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Is Oracle-IBM merger likely?

Is Oracle-IBM merger likely?

[jumbotron heading=”Analysis”]In this analysis for Technology Times, Martins O. Adegoke, Principal of ZARPHYRE, an independent, private IT consulting company registered at Dallas Municipal, Dallas, TX, analyses the prospects and possibilities of a merger of two global technology giants, Oracle and IBM. [/jumbotron]
Someday, hopefully, I would be able to connect the intrinsic wiring into my DNA and the pathological attachment I have for strong stock market performance by global firms. For years, my days would not complete if I don’t check the stock performance of a number of firms on the NYSE and NASDAQ.

Oracle, IBM, Google, Apple, Goldman Sachs, Microsoft, Facebook, Bank of America, JP Morgan, Wells Fargo, Accenture, ExxonMobil, Chevron, Wal-Mart, P&G, GE, Amazon among others, feature prominently among the firms I regularly check their stock performance.

By the way, these global firms have substantial leverage on the wealth of nations from the United States (US) to Europe to Asia to Africa and beyond!

[blockquote right=”pull-right”]As at Monday June 16, 2014, Oracle, at mid-day stock market caps is around $187.80 billion, while IBM IS $183.80 billion. Pretty close stock cap, yet a subtle victory for Oracle and a validation of Gartner.[/blockquote]
In effect, like average investment-inclined business professionals, you can imagine the mood to US investors and the global economy each time the Dow and the NASDAQ and the S&P 500 go down. In a way, a firm’s consistent quarter after quarter’s strong stock performance over a fairly long period on Wall Street represents one method to measure a firm’s corporate performance management generally and the ability to retain the trust of the firm’s stockholder and engender the interests of new ones, including the total ecosystem of a firm’s trading and supplier partners and the human capital assets, are also determined to a large extent by this singular capital market equity variable: the stock performance. In addition, the global economy depends to a very large extent on what happen daily on Wall Street.

However, when Gartner reports at the beginning of the year that Oracle Corporation is on the upside swing, and that it has actually outperformed IBM – the legendary US global IT vendor – becoming the second largest software vendor in the world in 2013 as measured by annual revenue, I shuddered a little!

However, the Gartner Report got me thinking about an incident at one of Oracle’s IT seminar in which I was privileged to attend about two or three years ago in Las Colinas, Irving, Texas.

One of Oracle Corporation IT consultants who had delivered a presentation in responding to a question from a participant in the seminar, had boldly proclaimed that it would be a matter of few months for Oracle to catch up with IBM and replace it as the second major enterprise software IT vendor.

Apparently, the gentleman probably knew his facts then in the light of the Gartner Report cited above and current Oracle and IBM performance at the Wall Street. But even when Oracle was number three, the firm has always maintained the position that it is indeed the number two software firm in the world. Sometimes, maybe our word and confidence level invariably define what we become.

However, Oracle’s confidence and bullishness even at a distant number three as a global IT vendor some months ago is simply not about brashness. It turns out now as Gartner Report early in the year validates, and by the current stock rating of Oracle and IBM. In the last few days in June 2014, Oracle has been consistent in outperforming IBM in its total stock market capitalisation on Wall Street.

As at Monday June 16, 2014, Oracle, at mid-day stock market caps is around $187.80 billion, while IBM IS $183.80 billion. Pretty close stock cap, yet a subtle victory for Oracle and a validation of Gartner.

As a global IT titan and a US premier IT firm, it is kind of counterintuitive seeing IBM lagging behind Oracle now. True, Oracle has been involved in a number of acquisitions over the years, including its arguably the best software asset acquisition, Sun Microsystems, the original custodian of the Java software that is the underpinning of great technology breakthrough including cloud computing; cellular phone handsets and mobile applications – already in possession by billions of users around the world, with promise to power Internet of Things (IOT) as digitalization – cloud computing, mobility, and data analytics would soon be able to connect and automate almost everything in your living room to your car driving habits as you drive to work. Of course you would always be able to connect on Facebook, Twitter, LinkedIn, Instagram, and whatever you like in the Internet economy.

As a digital consumer in the new global economy, you will also be able to seamlessly connect with your children via their digital devices at school in real time when you need to a give five-minute inspiration during break hours or when doing your regular physical exercise in your gym and getting real-time feedback about your body reactions or when shopping in your favorite retail place with ability to get instant, real-time answers to your shopping question via your mobile phone with accurate data analytics enriching your total shopping experience or able to measure your heartbeats and get basic facts about your medical state of health, things you would ordinarily schedule appointments with your doctors for in your hospitals, including ability of farmers in rural Africa to get in touch with their supply chain merchants and sell off their produce as soon as harvested, preventing wastages and unnecessary costs. These are some of the promises of digitalization – cloud computing, mobility and data analytics around the world in the new data-driven global economy. All these are amply illustrated by Messrs. Eric Schmidt and Jason Cohen in their 2013 book: The Digital Age: Reshaping the Future of People, Nations and Business.

However, the wide difference between IT sector growth between emerging markets such as Nigeria to realize the potential and full promise of these technologies and advanced lifestyle is the difference in investment in information technology capabilities. United States (US) currently stands out for its sheer size of its IT expenditure or (investments), with Internet user penetration in developed economies at almost 90% of the population, followed by China, according to Accenture Research in 2014. It is clear that information technology expenditure or investment by respective governments and private businesses across global economies would continue to influence greatly for the huge difference between levels of economic development and acceleration, and the attainment of higher standards of living amongst the people of developed and emerging economies.

IBM is no stranger to these breakthrough technologies, in fact IBM has been one of the pioneers of cool and powerful technologies over the years. And in recent times, it has also been a strong player in the acquisition field, with acquisitions of Cognos, a major business intelligence (BI) firm, Netezza, SPSS, and the global consulting firm: PricewaterhouseCoopers (PWC) which many analysts believe has been a strong factor as IBM is seen becoming more and more of IT services firm. The Big Blue has also been a player in the cloud computing acquiring Cloudant and most recently Softlayer Technologies and is reputed to have one of the best security architecture product portfolios and platforms among global IT vendors. However, times are changing in the global IT industry and IBM may need more innovation as the firm’s performance slide against Oracle’s.

Though, it is not uncommon for one IT firm to outperform another at the US stock exchanges only to see a complete reversal of events weeks, months or years later. HP, until recent past was the largest technology company by revenue according to New York Times, June 12, 2014. Also, Google that is barely 16 years in existence has outperformed both Oracle and IBM, including Microsoft, the three largest enterprise software vendors. Though, Google, a global leader in search engine and Internet advertising as well as cloud computing with sprawling global data centers in the US and around the world, including mobility business and mobile applications on its Android platform is rather categorized as an Internet and e-commerce technology vendor rather than core enterprise software providers in the space of IaaS, SaaS, and PaaS like Oracle, IBM and Microsoft. Whether Oracle has indeed become the de facto number two global IT vendor is an intriguing saga that would be firmly established in the months and years ahead as a friendlier, gentler and thorough professional IT corporate brand worthy of doing business with again and again as the firm enters a new stage of growth. After all, a business as they say, is only as good as its reputation.

Going forward, the main issue seems to revolve around broad-base business strategies adopted in the last few years by IBM and Oracle respectively and the spate of innovation in product architecture, product development, and product management generally including enterprise architecture around cloud computing, SaaS, IaaS and PaaS solution offerings, plus digitalization as a subset of business strategies including the rationale of seeing IT solutions delivery primarily from the perspectives of IT services, vis-a-vis the increasing leveraging of sophisticated and fundamental leadership and management principles and innovation to improve brand management and corporate performance management of both firms. Already, both firms, late comers in cloud computing solutions, are ramping up steadily with aggressive acquisition and cutting-edge global data centers in the US and around the world in order to be able to meet the dynamic IT resource provisioning of businesses and governments as cloud computing solutions become the drivers of businesses across industries in the increasingly digitalized and highly connected, almost real-time global economy.

Coincidentally, in the US technology industry, rated as one of the fastest growing sector, Oracle brand management in recent times has also outperformed IBM according to Interbrand, the largest world brand management consultancy. Unfortunately, IBM business strategies, including strong historical precedent in the information technology (IT) industry with diverse media mix spending in product and brand management has not resulted in stronger financial performance lately. And that is one thing experts in marketing management and strategy would need to figure out very soon, whether IBM business strategies and brand management in the last few years have seriously fallen behind its traditional strong corporate culture, strong brand management and strong product portfolio architecture.

Even then, Oracle is not at its strongest corporate financial performance yet on the US stock market, or in its’ overall brand management in the minds of enterprise customers or ordinary customers in the US and around the world. For one, Oracle’s sprawling acquisitions in the last few years and certainly with more to come, including the strategic asset of Java and J2EE software as the most popular software programming language that would continue to underpin cloud computing solutions, plus the burgeoning global mobile handsets and mobile applications market, as digital solutions permeate businesses from e-commerce to e-banking, are sure pointers to help Oracle achieve better financial performances in the months and years ahead, given consistent and innovative leadership.

Add to the above, Oracle’s end-to-end to integrated suite of product portfolios from its flagship Oracle database management systems, to engineered systems, to middleware solutions to web applications product suite such as Oracle Webcenter and ERP business applications including the Oracle E- Business suite, now being transformed into software as a service (SaaS) for cloud deployments for enterprise clients, coupled with robust Infrastructures as a Service (IaaS) and Platform as a Service (PaaS) from its Sun Microsystems large installment base of hardware and servers; and combined with professional services at Oracle Consulting including the total ecosystems of Oracle world spanning Oracle PartnerNetwork (OPN) with various independent software vendors (ISVs), system integrators, global IT firms, spanning US, EMEA, Pacific-Asia markets etc. ensuring that any firm across all industries, can meet their enterprise IT solution needs from just one firm: Oracle! And if most firms can obtain their IT solutions from one firm, they may not need to look around shopping from a competing IT vendor.

Moreover, if Oracle continues to improve on R&D to deliver secured and highly scalable cloud computing solutions, superior product portfolios and agile, flexible enterprise IT architectures that adapt to business changes at enterprises on the fly, including a progressive and creative corporate culture that brings out the highest productivity from its’ employee, by focusing on total incentives that boast employee morale leading to undivided loyalty of its human capital assets, which inevitably leads to the delivery of amazingly, truly professional services to the firms’ customers and clients in the US and around the world, and with more social focused programs on society such as endowments in schools, more visibility in niche sports sponsorship, all which have the overall effect of improving the firm’s corporate brand, and obviously with good governance, principled management and a commitment to the core fundamentals of leadership at the helms of business affairs, Oracle may continue to be a very strong US and global IT vendor with better days ahead as the global economy improves generally.

Yet, in another scenario, let’s imagine an IBM and Oracle merger one day very soon, then, every firm from industry to industry across the globe, can always get and choose what they need from cloud computing solutions to superior enterprise business IT applications to run their business for optimal performance. Already, Oracle and IBM technologies are overlapping, powered by, to a very large extent, Java and J2EE, SQL, UNIX, LINUX and myriads of open source technologies in addition to its hardware and server series built on Intel microprocessors and chips, much like Oracle SPARC platforms for its hardware and servers and Solaris UNIX operating systems inherited from its Sun Microsystems acquisition in 2010, even as IBM continues to invest quite a sum and resources in the transformation of its largely mainframe applications into becoming service-oriented architecture (SOA) compliant, driven largely by Java, J2EE and RESTAPIs.

IBM middleware solutions, a centerpiece of its core technology spanning DB2 database management systems, business intelligence (BI) applications, data warehousing and data analytics is centered on WebSphere application server, including Rational Application Development (RAD) suite as well as the messaging queuing (MQ) and enterprise service bus (ESB) integration technologies which are largely underpinned by Java and J2EE, though its J2EE implementation is slightly different from Oracle’s Weblogic, but essentially same software technology. Today, Oracle through its Tuxedo mainframe applications is already hosting mainframe based businesses deployments for enterprises across industries.

In essence, Oracle and IBM fusing together as one global IT firm is more feasible than before because the technology integration interfaces and inter-operability hooks are in place, and if such synergy is to take place, enterprises can be relieved of many duplication of technologies that is still occurring today in enterprise business application landscapes which have spawned across heterogeneous IT environments and often leads to siloed data marts and mish mash technology deployments and sometimes wasteful, debilitating technology investments costs to enterprises and governments in the US and around the world, in spite of the promise of service oriented architecture (SOA) to seamlessly deliver robust and efficient enterprise business applications with flexible IT architectures.

And with the above merger scenario, Oracle and IBM automatically become the number one firm, even ahead of Microsoft by stock capitalization at an estimated market capitalization of around $400 billion dollars, but most importantly in the ability of such global IT powerhouse to meet enterprises’ cloud computing dynamic provisioning needs, deliver streamlined business IT solutions with agile technology deployments across every industry and governments around the world and in the process provide better global economy and simplified life all around.

Will United States (US) and Euro regulatory agencies approve of such merger? Well, it depends if such merger scenario will results in streamlining of enterprise business applications deployments, flexibility of enterprise architecture technology platforms and cost-effective IT solutions to enterprises, governments and other organizations including small medium businesses (SMB) in the US and around the world and if respective boards of directors and shareholders of respective firms are willing to combine both companies, is there any reason why US and Euro governments regulators should block such merger? It is a scenario! Remember, but it is also the promise of a global technology powerhouse to deliver highly efficient enterprises in governments and businesses around the world. Think about it.


* Martins O. Adegoke is the principal of ZARPHYRE, an independent, private IT consulting initiative and a Remarketer level member of Oracle PartnerNetwork (OPN). The nascent consultancy provides professional advisory services and recommendations in the deployments of Oracle technologies and IT solutions across industries. ZARPHYRE is registered at Dallas Municipal, Dallas, TX.

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