Enterprise Software in 2008: Consolidation and Chaos Loom

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Looking Ahead

Many of the themes that dominated the enterprise software sector this year figure to bleed into 2008 as the industry continues to adjust to the demands of customers enamored with Web 2.0 applications and new delivery models.

But is the Web 2.0 bubble about to burst?

One of the more daunting obstacles facing large companies and their software vendors in the coming year will be figuring out how to make use of Web 2.0 and similar developments — and whether such a task is worth it at all.

After all, businesses are already finding that it’s no small task to securely interweave these consumer-based technologies into the enterprise without compromising or watering down the features that make them worthwhile in the first place.

Unified communications is another area key to software vendors’ long-term strategy heading into 2008. The term describes the cobbling together of instant messaging, Web conferencing, e-mail, desk phones, mobile phones, blogs, RSS feeds and all the other tools employees and businesses use to communicate and collaborate.

If vendors’ marketing and public relations departments are to be believed, unified communications offers tools and processes businesses use — in the form of consolidated and secure enterprise-grade platforms.

Of course, that’s the claim of vendors’ marketing and public relations departments, which maintain that “sharing” and “collaborating” are essential to innovation. Anyone with an instant messaging client knows these technologies are disruptive, but are they that kind of disruptive?

Besides the mania surrounding these technologies, here are a few other developments to keep an eye on during the next 12 months:

Is it possible there’s even more consolidation ahead?

In a word: Yes. But figuring out which companies will serve as the next snack for the likes of IBM or Oracle isn’t so obvious anymore.

Following a year of multibillion-dollar deals, Business Objects is gone. IBM gobbled up Cognos. Oracle reeled in Hyperion. Cisco snared WebEx. And BEA… well, we’ll get to BEA in a minute.

With very few exceptions, what remains are bunch of mid-sized companies recording annual sales of between $100 million and $300 million, as well as a herd of even more, far smaller firms. Attractive in many ways, they’re still not the kind of companies that would qualify as blockbuster pickups for the likes of Oracle, IBM or Microsoft in 2008.

Look for smaller, niche-type players to be swallowed up, particularly those with expertise in data management, business intelligence and analytics and security. Top-tier vendors are always on the prowl for companies with tremendous depth in specific verticals like retail, healthcare and financial services.

A couple companies worth watching, according to Cowen & Co. analyst Peter Goldmacher, are Informatica, the data integration and data warehousing provider, and i2 Technologies, a player in supply-chain management software and services.

“Right now there really doesn’t seem to be anyone of real consequence, besides BEA, still out there,” he said. “But there will be more consolidation.”

This article was first published on InternetNews.com. To read the full article, click here.