Three quarters into 2009, and it seems that the market share of the four megavendors in IT management software (BMC, CA, HP and IBM) has again seriously eroded against their smaller competitors. The global ITMS market itself did not shrink: smaller vendors are reporting better results than forecast.
One major reason for this turn of events is that enterprises are struggling with smaller or flat IT budgets, and are therefore looking for a bigger bang for their buck, both in terms of CAPEX and OPEX: deals are smaller, more tactical in nature and tend to favor point solutions again.
But why is it that the larger ITMS vendors cannot compete with the smaller ones in tactical solutions?
For the past few years, the megavendors have focused to the higher levels of the management stack, where they don't have to compete against commoditized products. But I believe that the true, fundamental reason for this lack of competitive products is the result of a mismanagement of their capabilities to innovate. Many acquisitions over the past two years have been of overpriced companies, with no real evidence that a return on investment was anywhere in sight. With the notable exception of CA, which has acquired point solutions like Wily, Aprisma or NetQoS and let them prosper as such, most of the recent acquisitions have been in "strategic" market segments.
That would not be a problem if these strategic acquisitions complemented a strong foundation of innovative solutions at the base of the stack. But that is not the case: the solutions proposed are often a patchwork of old stuff and new acquisitions wired together with bale wire and rubber bands: it does work, but it is awfully complex and cannot stand the comparison with the simple elegance of some point products.
The megavendors must correct the situation and find their way into what made them successful in the first place: the ability to read the market and propose innovative solutions to the real needs of IT organizations. Not that the high level layers are not useful and necessary, but many enterprises are still struggling with basic application delivery problems, and the way to higher levels goes through the basic ones.
If this megavendor revenue downturn is confirmed, it should be a wake up call. Some megavendors have gone too far into complex solutions which returns on investment are difficult to assess. To regain their market preeminence, they need to better understand it and get back to basics.