IT buyers go shopping with an eye to risk

February 16, 2004, 11:02 AM —  Computerworld Today — 

Large-scale vendor consolidation continues to shape market activity and is enforcing the conservative and risk-averse buying strategies of enterprise customers today.

When assessing vendors to sign-off on even a half-decent deal, IT professionals want to protect the long-term interests of their organizations but also measure the impact of any buying strategies against their resumes.

IT professionals want vendors with checkable references, according to Phil Ackman, the managing director of research and consulting firm Project Media.

"(Customers) want to know how big you are and how credible, how big is your development budget, are your offerings broadly available with global product support and does your business fit with my resume," he said.

"To invest the time required to become familiar with a product and to develop market skills in Oracle or a small company we shall call Boracle, the IT professional wants to know the career implications."

After 40 years of technology purchasing, Ackman said the IT professional is a sophisticated buyer and very conservative.

As the dark veil of "16 quarters of IT depression" begins to lift, he said the aftermath and its consequences are emerging for both vendors and customers.

"There has been a fundamental shift and there will be no return to the good old days before the depression; today's market is driven by consolidation and recent activity in the enterprise resource planning (ERP) space is a prime example," Ackman said.

"There are 650 ERP vendors out there but the real game is being played out by a few big players such as Oracle, PeopleSoft and SAP and a few exotic players like SSA; customers today only deal with the top 20."

IT buyers are certainly a lot tougher, according to Bruce McCabe, the managing director of analyst firm S2 Intelligense.

"That toughness won't go away regardless of how much economic conditions improve," McCabe said.

"The focus is on vendor viability in these tough times. A CIO told me just the other day he will buy an inferior solution if the vendor has financial integrity, he wants stability over product because long-term support and a product roadmap is critical.

"Buyers don't want to deal with companies that could disappear and I don't buy the argument that consolidation is leading to less innovation; this claim is grossly overstated."

While larger players dominate the market, McCabe said there is a second layer of providers teaming with innovative offerings and a healthy future.

Ackman agrees, claiming there will always be 'dining room startups' and in the past six months the market has been buzzing with acquisition activity.

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