Guest Column: Honey, Have You Seen My Market?
"I know I put it somewhere. But it's been a while. Let's see, I used to
have Compaq, Informix, Macromedia, Siebel Systems, PeopleSoft, Prometheus, and
Sybase."
"Well, I found Sybase, honey, but I'm afraid we've misplaced your WebCT.
And oh, I also found your SCT and Collegis, but they look a bit different. Oh
hey, remember Digital?"
My friend Richard Katz sits where he has a good look at the corporate mergers
and acquisitions that have alarmed many in higher education have taken place
recently. He's reached a place that the rest of us might get to in a year or
two. Enjoy his essay and, thanks Richard! - Terry Calhoun
By Guest Columnist Richard N. Katz
Vice President of EDUCAUSE and
Director of the EDUCAUSE Center
for Applied Research (ECAR).
Analysts for Thomson Financial estimated $75-80 billion of technology mergers
in 2005, compared with $60 billion in 2004. Much of that activity revolves around
software. Benjamin Pimentel, a writer for the San Francisco Chronicle,
has noted that software firms are in the grip of "merger mania." ("Software
Firms in the Grip of Merger Mania," San Francisco Chronicle, September
18, 2005). Though it is true that merger activity can promote standards and
that the merging firms do find efficiencies of joint operation and economies
of scale and scope, all these mergers still make me nervous. In fact, I am drinking
even as I write this. And I am concerned that I will have to start buying my
own T-shirts.
Harvard Business School Professor Michael Porter has described competitive
strategy in terms of five basic forces: supplier power; buyer power; threat
of a new entry to the market; threat of substitution (by customers); and the
intensity (or lack thereof) of competitive rivalry. ("How Competitive Forces
Shape Strategy," Harvard Business Review, vol. 57 (March/April 1979):
86-93). I think he has it about right. The current software merger frenzy comes
after a time when much of higher education IT went "enterprise" and
went commercial. Higher education learned that vanilla was a really good flavor.
In the past decade, most institutions integrated robust environments composed
of commercially vended databases, portals, and integrated ERP applications.
These have generally been good for higher education and-when combined with networks,
the Web, middleware, workflow, business intelligence, and other innovations-have
ushered in an era of online self-service applications, reduced authorizations,
shorter lines, better controls, and more satisfied students.
In light of these real benefits, should I be drinking this much? As a Libra,
I have to conclude: "yes and no." Software industry consolidation
is inevitable and inexorable. Shaking our fists at the sky will not reverse
the trend. In the short run, newly consolidating firms will be too busy with
their own problems of "accidental" architecture, expectant shareholders,
nervous staff, executive beauty contests, and drinking customers to show off
their expanding supplier power to full effect. In the long run, as John Meynard
Keynes reminds us, "we are all dead."
Given a possible short-term reprieve from the worst effects of rising supplier
power, we in higher education need to work hard and stay focused. Our power
as buyers is indeed waning. That is dangerous. Some of us remember what it meant
to "sleep in blue pajamas." We need to strengthen our power as consumers.
Quite frankly, the open source movement in higher education (and elsewhere)
is simply a way to do this. In Porterian terms, that movement increases the
threat of substitutes.
First, we in higher education need to continue to develop alternatives that
can provide choice-that is, a healthy competitive market. We need to do this
in a grown-up fashion: we must be honest with our colleagues that "freedom
[from vended software] is not free," and we must remind ourselves that
software often represents only a small part of the total costs of an enterprise
implementation. Second, we must focus attention on the art of collaboration-not
merely on the intent or rhetoric of collaboration. Third, we need to concentrate
on architecture. What is our next target application environment? Will a services-oriented
architecture (SOA) really lower costs, add flexibility, and improve interoperability,
or is it just more marketing hype? Fourth, we must foster the conditions that
will allow a healthy ecosystem to flourish around open source applications.
Finally, and most important, we need to acknowledge that the commercial providers
are critical even in the context of open source solutions. We need to work with
our traditional suppliers (many of whom have become trusted partners) to determine
how to produce a synthesis that balances their goal of maximizing profits and
our need to control costs. We must remember that software, like hardware, is
likely to become a commodity. Our vendors are fighting for survival, and frankly,
so are we.
So maybe I won't find my old market in the closet. And maybe I won't shake
my fist at the sky. Perhaps it's time for us to discuss and craft the new market
for software in higher education and our new role. What fun!
"Our vendors are fighting for survival, and frankly, so are we."
So we fight smarter, and look to partner when we can. Good advice in early 2006.
This guest column by Richard Katz is reprinted with permission from EDUCAUSE Review, January-February 2006, p. 76.