IT industry shakeout forecast fails to dismay

IT industry heads have agreed with research giant Gartner's prediction that half the well-known IT vendors doing business today will disappear in the next three years, but disagree on the who and why.

They say IT firms have always come and gone, though none were willing to suggest who might not survive this latest business cycle.

Gartner head Michael Fleisher describes the proposed merger between Hewlett-Packard (HP) and Compaq Computer as "the beginning of this new wave of consolidation."

However, Sydney-based Strategic Research analyst Rob O'Neill believes that while other mergers will happen, for various reasons the HP-Compaq union won't.

O'Neill says mergers will be boosted by the "rapid commoditisation of what were once high-value differentiated products". Dell, he says, is looking to "commoditise" rival businesses, and there have been many rumorus about IBM purchasing EMC, which would be "a great fit". Ariba and Commerce One look ripe for takeover by an ERP vendor, while software tools company Jade in New Zealand would be a "crown jewel" for IBM or Computer Associates.

Counties-Manukau District Health Board CIO Phil Brimacombe says the industry can expect different firms to be around but remain about the same in number. "One company's demise is another startup's opportunity." However, purchasing decisions will not be affected, he says, as the viability of suppliers is always a prime consideration.

Compaq New Zealand head Russell Hewitt, who is awaiting the fate of his company, says consolidation is always on the cards. He refuses to comment on the HP-Compaq merger proposal, which is still subject to regulatory approval.

Computer Associates NZ managing director Richard Collins believes the major players, outsourcers such as Datacom and Fujitsu, and boutique providers, will remain. He says firms like CA anticipate change by deploying resources to busier areas such as security, storage and infrastructure management.

Gartner's Fleisher told the audience at his company's Symposium/Itxpo 2001 in Florida that they should have anticipated the current slowdown. They made "adolescent" business decisions, he says, and failed to develop innovative new products.

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