* Reflections on how the management software solutions industry has evolved over the years
As we decommission 2006 and launch 2007 I’ve been reflecting on how the management software solutions industry has evolved over the years, and how some companies appear to have gone to school on that evolution to position themselves for victory in 2007 and beyond.
Those of us who have had the privilege of being a part of this business for a long time have seen what I call “the migration of the animals across the continental land masses.”
At Applied Computing Devices we were one of four companies serving what was just beginning to be known as “the OSS market.” The others: Bellcore; AT&T Network Systems (now part of Alcatel-Lucent); and Objective Systems Integrators (OSI, today part of Agilent). The deregulation of the telecom market in the 1990s, marked by the Telecom Act of 1996 in the U.S. and “liberalisation” of markets across Europe and Asia, lowered barriers to entry and created waves of new “service providers” – some little more than a few sharp businesspeople in expensive suits with a VC-approved business plan – who needed a ton of software help to roll out and manage all of that shiny new network equipment the bulk of their VC money had bought. The former monopoly providers – RBOCs in the U.S. and PTTs everywhere else – now found themselves in a competitive marketplace, suddenly having to care about customer care and roll out new services to match what was being offered by the upstarts.
All of this led to unprecedented growth in the communications software market. Our original OSS Band of Four was suddenly joined by hundreds of other firms clawing for a piece of the telecom software pie. Many were newly-formed “hot software shops,” but many others were “enterprise” software companies who couldn’t resist the lure of what appeared to be The Big Easy: big and apparently easy money in the telecom market. So they brushed up their slideware (and occasionally even modified their core LAN management products) and announced to the world they were now “in the telecom market.” So what if most of them couldn’t scale up to handle the massive traffic and transaction volumes of the carrier networks? It was a fun ride while it lasted.
Fast-forward to the trail of tears, the Telecom Downturn of the early 2000s: the death of nearly all of the CLECs and DLECs. Carrier-on-carrier M&A creating a short list of regional and global supercarriers. Emerging communications service providers (CSP) such as cable companies who developed a reputation for being quick on the draw when it came to issuing software RFPs but slow on the pen when it came to actually signing software contracts. The telecom software market, which had enjoyed explosive growth 5-7 years earlier, now imploded. Casualties littered the battlefield and the animals began migrating back across the land masses the way they came. Enterprise software providers “rediscovered their roots” in enterprise IT shops. OSS survivors, surveying the scorched-earth telecom landscape, developed a newfound appreciation for the enterprise and government sectors. So what if most of their products (and management mindsets) did not scale “down” to the enterprise world and they didn’t have a clue how to land government contracts?
Press “LIVE” on the DVR remote. Today there’s a resurgence in our markets, and when most boats are rising together it can be easy to forget past lessons. A word to the wise: don’t. Especially in today’s converging markets I don’t think most companies should limit themselves to one of the two major market segments: “We’re an OSS company.” Or “We don’t mess with telecom, we’re strictly in the enterprise space.”
“But Jeff, earlier in the column you cast aspersions on companies who tried to magically morph themselves from enterprise to telecom (or vice versa) to cash in on new opportunities.” True. We’re not talking about magical morphing or smoke-and-slideware. I mean rolling out at least one new product, or making substantive modifications to an existing one, to gain entrée into “the other market.” Or maybe entrée by acquisition.
“But we don’t have experience managing telecom switches.” How about routers and servers? Computers? Telecom switches are for all intents and purposes specialized computers. Think IPTV is for OSS vendors only? What if I told you that a big part of IPTV service delivery is in server management – provisioning and managing IPTV servers – and supporting two-way communications between provider and user? Does that truly sound out of reach? Other examples: does it truly require an Evel Knievel-style death-defying leap of faith to evolve an enterprise internal chargeback system into something that can help service providers manage external subscriber billing across multiple services? Perhaps even better: if you are an “OSS” vendor specializing in inventory, or an “enterprise” vendor providing asset management, why not make the investment to cross the divide? These are two of the most solid market opportunities because no enterprise SMB or above can afford not to have a good handle on its assets and service providers cannot survive with only a 60%-accurate view of their own inventory, as some have been doing.
To be clear: I’m not saying crafting systems that specialize in meeting CSP-specific needs, or that are tailor-made for corporate computing environments, are no longer valid courses of action. I am saying that given our collective experience, and especially now in an era of converging markets and business models, being a one-trick pony is a sure way to get run over on the racetrack that our market has become.
Lest you think I’m speaking here only to small software companies who I suspect may not survive the next twists and turns of the market, let me introduce you to a little company you may have heard about that perhaps best exemplifies this kind of cross-market and cross-functional diversification. IBM, who many conceptually pigeonhole as solely an “enterprise” infrastructure heavyweight, is also a major player in telecom – up to now mainly as a systems integrator (SI) providing deployment and ongoing support services. After fortifying its enterprise software position in 1996 with the acquisition of Tivoli, in 2006 IBM made two more game-changing software acquisitions that signal its intention to become a major force in the CSP market: Micromuse in February and a scant nine months later, Vallent.
In Micromuse, IBM gained a capable player across telecom and enterprise markets, and Vallent is the CSP market’s strongest wireless management player. Back to enterprise, IBM’s August 2006, $740 million acquisition of MRO Software gave it one of the strongest lifecycle asset management solutions in the industry. MRO’s Maximo product has no true chargeback capabilities, but IBM’s acquisition of CIMS Labs in January 2006 had already closed that gap, and Maximo can either be purchased or used on a hosted/outsourced basis, a flexible delivery mechanism that IBM Global Services (IGS) may be able to leverage to maximum advantage. Capping off a busy year in which one of the world’s largest corporations positioned itself with a vengeance across the enterprise and CSP markets, in October 2006 IBM acquired Ubiquity’s Dorana inventory management assets.
You’re absolutely correct: IBM does have the vast resources to acquire and leverage multiple software properties and thus position itself across markets. IBM also, however, with an employee base of 365,000 across world regions, is a corporate behemoth not prone to risk-taking. Yet here it comes to the table, placing one of the world’s biggest corporate bets.
Key movers inside IBM’s software organization are frankly less interested in labels and more focused on capabilities, performance and meeting the needs of customers, wherever it encounters them. If global juggernaut IBM thinks the time is right to begin reshaping its software and services offerings as neither “enterprise” nor “telecom” but instead as [my term] management software solutions, shouldn’t you?
