The acquisition of CRM software bellwether Siebel Systems Inc. earlier this year signaled to even the most ardent defenders of best-of-breed software that the business of creating stand-alone, specialized applications was a dead-end proposition. Even co-founder Tom Siebel acknowledged as much when he announced his company's long-anticipated plan to sell out to Oracle Corp.
Following a year that saw the takeover of once-prominent best-of-breed software vendors such as Epiphany and Retek, as well as continuing turmoil for other point-application specialists such as Manugistics Group Inc. (Rockville, MD), few could argue with that perspective.
Well, the death notice for the best-of-breed vendor, at least in some sectors, may be a bit premature. i2 Technologies Inc. (Dallas) and MRO Software Inc. (Bedford, MA), for instance, established a good deal of momentum throughout the last year amid the slowly shifting sands of the application software business. i2 is coming off its first year of profitability in years and is emphasizing its supply chain expertise in the form of composite applications that ride atop its new service-oriented architecture -- the Agile Business Platform.
MRO, after a slow start to calendar 2005, has achieved solid top-line growth as it transitions into a soup-to-nuts provider of asset management software -- including traditional maintenance and repair as well as IT service management.
While both vendors face stiff competition from the likes of SAP AG and Oracle, each seems to have found breathing room, as customers still appear to place a premium on software designed from the ground up that meets specific functional requirements that can adapt as business processes dictate.
In addition, opportunities abound for forward-thinking software developers to create vertical industry and horizontal plug-in application components for Oracle's and SAP's respective service-oriented architectures, AMR analyst Jim Shepherd says. Yahoo, Google, and Microsoft are also seeking development partners to build web-service-enabled components that snap into their emerging best-of-breed business process suites.
Yet, to make a go of it, today's point-software vendors will need to be constructed very differently. "They won't need their own sales force since they won't be selling directly to end users, which is obviously an expensive proposition," Shepherd says. Also, they will need to pay a development "toll" for the privilege of creating application plug-ins, he noted. The upside: In the case of SAP NetWeaver, point-application developers will have a 30,000-user installed base to target from the get-go, Shepherd points out.
In the end, he says, new entrants built on a 21st century business and technology foundation may be better equipped to survive yet another paradigm shift. "They don't have a proprietary architecture to support," he concludes.
This article originally appeared in the April 2006 issue of Managing Automation magazine.