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Market Prediction: IBM #3 in ERP

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Permit me to be the first to predict that IBM will acquire an ERP (Enterprise Resource Planning) software product and shoot to the number four market share position within 4 years and the number three market share leader position within 5 years. To put this prediction in perspective, it's important to note that IBM categorically denies any ERP acquisition plans. Also recognize that IBM only four years ago stated that the company is not moving toward acquiring business applications and has since acquired Ascential, iPhrase, FileNet, MRO and most recently Cognos.

The basis for my prediction is largely based upon the pressures being imposed by IBMs shareholders and competitors. There are not a limitless number of routes for a $90 billion organization to show sustained growth. As IBM and its operating margins have become much more dependent upon software - and especially business application software - since liquidating major portions of its hardware business, the ultimate software growth plan ends with mission critical ERP business applications.

IBMs competitive landscape is changing. The value-added software components which generally compliment business application systems are vanishing and in fact being absorbed directly into those business applications. As evidenced in the highly coveted business intelligence (BI) space, the business models for standalone BI are dying. Microsoft bought Proclarity, Oracle bought Hyperion (for $3.3 billion), SAP bought Business Objects (for $6.8 billion) and now IBM will acquire Cognos (for $5 billion). However, unlike the other acquisitions, IBM has no vested ERP applications partner and in fact has increased competition as those ERP vendors up until recently may have entertained an IBM BI solution within their client bases. No longer. The path and evolution of BI systems will be followed by other complimentary component solutions. ERP vendors are showing an appetite for owning and delivering more of the 'stack'. SAP, Oracle, Infor and others demonstrate sustained acquisition strategies and surprisingly, the ability to integrate acquisitions for synergistic value. If IBM intends to compete in the business software market, it will be forced to acquire an ERP system and go toe to toe with Oracle and SAP. While these two formidable competitors have significant early market advantage, IBM could carve out massive gains simply climbing to the number three or four ERP business applications position.

Posted by: Jeffrey on 12.01.07
Posted in:
IBM
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