GreenCrackBaby ( 203293 ) on Friday July 09, 2004 @05:40PM (#9656674) Homepage
    My old company (a hardware company) just sold off its software division to another software company. Bottom line is that nobody was/is buying, and the budgets for multi-million software deals just aren't materializing.

    For the past 4 years companies have been forced to tighten/halt their IT spending, and they may still be saying "if we could last the last 4 years with our current software, perhaps we can last a few more..."

  • Merge or Die? (Score:5, Interesting)

    by evilviper ( 135110 ) on Friday July 09, 2004 @05:45PM (#9656712) Journal
    Software Companies - Merge or Die?

    Here's an idea.... INNOVATE or die. Companies merging is not part of the capitolistic system. The idea is that you produce good enough products that enough people will pay to get them. Merging is just the corporate pyramid scheme.

    Just as Time Warner how great their merger with AOL worked out...
    • the capitolistic system
      I see a lot of typos (not just /. either). However in this case, the word is a better description of the US economic system.

      So, was that a typo, or did you actually mean that? :)
    • "Here's an idea.... INNOVATE or die."

      Innovation is dead. One set of companies don't develop anything of real value, but spend their time suing others for patent infringement. While the others have to spend their time and money defending against lawsuits, or even squashing projects and ideas early because of the fear of being sued. And the type of innovation that is based upon building on earlier ideas has slowed to a trickle, because those ideas are tied up in patent thickets.

    • Here's an idea.... INNOVATE or die. Companies merging is not part of the capitolistic system.

      Heck yes it is, but I'm not up to discussing that one.

      The idea is that you produce good enough products that enough people will pay to get them. Merging is just the corporate pyramid scheme.

      My $deity how I wish it were that simple.

      Look, I'm an architect - buildings, UK, not the sort that the title implies here. It's a mature market - we've only been at it a thousand years or so ;). There are a small number of

      • Software is a commodity.

        Like any commodity, you can still compete by making yours just a bit better. You don't need radical innovation, just small ones.

        In software, that can be a matter of a better user interface (if you think all programs have a good interface, you are sorely mistaken), or just better performance (yes, companies would rather pay an extra $1000 on a piece of software, rather than having to spend a couple hundred to upgrade each of their hundreds, if not thousands of computers).

        In archit

  • Seems logical.

    After all, if people have purchased the software and it keeps running, why buy anything more? If it runs well enough, why not just buy support when you need it instead of with an indefinitely long contract?

    You can say that if the software company's product quality is sufficiently low that future returns will be guaranteed. But that's only true if there are no competitors with a higher quality equivalent (and, yes, you'll notice profitably comfortable footdragging going on in certain market

  • Its that simple. As long as workers can be fired and treated like shit, companies should simply die when they run out of money. They failed.

  • One problem though... (Score:4, Insightful)

    by Enthrash ( 545820 ) on Friday July 09, 2004 @06:20PM (#9657019)
    ...these "investment" bankers are the same toads which suggested Timer-Warner merge with AOL and the many other content & distribution companies which are all now being sold off in pieces (i.e. DE-merged).

    As such, I hope these software companies ignore this "advice". These bankers are proven investment moron in it for themselves and their greedy friends.

    The only benifit to this might be we'll be able to see some more perp walks on CNN.

    Rich...
  • For just a moment, join me in my madness and try to envision the capitalist system as a giant genetic algorithm. The companies producing products which sell well continue to operate, while the ones with bad sales wither.

    Now, picture a capitalist system with no mergers or splits. Companies evolve purely through "mutation," by making incremental changes to their business strategies and product lines. This is analogous to a asexual biological reproduction, like we see in bacteria. A growing company is like a


  • 1) Adding engineers to a software project only makes it later

    2) Dueling projects. The more politically powerfull will win

  • Offshoring not saving them? (Score:3, Insightful)

    by rollingcalf ( 605357 ) on Friday July 09, 2004 @06:32PM (#9657121)
    They all keep shouting how offshore outsourcing will cut costs, boost the bottom line, cure cancer and bring world peace. That the savings are so COMMANDING that they MUST get rid of US and Western European jobs to send the work where the labor is cheap.

    I'm sure we'll soon be seeing an emergence of Indian and Chinese software companies producing software that competes directly with the Western bigwigs. Guess where they got that knowledge?

  • It's only Natural (Score:4, Interesting)

    by ROOK*CA ( 703602 ) on Friday July 09, 2004 @06:33PM (#9657127)
    Consolidation is only natural among relatively "young" business sectors ("economic history" is rife with examples). With the proliferation of companies in the sector, overlapping product offerings, finite market size and the struggle to offer REAL value propositions to customers it's rather inevitable.

    Now if you add the unique trends that are pressuring this sectors consolidation like Open-source and "off-shoring" it's rather a surprise it's taken this long for the media to recognize it. Let's face it the software sector has grown bloated and in a lot of cases has lost touch with customers needs. A good "shakin-up" is just the ticket for improved quality and reasonable margins (re: pricing).

    It's a great strength of capitalism that the market eventually will grab a shovel and bash in the heads of those companies whose demise will lead to better value for the customer (well that's the theory anyways ;-) ).
  • This is not the nineties.

    I remember when anyone with a CS degree who knew what http meant could get a job as a trainee programmer. I actually remember taking a test for an anti-virus company which had the question "What does TCP/IP stand for?".

    The fact is that now, those people have either become managers because TCP/IP was the only acronym they knew, or they knew all the acronyms but didn't know how to make money from them.

    I make software on GPL for suppliers because software companies can't compete - t

  • Shows failure of factory model economics (Score:4, Insightful)

    by MCRocker ( 461060 ) on Friday July 09, 2004 @08:58PM (#9658054) Homepage
    The notes section of ESR's [catb.org] Magic Cauldron [catb.org] has a wonderful comment [catb.org] that suggests that since programmers and support staff appear on the books as a liability, expanding by hiring more staff is a net loss. However, the aquisition of another software company, which is primarily valuable because it is a bunch of other programmers and support staff, is seen as an investment on the books.

    It all seems so bizarre that the factory model treats software as if it has some sale value, when it's really the service provided by the programmers and support staff that has real value. In this topsy turvy way of looking at things the accounting systems artificially encourage mergers rather than increasing staff because the former appears as growth, while the latter appears to be a loss.

    All of this is why we end up with huge companies that produce mostly shelfware [catb.org] with a point upgrade cycle that is not backwards compatible so that customers are forced to keep sending in money or be abandonned. An honest service model would be much better for everybody.

  • why all the big companies are "doing so poorly" (Score:3, Interesting)

    by psyph3r ( 785014 ) on Saturday July 10, 2004 @02:39AM (#9659491)
    I am thinking that all of these large corporations are using this P2P scare to their advantage. Music industry, Movie industry, and the Software Industry are all having " huge problems because of people stealing their products". I believe the MPAA reported something in the range of a billion dollars for overall profit in the industry last month, a new record gross. Yet they are doing poorly? Software companies now must merge? looks like a good excuse to form a bunch of microsofts aka trusts(fat cash cows with no inovation, no competition, and nicely equiped with a perfect scape goats) but digitizable industries are building up resentment and "statistics" all in line for congresses upcoming legistlation against P2P software. ...well, either that or open source software is just plain cleaner, cheaper, and more inovative that anything they could ever accomplish, and is becoming more and more availible to the "user". Either way everyone needs to stop feeling sorry for thes companies, they are just getting their "come upins". Especially the turd that won't flush: figting all the way down(microsoft)
  • Technological comapnies have had a boom/bust cycle since the 1940s with the Manhattan Project taking most talented engineers and then dumping them once "the bomb" was developed. This was also repeated in the 1960's with Apollo program sucking up Electrical Engineers like there was no tomorrow (together with mechanical and in some cases civil engineers as well) then with the cancellation of Apollo 18 the whole situation collapsed.

    Go back and read what the employment situation was like for Electrical Engineers back in the 1970s was like. I heard figures close to 50% unemployment for E.E.s during at least part of the '70s. What this did was set the stage for massive entrepreneurial growth, because suddenly massive amount of highly trained talent was available to move into new directions rather than being consumed by these massive projects.

    Right now I see the same sort of thing happening in the software industry, where college CS graduates are being "bought" for cheap and there is quite a bit of entrepreneurial activity to start the next wave of software companies. It won't be the companies that you are familiar with, or even writing the kinds of software that has been written before. It has been done before, which is why it won't be done.

    There are a lot of companies right now that are working "under the radar", that aren't a part of that 600 that will be doing the mega mergers. One problem, however, with all of this merger, fallout, and new company cycle is that software developers are kinda out in the cold as they get older, and glowing pension plans and 401K plans mean next to nothing when you really think about it. What this means when large numbers of software developers start to go grey remains to be seen.
  • I think it's too early to be calling for the computer industry to consolidate. Consolidation generally occurs when companies run out of innovation and they revert to increasing profits by monopolization (or oligopolization) of their industries. The computer industry still has a long way to go. Some sectors may see consolidation (PC manufacturing, semiconductors, etc) but a large portion of it is still in its infancy.

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