Software Companies - Merge or Die? 278
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!"
Great! (Score:2, Insightful)
Re:Great! (Score:3, Funny)
Re:Great! (Score:3, Insightful)
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)
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)
That would be a first.
Like AUTO industry (Score:2)
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.
Re:Like AUTO industry (Score:3, Insightful)
Re:Great! (Score:4, Insightful)
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.
Why whine about India? .. (Score:2)
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
Re:Why whine about India? .. (Score:3, Insightful)
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
Re:Great! (Score:3, Interesting)
Re:Great! (Score:2)
Actually, I think this has already started.
Re:Great! (Score:2)
i like it
Microsoft (Score:5, Funny)
Oh...wait....
Re:Microsoft (Score:3, Insightful)
So... (Score:3, Funny)
Tech Bubble: (Score:2, Funny)
Well there goes my retirement! Oh well, they say the minute you stop working, you are on the fast lane to fertilizer
Half? (Score:5, Interesting)
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)
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)
Re:Stock Analysts (Score:2)
Re:Stock Analysts (Score:4, Insightful)
Re:Stock Analysts (Score:3, Informative)
That only happens when the market is expecting them to beat the official expected earnings figures.
-a
still too many (Score:5, Insightful)
Re:still too many (Score:3, Insightful)
Re:still too many (Score:2)
Re:still too many (Score:2)
Who needs to think after all...
Well... (Score:5, Funny)
No Competition (Score:5, Insightful)
Re:No Competition - not! (Score:2, Insightful)
Re:No Competition - not! (Score:2)
One argument (Score:5, Insightful)
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 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)
Re:Another Field (Score:5, Interesting)
Sometimes I wonder if some of the trouble the IT industry got into was when IT became the highest-earning after-graduation major at many colleges. I was in college in 2000 and I saw many students who just plain did not understand their computer at all trying to learn how to be an IT geek just in hope of the money... it wouldn't surprise me that such people are now moving on to the next big thing now that IT isn't so hot anymore.
Re:Another Field (Score:2)
Why don't some companys just change their values? (Score:5, Interesting)
Re:Why don't some companys just change their value (Score:2)
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.
Re:Why don't some companys just change their value (Score:4, Insightful)
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.
Re:Why don't some companys just change their value (Score:3, Funny)
Car industry (Score:5, Insightful)
Its going to be ugly in software. 75% of firms are on borrowed time.
True but irrelevant (Score:3, Insightful)
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
But your example is also irrelevant (Score:2)
Software will be the same. There may be a thousand websites, but they will all use Apache and MySQL.
Re:But your example is also irrelevant (Score:2)
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
Re:True but irrelevant (Score:3, Informative)
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:True but irrelevant (Score:2)
Re:Car industry (Score:4, Interesting)
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.
--
Re:Car industry (Score:3, Funny)
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
IP without people is worthless (Score:2)
By being hired as consultants to make things work. I find it quite ironic that the article refers to commercial software (closed source) companies that are failing. Meanwhile, companies that sell open source software, like Red Hat and Suse are surviving. IBM saw the writing on the wall and started selling OSS. No, the value of "IP" as owned by a corporation is very low. The true "Intellectual Property" that is highly valued cannot be cast into copyrights or patents, it exists on
Re:Car industry (Score:2)
I don't think you understand the implications of molecular nanotechnology. One of the most obvious is a return to self-sufficiency -- no longer would bulk-tech industry be needed to rape and pollute the environment for convenient resources that then get inefficiently shaped (top-down) into products and distributed at high energy cost around the globe just to get into your grubby hands and thrown out when it breaks.
The new me
Evolution in action... (Score:5, Interesting)
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)
Re:The Japanese are opposite to the OS crowd (Score:2)
Wonder why... (Score:4, Informative)
Re:Wonder why... (Score:2)
Re:oh? (Score:2)
Nothing -- and I mean NOTHING -- even comes close to the Holy Trio of Enterprise Systems (HTES)...
VxVM, VxFS, VCS.
Volume Manager, File System, Cluster Server.
They're the gold standard. Can Linux *really* do what VxVM can do?
Don't think so. LVM isn't even close. And that's not a slap against Linux -- AIX's LVM and HP's LVM aren't close either. (Sun's Online Disksuite is just a joke)
VCS? What's better than VCS? Sun Cluster? Yeah, right. MC/SG? Try again. HACMP? No way. All 3 try to
Blame Open Source. (Score:3, Insightful)
If a software company want to survive, it must try with a different business model. Maybe based on service/support and not just licences.
Re:Blame Open Source. (Score:2)
my claim is as firmly based on fact as yours.
Proprietary isn't dead (Score:3, Insightful)
But, there is plenty of other software for niche markets where a proprietary company can still make an impact. The realm of OSS is expanding all the time, but they're not filling the niche markets yet, at least not completely. Also, you miss the fact that a lot (maybe mo
Re:Blame Open Source. (Score:2)
Re:Blame Open Source. (Score:2)
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)
Re:And the lesson is ... (Score:2)
Re:And the lesson is ... (Score:2)
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.
Re:And the lesson is ... (Score:2)
But yes, when you hear that from any CEO just laugh.
Re:Really? (Score:3, Insightful)
You start a business to make a profit, not to save the world or serve the poor.
Says who? I can start a business for any "purpose" I like, and turning a profit is simply a requisite to staying in business... it doesn't have to be my sole reason for *being* in business. And nothing says I have to sacrifice any and everything under the sun, seeking to maximize profit down to the last penny. As long as I mak
stupid execs (Score:5, Insightful)
Doesn't matter really (Score:2)
Re:Doesn't matter really (Score:2)
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
BMC sucks (Score:2)
I hope they die a screaming, flaming death.
Re:BMC sucks (Score:2)
Maybe a good thing (Score:5, Insightful)
The purpose of software is to sell hardware (Score:2)
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
The purpose of hardware is to run software (Score:4, Insightful)
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.
Re:The purpose of software is to sell hardware (Score:2)
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)
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)
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...
Re:Merge or Die? (Score:2)
So, was that a typo, or did you actually mean that?
Re:Merge or Die? (Score:2)
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.
What odds do want with that? (Score:2)
Heck yes it is, but I'm not up to discussing that one.
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
Re:What odds do want with that? (Score:2)
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
Infinite Lifetime Software (Score:2)
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
DIE (Score:2)
One problem though... (Score:4, Insightful)
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...
Well, it's only natural. (Score:2)
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
the mythical man month (two observations) (Score:2, Interesting)
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)
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?
Re:Offshoring not saving them? (Score:2)
They aren't. The troubled companies named in the article do offshoring.
Re:Offshoring not saving them? (Score:3, Informative)
http://www.cnn.com/CNN/Programs/lou.dobbs.tonight [cnn.com]
Click the link "Exporting America: List of companies exporting jobs".
If you don't trust CNN, just Google for those companies' names together with "offshore" or "outsourcing" and similar words.
It's only Natural (Score:4, Interesting)
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
On the subject of IP and software knowhow (Score:2)
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)
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)
Death of Software companies makes... SW companies (Score:3, Interesting)
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.
too early for consolidation (Score:3, Funny)
Re:But (Score:3, Funny)
It'd recover faster if the gov't paid more for unemployment.
Re:But (Score:3, Insightful)
You're kidding, right? If I'd been paid more unemployment, I would have spent my time working on personal projects instead of looking for a job. I suspect that would slow down growth, not speed it up.
In response to the grandparent's comment: Your view of whether the economy is improving or not is probably maps to whether or not you have a job. It's looking pretty good for me right now. After 12 months of unemployment and freelancing, I finally
Re:But (Score:3, Interesting)
It is... (Score:2)
Which is a good thing as far as I'm concerned. Some of these companies I have had expierence with, and I would be happy to make a generalization that any product that cost more than $1M requires so much customization that there's about a 50% you can make it work at all - and you are going to cough up a fortune to even try. The very death of companies like these will probably lead to healthier use of capital in companies that actually do something.
Software Industry Self Destruction (Score:4, Interesting)
Most of the big software companies existed because their was a perception that the companies were building up equity in intellectual properties.
As OSS is set against the corporate (capitalist) software industry, it seems that threads like this should be entirely about celebration...and the big question should be about how to coerce failing software firms into liberating their source code into the public domain as they close their ledgers and dispense any remaining funds to shareholders.
The real problem is not that software companies will continue to fail, but that they are leaving large numbers of customers with closed systems and no support.
Please, don't misunderstand, bashing Bush for any negative news is desirable. But, I really can't see how Bush is responsible for the natural life cycle of an industry. It also seems strange to be blaming someone for the failure of a business model that OSS opposes.
I agree that it is wise to blame one's enemies for the necessary outcome of one's actions. I certainly don't want to be blamed for follow programmers losing the livelihood, but isn't the fall of corporate giant software firms the goal of a free software movement?
The failing businesses were all founded on that strange IP model that OSS rejects. The failing companies were built on the assumption that they were building an abstract thing called IP, and that they were re-investing this IP to create more IP.
Bush and his cronies were in the lead in trying to defend this IP.
It seems strange to blame Bush for not succeeding in stopping the outcome of what we desired to happen....the fall of corporate owned software. It seems to me that if you are against IP, then this article should be a cause for celebration.