The dis-integration continuum - Editorial

Is it mere coincidence that the majority of the companies presenting at last week's Goldman Sachs Technology Symposium are already well positioned on the IDC dis-integration chart (see the Gary Sheet 27:4, December 6, 1991, page 3)? We suppose not. The most captivating, fastest growing, and most attractive companies in the computer industry have very carefully positioned themselves to benefit from the trends we identified in our general theory of dis-integration.

Two fundamental tenets of dis-integration are particularly relevant here: the absolute need for a computer company to firmly identify whether it competes in supplying technologies or integrating customer solutions, and the inexorable growth of software and services as a percentage of industry revenues.

Some companies -- TI, Digital Equipment, and Oracle for example--lie toward the center of the dis-integration continuum. Digital, the company with perhaps the most compelling interconnection and integration story in the industry, is convinced that building a $500 million Alpha chip fab makes sense. In the past couple of years TI has not made much money selling computer systems hardware (until, perhaps, very recently) while its semiconductor business is now going through its own travails. It can't seem to move fast enough away from the center. Oracle may find itself with some hair-raising either/or questions: should the company be developing core RDBMS technology, or focusing on developing custom applications?

Does this analysis mean these companies are doomed--either in the short or long term? Hardly. Any company can position itself to take advantage of dis-integration. Consider Tandem's recent initiatives placing more emphasis on selling through VARs and selling packaged applications. Each move accentuates Tandem's emphasis on building core technology (in the first case) and on the other hand, providing integrated customer solutions (in the second case). While the industry is changing, it hasn't completely changed. Consider also the outlook for Dell, Sun, and Sybase.

Dell is more of an integrator than a technology supplier. It employs highly innovative ways of "surrounding the customer" with custom manufacturing and multivendor software installation and support. It's not hard to imagine that the company's custom manufacturing and integration delivery structure could add value to mediocre hardware products in sufficient quantities to sell them successfully. It has successfully created value in two areas (distribution and customer service). It creates enough value in those areas, in fact, to make up for mediocre value-add in core technologies (the hardware Dell makes is excellen--it's just impossible to add much value to MS-DOS boxes when you don't own the microprocessor technology or the operating system).

Sun Microsystems Inc. is at least equally competent as Dell ... only in a diametrically opposite market. SMCC (the hardware business) never really pretended to be a solutins-oriented company. SMI's most vigorous marketing initiative has been SunExpress. On the software side, SunSoft is focusing on writing a better Solaris to OEM to PC clone companies or other third parties, or to sell direct to end users. Across multiple distinct corporate entities, the company seems reasonably focused on supplying core technologies, and is not concerned with supplying integrated end-user solutions.

Sybase keeps its focus on distributed RDBMS technology -- not applications, not consulting services. To deliver customer solutions, it relys on VARs and integrators. The company has, apparently, no illusions about supplying RDBMS solutions, from the most elemental code all the way through to custom applications.

Even the oldest companies in the computer industry, and even those companies solidly in the center of the value chain, have begun to respond to the collective phenomena we call dis-integration. Newer companies have been created to take advantage of the dis-integration. Their challenges are in some ways less daunting. Older companies must restructure and, only then, play by the new rules. Either type of company can still achieve considerable success.

COPYRIGHT 1992 International Data Corporation
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