[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.