The Land of Consolidation

Ever since the Windows NT market evolved out of the Windows 3.x/Windows 9x market back around 1995, it seemed to be the land of opportunity. Of late, it seems to be the land of consolidation.

During the past year or so, the news has been peppered by acquisitions driven by or related to Windows NT. Many of the acquisitions are of relatively small private companies, and these deals don’t always make national headlines. But other acquisitions have received widespread press. More often than not, the scenario includes a larger vendor -- frequently a company with a long history in the Unix or mainframe market -- buying another company for its NT expertise.

There have even been a few defining moments like Compaq’s acquisition of Digital Equipment. That event seemed to have considerably more impact on the industry’s psyche than did Compaq’s acquisition of Tandem Computer one year ago, which at the time was a big surprise.

But then, the Compaq-Digital deal was not the only romance in the making. Earlier this year, rumors circulated widely suggesting that Dell was close to closing a deal to acquire Data General. That never happened. As with Compaq’s interest in Digital, Data General could have provided Dell with the large-server know-how that PC manufacturers want and need.

The consolidation trend seems to have focused on certain sectors of the industry, such as the storage market. Computer Associates snapped up Cheyenne Software two years ago, and since then has subsumed the company into CA’s infrastructure.

Earlier this month, Veritas Software turbocharged its push into the NT space with the acquisition of Seagate Software’s storage and backup business. You may know Veritas best for its Solaris disk and storage management software, but it plans to be a major player in the NT market, too.

Likewise, Legato Systems gobbled up Software Moguls early this summer, which increased Legato’s development expertise and gave it an increased customer base, particularly in the NT space where Legato had been less established.

Another area that seems to be ripe for consolidation or acquisition is the systems management market. At one end of the market are the framework packages from CA and Tivoli Systems. At the other end of the market are a wide variety of NT-specific packages that solve limited sets of management problems. There have been some acquisitions in this area, including Hewlett-Packard’s acquisition of NuView Inc.’s ManageX product, which has been integrated into OpenView, HP’s system management tool.

Unfortunately, at the point product end of the market, there is a plethora of NT-specific tools that incorporate little cross-tool integration. There are some efforts to integrate packages with each other, but these initiatives are generally focused on integrating point products into the larger framework packages.

Some of the more notable NT-specific vendors include ABC Systems (Andover, Mass., www.abcsystems.com), Heroix Corp. (Newton, Mass., www.heroix.com), NetIQ Corp. (Santa Clara, Calif., www.netiq.com), and Mission Critical Software (Houston, www.missioncritical.com). I wouldn’t be surprised to see some of these companies get themselves assimilated into some larger organizations, given the trends in the market.

Some large companies are investing a lot of time and energy into buying technology. For example, Platinum Technology has completed 60 company and technology acquisitions over the past 4 years, with the majority of the systems management acquisitions being related to Windows NT.

What happens next probably depends on what happens to the computer market as the Y2K crunch closes in, and how well-funded corporate America is, given the global financial market’s current state of crisis.

One thing is certain. The window of opportunity to jump into the NT market and quickly become an important player is getting smaller. Once NT 5.0 is released and Microsoft gets out from under one of the biggest development challenges it has ever faced, and if the company decides to start populating the Microsoft Management Console with tools, the door could slam shut for non-heterogeneous tools.

Then again, maybe the DOJ proceedings will replace NT 5 as Microsoft’s biggest challenge, one with potentially dire consequences for the software giant. That sequence of events could well leave the door wide open for a long time to come.