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Summary

The enterprise applications market has always cycled between periods of innovation by multiple developers followed by acquisition of those innovators by larger corporations. Recent trends suggest that acquisition of technologies and the companies that develop them will become more of a constant swell than a series of waves.

Acquisition is the new innovation

The number of technological threads in need of development has never been greater, ranging from data security to artificial intelligence and beyond. The tools of innovation, accordingly, are in more hands than ever before; the democratization of expertise and computing power have brought back the hope that one could invent the next big thing in one's garage or home office. At a more practical level, there are myriad relatively small developers working on products and services that one would expect to be the domain of large, multifaceted corporations.

While the major players continue to spend significant chunks of their budgets on research and development, Ovum speculates that the leading edge of innovation for many technologies may shift toward smaller, more focused, and agile companies for the foreseeable future.

That would seem to suggest that we will see an explosion of boutique vendors seizing niches. History shows that such periods have occurred many times before, followed by a period of consolidation as large corporations invest in the new ideas and shore up their existing offerings by acquiring those small developers. However, with such breadth and depth of innovations, the big players may no longer have the luxury to take such a wait-and-see approach; we may well be entering a period where the acquisitions no longer appear cyclical but are more or less constant.

Vendors that pursue this approach will need to account for the changes it will bring. Whenever one company absorbs another, there is a period of adjustment as people and technology are integrated with their new environment; cyclical acquisitions allowed space for this to happen, but continuous integration would mean constantly shifting the goal posts. Similarly, the ability to present a unified and logical catalog – what to offer, what to charge, and whom to offer it to – may be compromised. Ovum believes the continued use of open industry standards for programming and design will help mitigate these issues.

Appendix

Further reading

2018 Trends to Watch: Customer Engagement, IT0020-000321 (September 2017)

"SAP Hybris exhibits visionary thinking allied to practicality," INT001-000004 (November 2017)

"Aspect bolsters its shift to the cloud with R&D and acquisitions," IT0020-000250 (March 2017)

Author

Marshall Lager, Senior Analyst, Customer Engagement

marshall.lager@ovum.com

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