It's an old approach revised for new competition. The idea is to increase sales by offering everything from an operating system to database software and business applications. IBM has for years followed that model, selling everything from hardware to software and services to put all of the pieces together. More recently Microsoft has sought to offer one-stop shopping for software buyers, as have Oracle and SAP.
It's a switch from just a few years ago, when the software industry's "best-of-breed" notion was all the rage. Back then, companies were advised to assemble an "all-star" lineup of products from category leaders, picking and choosing the best products based on features, no matter which company wrote the software.
But shifting economics, industry consolidation and dwindling profits have changed that. Now, big software companies, hoping to keep a greater share of software profits, are building and marketing comprehensive product stacks.
Just this week, Oracle CEO Larry Ellison that he would "like to have a complete stack." Oracle makes billions of dollars selling databases and business applications. In recent years, the company has bought up many other companies, including rivals like PeopleSoft and Siebel Systems.
"We're missing an operating system. You could argue that it makes a lot of sense for us to look at distributing and supporting Linux," Ellison told the newspaper.
last week added an open-source wrinkle to an ongoing competition among companies to build all-encompassing product lineups. The company now offers a broader range of big-system software.
So why the newfound love for the stack sell? By offering a broad product set, software companies can maximize revenue from existing customers and maintain control over product development. Customers get "one throat to choke" for product support and better integration--long the bane of big companies attempting to assemble their IT departments from a hodgepodge of components.
The strategy makes perfect sense--for the software companies. "This is all about control," said Forrester Research analyst John Rymer. "Oracle will sell you an all-you-can-eat license...then capture the maintenance revenue--which is almost pure profit--and then you got access to the customer for up-selling and all the growth potential."
Following a multibillion-dollar buying spree, Oracle has assembled a wideto complement its giant database business and growing middleware line.
Microsoft, IBM and SAP have similar stack strategies. Microsoft covers the broadest ground in terms of products, while IBM and SAP, like Oracle, have some holes.How software makers stack up
|Business Apps||Middleware||Database||Manage- ment||Operating System|
|Oracle||Fusion Apps||Fusion Middleware||Oracle 10g||Enterprise Manager|
|Microsoft||Dynamics||Windows Server System||SQL Server||Systems Center||Windows|
|IBM||WebSphere||DB2||Tivoli||Unix, mainframe, others|
|Sun Microsytems||Java Enterprise System||PostgreSQL (support)||Solaris|
|Red Hat||JBoss||Red Hat Linux|
|Novell||ZenWorks||NetWare, SUSE Linux|
Meanwhile, hosted software providers are pursuing a similar strategy tuned for the online world. But don't use the word "stack," said Salesforce.com CEO Marc Benioff. "The concept of a stack is outdated. Unless of course you work for a stack company," Benioff wrote in an e-mail to CNET News.com.
Salesforce.com is looking to drive revenue from third-party products that run on its AppExchange "platform" for building and running hosted applications, according to company executives.
Watch out for the lock-in
However, buying into the stack approach can be a mixed blessing for customers.
On the one hand, customers end up "locked in" to a specific vendor, depending on what products they sell, analysts said. Oracle, for example, doesn't support databases other than its own andfor a competitor's offering.
"A significant reason for this trend is customer desire to minimize integration, upgrade, and maintenance issues among the different layers of the software stack. (Customers) also want to deal with fewer providers to ensure better pricing and accountability," Merrill Lynch analyst Kash Rangan wrote in a recent report.
On the other hand, industry consolidation and standardization have led to products from large "super platform" providers that are as good as "best of breed" products from more specialized companies, said Burton Group analyst Peter O'Kelly.
"We're getting into this battle of attrition as all (the vendors) try to move to super platforms," O'Kelly said. "It's not just more products at a discount. Now you need demonstrable synergies between the products."