The news from the stock markets on May 23, that IBM had just overtaken Microsoft in market capitalization pushing Microsoft into third position whilst Apple retained its first place position, launched a lot of press coverage. Given that the figures at that time were Apple $309.2 billion, IBM $203.8 billion and Microsoft $203.7 billion, it didn’t seem that earth-shattering to me, so when I got asked for a press comment, my point of view was about the value that mega vendors create for their customers.
It’s interesting that, other than IBM, and HP, the other names that spring to mind – add Oracle, SAP, and Cisco to the list – all owe their status and growth to starting with a unique core proposition that had great value, and timing. The time was the beginning of the next technology era, one based on PCs, networks and client-server systems, and it needed radically different products than the mini computer generation dominated by Digital, Wang and others. At this time, IBM was in the race as the key PC player together with Microsoft underpinned with Intel processors.
The point is that the core product and technology was, and still is, a unique building block, and as such the importance, scale of use, functionality, etc. demanded by each company’s customers resulted in an expanding product line, increased technology footprint, and market leadership. At this stage of a new technology market place if we are honest with ourselves it feels the right thing to buy the market-leading product. After all it has proven itself in the market and usually there is a string of alliances with other recognizable players that seem to reinforce the idea that it’s the best and safest option.
Quick change in this thread here to reflect on what is happening today; ask yourself what names you associate with. Well, let’s start with an easy one; tablets – got to be Apple currently with software development on the iPad continuing to drive its popularity. What about virtualization? Probably you will say VMware. Cloud? Maybe Amazon. Search engines? Got to be Google, and you can continue with other hot topics of our new technology era. For each of these there are alternatives, and pretty good ones too, but that’s not the point – the leadership has already been established, and the vendor is at the center of an ecosystem of smaller innovative technology vendors, some of which it will acquire to meet the demands for more capabilities in its core market.
And there you have the conundrum; we are the creators of mega vendors, because we want stability, and with it the safety that comes from a well supported, fully integrated product. However, at a point in the cycle when the technology has matured, is understood, and possibly no longer the center of new requirements, then do we see the mega vendors in a different light, are they now abusing their dominance with high maintenance costs, and tricky support contracts?
On the plus side remains the well structured, reliable and managed core set of capabilities that a mega vendor is providing, and that does matter. After all, it’s usually a very visible aspect of the IT department’s service to users. If it is running well then it frees time up to look at the new requirements and the new technologies too, and it usually helps with the approach to take. The installed mega vendors are acutely aware of the market and technology changes so they are working hard to understand how and with whom they should be working to keep their positioning relevant to their customer base. In short, don’t ignore their activities, plans and alliances in considering what your own should be; at worse it will provide a benchmark to check your own views against, and at best it might once again provide that stability of integration and operation that you have previously valued. Alternatively it can illustrate clearly that the direction your mega vendor is taking is not for you so creating a decision to make a strategic break.
The big tip? Take some time to do a proper assessment along these lines, and don’t find yourself in a position that you didn’t plan for because of tactical adoption of new products as fixes to immediate new business requirements. We all created mega vendors in our businesses today and we can see the new ones emerging. Plan well, negotiate better, and there are some clear benefits. Do neither and it will be a cause for complaining about high cost lock in!