Evan Schuman's StorefrontBacktalk

Is Consolidation Such A Good Thing?

Even if none of these issues undermine Oracle, we can look to more general emotional concerns. There was an interesting analysis of the acquisition penned by our friends at Retail Systems Research. It basically makes the argument that retail IT execs want a single throat to choke, if you will, and that to the extent that this move gives Oracle a more complete family of technology enterprise offerings (including now hardware), it will be a good thing for them.

I must disagree with that conclusion, though, and for two very different reasons. The premise is that retail IT leaders want to consolidate their technology purchases as much as possible. For most chains, I’d argue that the opposite is true. The point of failure philosophy wants as many different vendors in a network as possible, so that a problem with any one is as limited as possible and won’t blow up everything.

The real issue against consolidation is that retailers are generally loathe to give that kind of power, that much control, to anybody. If the vendor wants to impose a rate hike or arbitrarily change licensing terms or stops being responsive on tech support issues, retailers want to be able to remove them without forcing a catastrophic change. No vendor should control too high a percentage of systems, the thinking goes.

But even for those retail CIOs who have opted to accept such control risks in exchange for the easier management and the reverse control (if the retailer is writing one huge check to that vendor, that’s quite a bit of power as well), there is psychological history to contend with. Other than Computer Associates during its height, no company has a nastier reputation than Oracle of being difficult to work with and of pulling surprise extra charges. To the level that any CIO is comfortable turning over a lot of control to a single vendor, asking them to do it with Oracle is a huge leap. Oracle may have done the impossible: Make Microsoft and IBM look like flexible and easygoing partners by comparison.

I’m therefore having difficulty envisioning Larry Ellison’s crew as this warm and inviting group that will make retail CIOs willingly turn over the car keys for their entire fleets.