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IT braces for further enterprise mobility management consolidation

Consolidation has been coming to enterprise mobile for years, and recent news is more of the same. But is IT ready for a shrinking field of providers?

Market consolidation is nothing new in the IT world, and as enterprise mobility management follows suit, some IT shops must be ready for their vendor to get acquired.

Last week saw two enterprise mobility management (EMM) players get swallowed up, first with Fiberlink's acquisition by IBM, and then with Oracle's purchase of Bitzer Mobile.

Neither move was considered Earth-shattering, but IT industry watchers felt a trend is unquestionably afoot and the enterprise has to take notice of the changes.

At this point, [smaller companies] aren't going to make it on their own.

Benjamin Robbins,
mobile analyst, Palador

"It's going to happen, for better or worse," said Todd Knapp, CEO and founder of Pawtucket, R.I.-based IT consultancy Envision Technology Advisors. "It can be a good thing."

A bigger company like an IBM can better capitalize on the development of a project started by a smaller company after they are acquired, especially if that smaller company has been able to identify a strong position in the marketplace, Knapp said. 

In addition to other services, Knapp's company is a Fiberlink reseller. Knapp's team has been in "regular contact" with his Fiberlink compatriots and doesn't believe there will be big alterations in his dealings with their products. He also felt positive about IBM being a "very channel-centric company" with a lot of experience in acquisitions.

IT shops that use small technology vendors run the risk of being impacted by an acquisition. The challenge isn't whether or not IT should go with a small mobile company that might get bought but what the cost is going to be, according to Ralph Rodriguez, a former CTO and analyst and current  CEO of Boston-based Blue Hill Research.

"It comes down to whether or not the company is going to give me a platform for what I need," Rodriguez said. "Large companies can't afford to take a risk. They have to look at the finances of a company before going ahead."

A lot of small EMM vendors aren't profitable or are running very small profits while looking to be acquired, according to Eric Klein, senior mobility analyst with VDC Research Inc., a mobile analyst firm based in Natick, Mass. Organizations in need of mobile vendors are well aware of that, and many of the core customers for a company like Bitzer Mobile were likely early investors.

"There is risk associated with going with a smaller vendor because the level of support might change," Klein said.

Companies that want to get acquired may also reach out to their top customers for guidance on what they'd like to see if an acquisition takes place, according to Rodriguez.

"If you weren't one of the customers to get that call, then you'd have to come up with a contingency plan," Rodriguez said.

Which EMM vendors are left?

Fiberlink's purchase leaves AirWatch and MobileIron as the two largest remaining EMM providers that haven't been gobbled up.

That creates something of a problem in the marketplace for both, according to Benjamin Robbins, an analyst and principal of Seattle-based enterprise mobility consulting firm Palador, Inc.

"They have a problem in terms of valuation," Robbins said. "There's been so much investment in them already that now there aren't many who can afford to buy them…Some of the lower tier companies are ripe for acquisition. At this point, they aren't going to make it on their own."

Klein specifically mentioned mid-level vendors Boxtone and SOTI, Inc. as secondary category options, adding that the bigger players may be going down the initial public offering route.

But those smaller players could find themselves in the midst of a trend that seems to come out of a new approach to innovation by the major infrastructure companies. IBM, SAP, Oracle and the like purchasing smaller businesses is a better incubator for introducing new services into their portfolio, according to Knapp.

"There was a time when a company like IBM, if they wanted to get into a new area, would cleave off a part of their business, devote it to testing and working on a product and then adopt it whether it was good or not," Knapp said. "That was costly and time-consuming. It makes more sense to let others test the waters and see if they can make the adoption work first."

Consolidation -- more than mobile

The move toward EMM consolidation is a win for the enterprise because the proliferation of mobility makes it necessary to have more than just mobile device management (MDM) at a company's disposal, according to Robbins.

"Only having MDM isn't enough," Robbins said. "For mobility, you have to go beyond these single-point solutions. It's one component. It's just not viable to offer a limited set of functionality."

The size of the recent transactions paled in comparison with a move like that of SAP AG in 2010 when it bought mobile software company Sybase, according to Eric Klein, senior mobility analyst for VDC Research.

"In the last decade, [consolidation] has had a big impact on IT," Klein said. "Mobile is still in a small space in terms of overall customers. For something like Fiberlink, the impact will be on what kind of support [there is]."

Klein agreed that consolidation is easier when a bigger company such as IBM comes into the picture, and that IT professionals can expect smooth transitions and a continuation of services in most cases.

"There's been some criticism through the years [about consolidation], and there are some who don't have the same point of view on it," Klein said. "But you have to look at the overall volume of companies acquired. IBM and Oracle have done a fairly good job with it."

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These acquisitions indicate smaller companies are more competent and have courage to test the waters compared to big gigs.