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Article by Mohan Babu


Larryspeak: And a thousand companies will fail...

MOHAN BABU focuses on the predictions made by the Oracle Corp chief in a recent issue of The Wall Street Journal, which is contrary to the optimism shown by other business leaders

The IT industry, at least during the past few years, has got used to sobering analysis and predictions from analysts and gurus. Anyone who has been in the industry in the past few years would realise that these are not the best of times. However, unlike the analysts, until recently most business leaders and CEOs in the industry have either continued to put on an optimistic front or have been diplomatic about their views. Therefore, Larry Ellison’s views that appeared in the recent issue of The Wall Street Journal, came as a breath of fresh air (needless to say, not the views one would like to hear, nevertheless). Ellison has always spoken his mind, mincing few words when it comes to his views on his opponents or technical trends.

Following are a few of Ellison’s predictions in the article:

  • Shrinkage of the tech industry and failure of about a thousand companies. According to Larry, the industry “is as large as it is going to be”.
  • A handful of dominating winners will control innovations. The maturing of the industry will lead to bigger companies, which will offer a wider range of products.
  • Cheaper computers that use the free Linux software and other technical efficiencies will drive down the prices.
  • More software development will move overseas, seeking lower cost of labour.

Some of the trends articulated by Ellison are already taking hold in the industry. For instance, IBM, with the acquisition of Rational, is already readying to equip its Global Services consultants with an arsenal of solutions and tools that can be used end-to-end, including Data-bases (DB2 and Informix), workflow and middleware (MQ and Websphere), collaborative software (Lotus Notes), methodology (RUP, Rational Rose) hardware and OS (boxes ranging from small systems to large mainframes) and open systems (Linux).

In theory, an organisation could call IBM and get any software or solution using IBM hardware and software. Getting all of them to work seamlessly? Well, that topic will require a different column. Even Ellison’s Oracle Corp is pushing its thrust towards integrating the core Oracle database software with its suite of applications (apps) and development environment. Oracle’s software suite is not as diversified as IBM’s but Ellison would like it to eventually get there.

The other prediction regarding Linux driving down costs and efficiencies is also happening as we speak. Companies are starting to give serious consideration to Linux-based hardware boxes that cost considerably less than those built with proprietary software, including Unix. Oracle is trying to eat its own cooking by selling versions of the software for the Linux environment. Of course, Oracle also has a vested interest in doing so: it does not want users to discover MySQL, a freeware database that works on Linux.

The topic of software development moving overseas is dear to most of our readers and I would be preaching to the choir if I were to continue on about this trend. Scores of companies have already moved their outsourcing work to India and even large integrators like Accenture and EDS have begun shifting operations by either tying up with local partners or starting their own subsidiaries.

The most sobering of Ellison’s predictions is the failing of a thousand tech companies. In a sense, even this has been happening gradually, especially in the Silicon Valley where the dotcom bust saw the vaporising of hundreds of small startups. Some of the larger software companies are however sitting on piles of cash generated during the boom time that they are slowly burning, and it may be a while before they disintegrate.

Many of the large software companies like Siebel and i2 (that Ellison talked about in the interview), have been bleeding cash and declaring losses in the past few quarters but are still sitting on piles of cash generated by their IPO and during boom time. Even with slower sales, they will continue to limp along till either the market stabilises or till they run out of cash. Will they go the way Ellison predicts them to? That’s anybody’s guess.

The sobering view from Ellison is bound to give some food for thought to a few of the tech analysts and pundits. However, on the flip side, his prediction on outsourcing will bode well for the Indian software industry where the bulk of offshore outsourcing work is expected to move.





About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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