BMC, one of the world's largest enterprise software management companies, is planning to spend some of its $1bn (£630m) cash mountain to acquire a selection of software companies, plugging gaps in its product portfolio.
Speaking at a BMC user conference in London, chief executive Robert Beauchamp said that enterprises purchasing management software are no longer interested in individual products; instead they want complete solutions.
"This is clearly the trend and BMC is focused on one strategy -- delivering a service management environment," said Beauchamp. Holes in the company's current product portfolio means acquisitions are on the cards. "We have zero debt and $1bn in cash. Most small software companies today are either for sale or in serious distress, and BMC intends to be one of the companies that helps consolidate this sector," he said.
Dr. Thomas Mendel, director at Giga Research agreed with Beauchamp. "By this time next year, there will only be four or five vendors left in this space. The rest will have gone away -- either out of business or acquired," Mendel predicted.
He warned enterprises looking at investing in business service management (BSM) products to think carefully before committing to products from smaller players in the industry. "Do you really need a fully fledged BSM? Only if the need is immediate should you buy now from a smaller vendor. It is better to start slower -- by automating just a few services for now."
James Governor, principal analyst at RedMonk said that BMC shouldn't expect the acquisition road to be easy, despite its deep pockets. "There are many elements to a successful acquisition that go above and beyond technical integration," he told ZDNet UK, revealing that BMC still has some "swallowing" to do from its acquisition of Remedy last year.
"It is no good just buying companies, they have to be closely integrated," said Governor, who points out that IBM bought Lotus about eight years ago and has still has not completed the integration process.
However, Governor agreed that in general, consolidation or extinction is inevitable. "Small companies go through the multiple steps involved in selling to a large organisation and then the purchasing department will put the kibosh on the deal, purely because they are too small. This happens all the time," he said.