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It's All About the Connections

Although none of the recent portal plays comes anywhere close to threatening the ERP and CRM hegemony of SAP and Oracle, you can imagine the day when such fragmented, consumer-dominated communities will evolve into formidable commercial marketplaces. Already, a big chunk of eBay's revenue comes from hooking up businesses with other businesses for everything from used Cisco routers to real estate. New mapping software from Google, Yahoo and Microsoft harnesses location databases, satellites and wireless services to help mobile business people find buyers and sellers. Yahoo's Hot Jobs site is all about connecting thousands of employers with millions of employment seekers.

It's tempting to hype the recent portal plays, especially eBay's $2.6 billion acquisition of Skype, as market-changing events while dismissing Oracle's $5.85 billion deal to buy Siebel as just another market share grab. But don't ignore the fact that the big application vendors continue to evolve their product lines and adapt to changing market conditions. They're not just getting bigger and fatter.

After leading the industry in hauling its enterprise applications over to a wholly Web platform, Oracle now plans to port the best of its homegrown and acquired apps to an integrated Java-based suite by 2007. One of the jewels in Oracle's pending acquisition of Siebel is an updated CRM product based on the subscription-service model made mainstream by upstart rival For its part, SAP has developed NetWeaver, an application integration and development platform that lends credibility to the "service-oriented architecture" movement and opens the vendor's software to more third-party developers. Even Microsoft, with four separate brands but only four percent market share, is taking a new approach to enterprise applications, tailoring them to more than 50 everyday job roles rather than to a handful of standard functions such as finance, human resources and manufacturing.

If the dot-com collapse taught us anything, it's that market capitalization is no reliable indicator of a vendor's long-term prospects. But it's at least interesting to note that the average market cap of Google, eBay and Yahoo (about $60 billion in mid-September) is nearly identical to the average for Oracle and SAP (about $62 billion). Skype, a VoIP start-up with a loyal consumer following (mostly outside the United States) but scant revenues, fetched almost half of what Oracle is laying out for Siebel, still a profitable market leader with a platinum enterprise customer base. Clearly, Wall Street hasn't lost its appetite for a good Internet investment.

Meantime, Microsoft hasn't been this paranoid about new competitors since Netscape was snapping at its heels in the late 1990s. The Wall Street Journal reports that Microsoft is in preliminary talks to take a substantial stake in AOL as a way to cut into Google's search supremacy. Microsoft's ongoing court battle with Google over Google's hiring of ex-Microsoft R&D exec Kai-Fu Lee also shows Redmond in reactive mode. Remember when the brightest technologists were pounding on Microsoft's door rather than bolting for hotter assignments elsewhere? This time around, crushing its Internet competitors won't be as simple as incorporating like functionality into Windows.

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