What the HP/EDS Deal Means

Rich Tehrani : Communications and Technology Blog - Tehrani.com
Rich Tehrani
CEO
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What the HP/EDS Deal Means

When you look around the tech market you see factors which suck the profit out of every nook and cranny. In hardware there is a trend towards standards-based hardware which is not slowing down. As this trend continues, prices shrink and more competition exists in building computers, etc.

Moreover, as computers get more powerful they suck the life out proprietary solutions. It is very difficult to build a proprietary hardware system and not get undercut by a competitor who uses PC-based technology.

Software should be immune to this trend but open-source has made this segment of the market more challenging. Open source firewalls, routers, CRM software, etc. There is virtually no area of software where open source hasn't appeared.

But as software evolves and once separate systems such as telecom and datacom continue to become more interdependent, a strange thing is happening... The need to integrate disparate solutions has grown. In fact it is growing faster and faster and many companies in tech rely on integration to drive the majority of their profits.

Avaya, IBM, Aspect and others are adding more resources to their integration teams and in doing so they will make more and more money. Companies need the integration and there is no threat of open source or commoditized hardware to worry about.

If you are a computer company, you realize why you need to become an integration company. IBM realized it years ago and others are discovering the need to integrate as well.

Where will all of this lead? Into larger and larger integration/hardware/software companies making money from a variety of sources. The challenge of course will be how do integration firms stay independent when owned by hardware or software companies. In the overall scheme of things, this is likely not so important as when you are making tons of money on integration, you may not worry so much about purchasing a few servers from the competition.

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