Business app vendor consolidation shifts power on infrastructure choices

It wasn't that long ago that platform and infrastructure vendors were the dogs that wagged the independent application vendors' (ISVs) tails. The ISVs had to make risky and costly bets on which platforms would, as much as years in the future, be prevalent in their desired markets. Back in the client/server heyday, ISVs had to make these clairvoyant bets on both the client and server platform sides. That made Windows and its associated tools hard to resist. Same for the major Unix flavors. Soon the choice boiled down to what Unixes to port to in addition to Windows.
In a sense the ISVs were beholden to the platform makers to carve out mass markets, and the platform players prospered while expanding their market reach and intertwining their tools and servers into de-facto industry standards. Sometimes they played hardball tactics on convincing ISVs where and how to port.
In this era, enterprise IT operators tended to choose their platforms first and foremost, and then went shopping for the best of breed applications that ran on them. This gave the platform vendors a lot of power. Only sometimes did the buyers make the application choice foremost, but then often had to support an expanding menagerie of isolated platforms that supported their desired applications. The Web accelerated with need for heterogenity. and it all lead to the integration mess that we're still expensively grappling with.
But, wow, what a difference a decade makes. The balance of market-shaping power and IT product pull-through is rapidly shifting. Oracle's pending acquisition of Siebel not only decreases the number of major global business applications vendors, its adds -- probably to the tipping point -- to a momentous IT industry flip. It reminds me of how the water in the nearby northern New England lakes where I live actually flip, bottom to top, each spring shortly after the ice melts. It ends up being quite healthy for the lakes.
It is less clear, however, whether the market power now building in the hands of a very few major business applications vendors -- SAP, Oracle -- will be as healthy.  Think of it, the foremost choice for enterprises now and for the foreseeable future is: Which major business applications suites do I want? And: Can I consolidate all my apps with one vendor? The other decisions on platform, tools, stacks, middleware, frameworks, hardware, data center -- they all now trail and follow from the consolidated business applications decisions (and subsequent migration and internal consolidation activities).
The smart enterprises will seek the infrastructures that save them the most TCO money, make migration and consolidation of front and back office apps and data easier, and allow for greater exploitation of business intelligence and process integration refinement. Enterprises will -- encouraged by their business applications vendors -- resist being locked in to proprietary products when it comes to infrastructure. The enterprises will team up (like they have a choice) with the ISVs to wag the infrastructure dog.
This is no minor flip. It dramatically and quickly commoditizes platforms and infrastructure. It is a catalyst to increased use of open source, open Web 2.0, and open SOA. It gives Oracle and SAP tremendous leverage. For the winning business applications vendors in coming years will determine the best partner and bundle packages, often using a subscription or enterprise-wide license relationship with the major end-user accounts.

This further relegates the providers of the lower parts of the runtimes and total data center infrastructure stacks to hoping the applications vendors will resell them. The applications then create the mass markets that the infrastructure vendors must then compete among each other to enter. The global professional services/systems integrators (SIs) and the global business applications ISVs will be the points through which the rest of the industry needs to line up behind. Achtung!
Now, Microsoft and IBM will no doubt characterize this future market scenario as oversimplified, and it is. Oracle is both an infrastructure, database, and apps vendor. Same with Microsoft, and IBM (which has the SI trump card, rather than the business apps one). SAP is ramping up quickly in the full software provider direction.
But it is hard to argue that comprehensive business applications suites supremacy in a few hands -- as the primary point of business contact with the major accounts -- is altering the market dynamics of IT. The smart money should be on the players that hold the best cards when it comes to the business applications market share.

• Oracle buys Siebel: Ellison firmly in CRM catbird seat
• Dana Gardner: Consolidation shifts power on infrastructure choices
• Phil Wainewright: Oracle, the 800lb gorilla of on demand
• Salesforce.com's Benioff: It's the end of Siebel
• Full text of Benioff memo to salesforce staff