And a thousand companies will fail...
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
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.
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.
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
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.