By Adam Lashinsky
January 17, 2008

I posted some insta-analysis on Oracle’s (ORCL) acquisition of BEA Systems (BEAS) this morning and distributed it among my network of friends and contacts. Their responses were interesting — and worth sharing.

One friend, a sharp-eyed historian, likened Larry Ellison’s role in enterprise software to J.P. Morgan’s consolidation of U.S. banks a century ago.

Morgan was a consolidator and rationalizer of maturing industries after a period of excess. He didn’t innovate, used his balance sheet as a competitive advantage and was a force for order. Also, he was way into big boats.

I didn’t know about the boats!

A keen small-business owner who toils far from Silicon Valley weighed in thusly:

I’m not exactly plugged in to the enterprise software market, but I didn’t realize that there were rumblings that it was dead. I think there is always going to be a market for an enterprise system that avoids the hassles, expense, and risk of integrating individual packages that are selected for each function (e.g., manufacturing, distribution, accounting, HR, etc.). Microsoft and perhaps SAP (SAP) have been smart to realize that they have a large middle-market opportunity because that market is traditionally underserved by the all-in-one concept. But I’m not aware of all of Oracle’s moves in the big company arena, and it sounds like they’ve done well to focus there. Also, I would agree with the statement that technology companies (and other high-growth industries) aren’t doing themselves a favor in terms of stock price or fueling growth if they just sit on cash (and sitting on the cash sends a signal that management isn’t good at identifying new growth projects, which depresses the stock further). As you know, this has been a criticism of Microsoft (MSFT) for many years, and I’m not sure if they’ve fully addressed it.

A correspondent of mine who is a true tech guy inside a really big diversified company had this guidance on the relative deadness of enterprise software:

Of course it isn’t dead, but it is simply a very mature business with not the extreme hyper-growth of 5-10 years ago. The dynamics of a mature industry are different than a nascent one, and the movement to a “gorilla game” is natural as a segment evolves.

A tech lawyer I know – but haven’t seen in ages! – quibbled with my praise of Ellison’s vision:

Not sure I agree with you. The spotting of trends can outpace reality by a couple decades or more. Wouldn’t you have thought that Toyota (TM) would have passed Ford (F) in the US twenty years ago, not this year? Same with Toyota passing GM globally. This dissonance is true even in faster moving tech. Why did it take AOL so long for its market share to erode? It held on for 6 or 7 years longer than the shorts (who got killed on AOL) thought they could, given the rise of broadband.

Another legal eagle who knows his bits and bytes had this to say:

Enterprise software may not be dead, but it is also pretty cyclical, right? Also, there’s a downside to tech companies overborrowing. If they get too aggressive they will stray from the ‘stick with the business you know’ observation you make about Oracle overall. Finally, what is Oracle’s batting average in spending that $25 billion. In other words, how many dogs did it buy?

Good question! Thanks everyone.

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