Tuesday, May 08, 2012

The Unholy Alliance of Analyst and Big Vendor

I was browsing IT news as usual and came across a commentary page that discussed Progress Software's recent decision to divest itself of several core products, including Sonic ESB, Savvion BPM and Actional Service Management. To tell you the truth, I wasn't paying attention to the website where this page was hosted. But then I came upon this statement:

The situation reminds us of a key benefit of selecting a top-tier enterprise vendor: IBM and SAP rarely kill established products, and the same can be said of Oracle in recent years.

I've been in the industry long enough to detect a "this-message-brought-to-you-by-your-friendly-neighbourhood-commercial-sponsor" marketing insert when I see one. So I glanced up at the website, and sure enough, it was one of the big analysts, Forrester to be precise.

The funny thing is, I would have drawn a very different inference from the news about Progress.

This news confirms a few things I already know:

1. Commoditisation continues its onward march in product category after product category. This is good news for customers because it means lower prices as well as standardisation of features (which in turn leads to greater interoperability and lower operating costs).

2. Commoditisation is dreaded by vendors because it erodes their profit margins. The large vendors have enough of a lock on their customers through network externalities that they can often maintain their profit margins in spite of commoditisation. But smaller commercial vendors must either exit these market segments or accept lower margins.

3. The unspoken trend in any modern-day commoditisation story is the rise of Open Source. After all, Progress is not quitting these middleware markets because of competition from the big vendors. The pressure on them is from below, from Open Source. And there is a thriving market here in the "supported Open Source" category, as this gleeful blog post from WSO2's VP of Technology Evangelism shows.

I'm disappointed (but not surprised) that a big analyst is spinning what is really a welcome story of commoditisation into a warning to customers to buy the big expensive brands, or else. I guess there's no money in it for them to recommend that customers choose Open Source alternatives to start with.

But really, chee, how low can they go?

1 comment:

Keven Huelin said...

I am just thinking of joining a company with its product built on the Progress platform.

Where is the product now from the prospective of future viability?