The Collective Good

Without question, the single-biggest story for the industry right now is the ongoing Oracle-PeopleSoft hostile takeover saga. Taken in the context of the several other more-friendly merger deals reached in the past two weeks, Larry Ellison's aggressive offer points to a much larger trend we'll encounter over the course of the second half: a major wave of industry consolidation.

Certainly, much of this activity will come from within the software applications sector, in large part because that is where the true industry innovation is happening right now and, on a more negative note, because some once-hot segments have stalled. But CRN's readers are likely to find themselves in the middle of some merger mania of their own.

There are several reasons why consolidation among solution providers is necessary and healthy, but mainly it's a question of skills.

Certain vendors,Hewlett-Packard is a great example,are requiring their solution providers to offer a broader portfolio of product representation and services than in the past. If you're a company that has built its good name through a speciality in storage, for example, your growth potential could be limited if you don't find a way to expand into other solution areas either through acquisition or alliance. I know that at least one of CRN's 2002 Rising Stars is exploring just such a scenario, although I am forbidden to reveal his name just yet.

Other solution providers are finding that their current management teams don't have the experience to take the company to the next level. Let's face it, running a small business has become a whole lot tougher in the past two years, especially when it comes to handling financial matters and knowing how to appeal to potential customers. Some existing solution provider owners are looking for business wizards to complement their own impressive technical acumen.

From a broader perspective, it wouldn't hurt for the channel to have a few more larger players, aside from the major systems integrators, to help keep vendors honest in their policies.

What are your consolidation expectations? HEATHER CLANCY, editor at CRN, welcomes your comments at [email protected].