Gartner: Consolidation to put squeeze on businesses

The announcement of Logica's takeover of CMG has fuelled speculation at Gartner's Symposium/ITxpo in Cannes about further consolidation in the information technology industry as it approaches another year gripped by recession.

Under the circumstances, Gartner said its analysts are advising clients to be cautious about any new expenditures, particularly where it comes to IT hardware.

The view of a panel of Gartner analysts at a press conference on Tuesday was that three big companies will come to dominate the most important information technology categories of hardware, infrastructure, software and applications.

In software, Gartner sees the big three "stack" software vendors -- IBM, Oracle and Microsoft -- increasing their grip on customers. "Each one of the vendors is trying to own more and more of the stack... their desire is to have you locked into their solution," said Gartner vice president Betsy Burton. "This is a game of world domination. They lock you into their infrastructure and you have to buy more of their products."

Gartner sees a similar picture in hardware, with Dell, HP and IBM dominating and all other players coming under increasing pressure. Gartner, Brian Gammage, named Acer, Fujitsu Siemens, Toshiba, NEC and Apple as among those under particular strain. "Basically anybody who is not IBM, HP or Dell," he said.

Gartner advises caution as the consequences of market consolidation present themselves. "We are advising our clients to keep a very close eye on their suppliers, because their suppliers are subject to the forces of consolidation. If they are signing contracts for hardware they need to make sure they are protecting themselves," said Gammage.

He is advising companies to make good use of existing hardware. "Sweat the assets. Get more from them. Use them until they break or until they are giving you a productivity penalty," he said.

Business infrastructure software will not escape the consolidation trend, Gartner anticipates. "There are going to be three leading infrastructure vendors. I typically say three and a half of software vendors in infrastructure, and they are Oracle, IBM and Microsoft... that half is Sun," said Burton. "Right now Sun's on the edge of not holding on to that half position. I'm not willing to give them a whole position."

"In applications it's going to be Peoplesoft, SAP, and Siebel... Siebel's biggest challenge is moving beyond CRM," she said. One path for Siebel could be to acquire companies, a route that Burton says may be difficult due to cultural factors. "Siebel has a very big culture. Let me leave it at that," she said.

She singled out BEA and Sun as two software companies that may have a hard time maintaining their current position. Borland also has a question mark hanging over it. Borland will "have to grow or shrink. They can't stay where they are for the next five years," said one panellist.

Have your say instantly, and see what others have said. Go to the ZDNet news forum.

Let the editors know what you think in the Mailroom.