Acquisitions + Price Commoditization = Vendor Lock-In

After a one-week hiatus during which Martin and I where attending SugarCRM’s biannual Sales Bootcamp, I’m happy to say we’re back to blogging. I’ll start with a Wall Street Journal article from last week that our VP of marketing pointed out and that highlighted a number of marketplace conditions we’re seeing here at SugarCRM, and that we underscored to our sales force.

The article, which talks about SAP’s and Oracle’s recent price hikes, speaks for itself, but also highlights the trend of price commoditization being played out in the market. While vendors use to compete on price, thanks to the recent surge in acquisitions, companies such as SAP and Oracle feel they’ve reduced the number of suppliers, and thus the pressure to reduce their prices.

It adds yet another point to the long list of proprietary-based, vendor lock-in strategies that companies such as Oracle and SAP rely heavily on. As Ray Wang, an analyst with Forrester Research, states in the article:

“Businesses that have already invested in software from the companies can’t afford to rip the systems out and replace them.

The good news is that with commoditization comes growth, because for every company that Oracle has purchased over the last 10+ years, new, next generation software vendors have arisen to take their place, and market share…SugarCRM being just one of them.