* Follow-up to column on management companies that are dead and gone
In a prior column, I mentioned updating a contacts list and finding that 30 or so of the network and systems management software providers had disappeared in the last 18 months. I received a high volume of e-mail in response, so I thought I’d do a follow-on, partly to answer some of the questions, and partly to share readers’ insights.
One reader requested that I, or Enterprise Management Associates, publish the names and perhaps do a more complete report. This is a good idea, and we may do it – as a more extensive analysis. We may wait, however, for some more shoes to drop.
I should stress that the list that inspired the earlier column is a personal contact list and so is far from complete. Since there are 13 analysts at EMA all tracking infrastructure management, one might surmise that the total number of vanished names is 13 times 30. However, for various reasons – including my own industry nosiness – I would guess that if EMA were to come up with a final tally, the list would be somewhere between 75 and 150. Also, as it is my own personal list, its focus reflects my own personal bias towards networked services, root-cause analysis, and some other areas. A look at the market sectors of the companies in the list reveals this:
* Root cause/fault management: seven companies gone, three of which were acquired.
* SMB or low-end enterprise: two gone.
* Performance management: seven gone, two of which were acquired.
* QoS: four gone, two of which were acquired.
* Business Process Management: one gone.
* OSS: two gone, one of which was acquired. (Note: To answer one query about the many OSS management products left high and dry – these are predominantly being tracked by another EMA analyst, I’m happy to say.)
* Predictive capacity planning: one acquired.
* MSPs: six gone.
* Security: four gone, one of which was acquired.
Standards for acquisitions imply that both the acquiring company is still around, and that something visible in terms of functionality, if not brand, is in play. Acquisitions that fail, or simply eat a company without using the intellectual property, are not counted.
In all fairness, a lot of the numbers here reflect a personal focus in root-cause analysis and network performance. Note that there’s a fairly high assimilation rate for root cause and QoS via acquisition – and this is not surprising. Root cause and other forms of analytics require a high level of intellectual capital. On the other hand, most analytically rich products are strategic investments – with products not easily sold by small companies with little critical mass, limited marketing budgets and a burden of proof for longevity. This makes them natural targets – innovative, available, and small – for larger companies. Overall, this type of amalgamation is a healthy sign and nurtures positive growth within the broader market.
Now to answer one other question. How do small companies that disappear still hold some potential to influence the course of market evolution? Aside from being good case lessons, all you have to realize is that selling software is essentially selling intellectual property. And intellectual property can remain available over time even after a company disappears. Sometimes the founders themselves bring it back under different guises. At other times it becomes available to other companies. And although this is more of a rare occurrence than it probably should be, it does hold the door open to future reuse.
Finally, I’d like to cite an observation suggesting that the dynamics reflected here about start-ups, in particular, is not substantially different than it would have been three or four years ago – with a twist. See if you agree with this correspondent to the first “Post mortem” column, as I largely do:
“The late ‘90s were really just the same song, different verse. Start-ups have always been the way you described them, and as a result only one in 10 survive – for just the reasons you mentioned. What made things different in the late ‘90s was that society let collective greed get the best of it and threw tons of money at unproven companies. As a result, the 90% of the companies that were failing were more spectacular failures because they had been able to hire more people.
“I watched the dynamic evolve over a number of years. In my first start-up we needed eight successive quarters of profitability to go public. By the second, you needed four quarters. By the third, profitability had to be ‘demonstrated.’ By the fourth, you had to have a cool idea that people thought could become profitable some day.”
Of course this last dynamic will encourage, as well, a higher success rate even for start-ups. Building an effective near-term beachhead from which to grow and expand is the first step to long-term survival.
