Even by the standards of a business that reinvents itself as routinely as the computing industry does, the last year has been an unusually momentous time for the global IT sector.

Since last April, corporate IT buyers have been obliged to stand by and watch as their key suppliers have been swept up in a wave of major alliances and mergers. For many, it is fair to say that it has not been an entirely reassuring spectacle.

First, the Unix and Java community was jolted into life by Oracle’s $5.6 billion capture of Sun Microsystems – which finally achieved regulatory approval earlier this year. Then in November 2009, Cisco Systems, EMC and VMware announced their intention to take on their long-standing server manufacturing partners with their own VCE (virtual computing environment) Alliance.

This move may well have provided Hewlett-Packard and Microsoft with the impetus to announce in January 2010 that they planned to spend three years and $250 million tightening the integration of their respective hardware and software products.

If IBM’s recent announcement of its own Smart Analytics Cloud initiative – effectively a co-development agreement between one of the world’s biggest business intelligence software organisations and a giant server systems group that both happen to be owned by the same company – is also taken into the reckoning, it is clear that is not just business as usual in the global IT market.

Indeed, although they may not all agree on the detail of what is going on, the industry analyst community seems united in the view that the IT industry is entering a period of profound change.

Fundamental shift

“The tectonic plates of the industry are shifting, and the rules of engagement that have governed its relationship with its customers are being transformed,” says Dr Stefan Reid, Forrester Research’s senior analyst for vendor strategies.
According to Mark Bowker, senior virtualisation and cloud technologies analyst at the Enterprise Strategy Group, “There is no question that big changes are happening. There is a major realignment of the industry under way that is affecting Oracle, IBM, Cisco, Microsoft and everyone that does business with them. And that means everyone.”

Nor are the companies themselves shy of talking up the significance of what they are doing. At the announcement of his company’s acquisition by Oracle, the then (but recently resigned) president and CEO of Sun, Jonathan Schwartz, called the deal “an industry phase change” – a merger that would create a new kind of unified IT supplier capable of meeting the demands of the fast-emerging market for seamless IT systems and services.

Portentous remarks like Schwartz’s are commonplace when industry giants are justifying multibillion-dollar deals. In this case, though, as subsequent events have shown, the IT industry really is being redefined and the boundaries that have defined the relationship between its major players really are being radically redrawn.

Certainly, as demonstrated by Oracle’s conversion from database-oriented business software vendor to supplier of enterprise systems stretching from the underlying microprocessor to desktop application space, the days of being able to categorise the major vendors in terms of their most well-known product lines – as database suppliers, router vendors or server manufacturers – are fading fast.

Instead, say analysts such as Freeform Dynamics research director Dale Vile, the industry is revisiting a former age: a time when IT systems were built from the ground up by a single vendor, and when manufacturers such as IBM were capable of supplying the entire ‘stack’ of technology components required to deliver a working business system.

This is not to say that there is about to be a mainframe or minicomputer renaissance, nor is a “vendor land grab” going on, says Vile. For once, he says, “the industry is actually responding to its customers. They have noticed that customers are tired of complexity, and they are trying to make things simpler for them,” he says.

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Simplifying the deployment of IT systems is supposed to be one of the key drivers behind the current vogue for cloud computing, and there is certainly a strong element of cloud rhetoric in the reasoning behind such initiatives as IBM’s Smart Analytics Cloud, the VCE Alliance and the HP-Microsoft agreement. However, the ability to deliver IT services as clouds is not the most important aspect of the move towards unified stacks.

“Cloud is only the marketing term du jour,” says Bowker. “What’s really going on is that vendors realise that they need to make it as simple as possible to use their products. Cloud is one way of doing that but customers are not telling vendors ‘we want clouds’; they’re telling them ‘we want an easier and less expensive way of leveraging technology’.”

This is what Schwartz meant in his announcement of the Oracle deal when he identified the need for IT to focus on components, ahead of systems. And, it is why HP’s CEO, Mark Hurd, needed to stress that his company’s new relationship with Microsoft had nothing to do with matching other vendors’ strategies. “This isn’t about responding to anything [in the industry],” he said, “it’s about meeting customer demand.”

Some customers may be wondering whether their current server, middleware or business applications supplier is at risk of being marginalised by recent events. In fact, says Vile, as the new alignments mature, there will be many more winners than losers in the user community.

Buying patterns

According to a recent Freeform Dynamics study into corporate buying patterns, there is a tendency to buy the same blocks of components from the same few vendors and to plug them together oneself, even when there is no explicit strategy to do so.

“Vendors have now recognised this and said ‘OK, if that’s how customers want to buy things, why don’t we make it easier for them. Let’s just sell them the same things, but pre-plugged.’”

Of course, as with any shift in IT practices, the new trend towards unified vendor stacks is not entirely risk-free.

As in the old days of the vertically integrated manufacturer, dependence on a single technology source brings with it the danger of vendor lock-in, with all that implies for costs and the future portability and flexibility of systems.

This time around, however, this may not be as grave a threat. Although the major vendors are undoubtedly busy developing what amount to proprietary links between their own and their partners’ products, the technology itself is built against open standards that would take vendors some years to unravel, even if they wanted to.

Indeed, according to Reid, the real risk posed to customers by current trends is their own potential failure to understand the fact that this move changes the role of the IT department and its leadership. In the past, he says, “CIOs were measured in terms of the excellence of their own data centre operations. Today, the same role is calling for excellence of a different kind, defined in terms of their ability to source, and in particular in being able to clearly see when it is better to source internally or externally.”

Today’s major vendors know this. And that is why they are learning to work together more closely, and make it easier for customers to “source their technology” to buy the products offered by competitors.

How the vendors stack up

IBM – the stack veteran

The computing giant is one of the pioneers of the pre-integrated systems model that is now returning to vogue

Oracle – from software to systems, courtesy of Sun

Larry Ellison’s company now has the technology required be a strategic supplier, but does it have the relationship skills?

VCE Alliance – an ambitious bid from the outsiders

The confederacy of VMware, Cisco and EMC has technological credentials but its stack vision is still a work in progress

Microsoft & Hewlett-Packard – a pragmatic partnership

The two IT giants’ commitment to co-operation and mutual interoperability is a practical reaction to industry moves