Oracle's recent acquisition of Sun Microsystems indicates an economic trend of consolidation, something which seems inevitable in a downturn. The firm has had an aggressive approach to asset purchasing for several years now, but the acquisition of its first IT hardware company last April has been described as ‘ground-breaking' by several key industry players.

When the possible depth of this financial slow-down is taken into account, many believe it could be the start of a pattern that has serious repercussions for marketing and branding in the IT industry - long considered the heartland of the B2B sector.

This is a move that could spark a flurry of activity at the industry's top table, but many predict that even a company with such an excellent track-record of integrating acquisitions will still face several problems completing such a large project - despite a lack of plans to curtail the Sun brand itself.

"With the purchase of Sun, Oracle really has changed the industry landscape - as it is now able to offer complete end-to-end business solutions," says Paul Cash, chief executive officer of Hurricane marketing agency. "This move really will shake everything up - effectively what we are seeing is the emergence of a new world order."

Industry ramifications

With the purchase of Sun, Oracle did more than simply reaffirm its position at the top of the IT market - for the first time in an extensive history of absorbing smaller companies, it has dipped into the hardware sector. As the industry adjusts to this debut, it seems the immediate impact of the move is likely to be retaliatory acquisitions from other large market players such as IBM and HP and a period of continued consolidation in this section of the market.

Most industry observers agree that the largest companies will dominate the sector as buyers are likely to be increasingly pragmatic in these times of economic crisis. But although companies like Oracle have the resources to invest and experiment, smaller providers should be able to adjust to new channels much quicker than their larger competitors.

"Decision-makers will probably be inclined to purchase core services from providers like Oracle. But they may also be keen to acquire non mission critical services from smaller companies offering innovation and value," explains Cash, before going on to suggest that in branding terms, bigger does not always mean better: "A few years ago Google rose rapidly to catch Microsoft off guard and in the future Oracle may have to make quick decisions, which for a company of that size is not easy - the market changes very quickly."

"Smaller companies must learn to form alliances and market themselves to Oracle as ‘gateways' to these customers," says Steve Elliot, managing director at Banner Corp - an agency which provides marketing communications solutions for IT clients. "Essentially one of the new approaches should be to make themselves known as system integrators."

Adjusting strategy

Cash builds on these explanations by promoting an aggressive approach whereby smaller firms identify weaknesses in the services provided by the sectors big players and attack them: "Its crucial that these smaller providers don't play the game by Oracle's rules - otherwise they will certainly lose - what they must do is take a credible challenger position." he explains. "Too few technology companies consciously do this, often they simply do what they feel is intrinsically right - which in many cases is amounts to copying the strategy of market leaders."

"Consequently, challenger brands have to be strong on philosophy and take a stance on failings within the category by articulating a clear vision for improvement. Therefore the tone they adopt when marketing themselves becomes crucial," adds Cash. "New thinking by challenger guru Adam Morgan suggests there are 12 archetypes or positions that a challenger brand can take. These range from the classic scrappy David against a Goliath e.g. Richard Branson v British Airways, to an irreverent maverick e.g. Red Bull, or a missionary whose role is to bring forward some new way of thinking."

Brand challenges

"The challenge these firms will face is staying locally relevant," says Elliot. "Oracle has a very distinct position and tone of voice that may not resonate locally, so it might be looking to improve its appeal to the SME market - which is huge in Europe and the UK." Elliot goes on to suggests that firms like Oracle should market their strengths by highlighting the security and viability they can offer with their product. "People used to say ‘no-one ever got fired for buying IBM' and that message should be the focus for these providers."

The Banner Corp boss believes that the largest IT service providers also run the risk of missing out to a certain extent on the SME market and need to reaffirm a branding message of ‘humility and authenticity' as we enter an era where firms purchase software as a service rather than a product. But how can these providers turn themselves into the next Google?

"Smaller companies must focus on an identified need and meet this identified need exceptionally well," says Elliot. "Salesforce.com has achieved some success like this by taking a lead and providing an excellent service in a specific market."

Ultimately most observers in the IT sector do not view this as cyclical echo of the dot.com crash in 2001, but as one that it is here to stay, and it is a common industry consensus that the markets biggest players will continue to seek acquisitions. "In 2003, Larry Ellison predicted that at some stage in the future the only IT service providers left would be Microsoft, SAP and Oracle," says Steve Elliot, managing director at Banner Corp - an agency which provides marketing communications solutions for IT clients. "Now people may start treating that prediction more seriously."

ShareThis