SI Consolidation Continues

Consolidation in the system integrator market seems to be on a roll again. On September 21, Dell announced the acquisition of Perot Systems. One week later, Xerox buys ACS. Of course, these deals have been in the works for quite sometime but it does point to a trend. Established companies seeking to expand beyond their core products are buying up services firms as a means to do so. That's a reasonable choice given the growth and margins in this business.

Let's take a quick look at who's still out there. The top 10 SIs by revenue are IBM Global Services, Fujitsu, Accenture, HP (EDS), CSC, Capgemini, Lockheed Martin, ACS (soon to be Xerox), Tata Consultancy Services and Wipro. Combined, these companies represent over $180B in annual revenue and 1.4 million employees. You can take a few of these companies off the acquisition list right away. Nobody is buying IBM, Fujitsu, HP or Lockheed. Tata and Wipro are based in India, are growing like a weed (30%+/yr) and have high ambitions themselves to continue that growth. Capgemini is based in France making a U.S. based acquisition unlikely. That leaves CSC with 2008 revenues of $16.7B and 92,000 employees. Sure there are hundreds of other local, niche SIs that are growing nicely, but this is a quick cut at the biggest targets remaining.

So here's my wild forecast for 2010: Continuing their string of large acquisitions, Oracle decides to enter the SI fray and acquires CSC. An SI arm within Oracle would complement nicely their enterprise software assets (databases, ERP, CRM, middleware, etc.) and help grow a new hardware business assuming the Sun Microsystems acquisition is successful. By the way, my second runner-up is CGI. But at a mere $3.7B in revenue and 26,000 employees it's likely too modest a start for Oracle these days.