Down To Business: The 10 Most Strategic IT Vendors

Interesting read.

In interviews with countless CIOs over the past decade, InformationWeek's editors have asked about their most strategic IT vendors -- or "partners," in the politically correct parlance. What makes for strategic? For one thing, those relationships usually are forged over many years. Strategic vendors often command a substantial share of IT budget and a central place in the IT architecture ("We're a Vendor X shop"), and they'd be very hard for CIOs to replace. Strategic vendors sometimes play a critical role in supporting basic business functions ("We run our business on Vendor Y") and delivering competitive advantage ("Vendor Z is our innovation engine"). And you'll find them at the end of the "No one ever got fired for..." line.

Given those rough criteria, what follows is a back-of-the-napkin Top 10 ranking of the world's most strategic IT vendors. Despite their dominance in certain sectors, all of these vendors are vulnerable (think DEC and Unisys), though some more than others. We invite you to weigh in with your additions, exceptions, and critiques -- and even your suggestions for Nos. 11 to 20. Let the debate begin.

1. IBM. Yesterday it was the mainframe and Big Blue's world-class service and support that commanded customers' allegiance. Today, IBM's range of services and products -- outsourcing, integration, consulting, software, systems, security -- still make it a one-stop business technology provider for the blue chip crowd, and not just for the banks that were once its core domain. Under the Smarter Planet campaign, IBM's vast system and software expertise is at the strategic center of healthcare, energy, crime prevention, retail, transportation, government, and many other sectors.

2. SAP. Customers literally run their financials, manufacturing operations, supply chains, and other core operations on SAP applications. For SAP to remain strategic, however, it must -- as my colleague Bob Evans argued in an open letter to company chairman Hasso Plattner -- start viewing customers "in terms of what they need rather than what you have." Following a boardroom shakeup earlier this month, Plattner promised to strip away the company's bureaucratic decision-making and renew SAP's commitment to technical innovation.

3. Microsoft. Some will say this No. 3 ranking is too low; others, too high. But for all the talk about alternatives to Windows and Office and Exchange and Internet Explorer, it's mostly just talk. And as my colleague Art Wittmann says, when Microsoft gets something right, "it really revolutionizes business." Think SharePoint, at the heart of many companies' efforts to spark Facebook-like collaborative energy inside their walls, or how fast Microsoft has executed on its "software plus services" strategy. What makes Microsoft highly strategic, "if not always all that innovative," Art says, is the answer to this question: What if there was no Microsoft? "The landscape of IT would change enormously."

4. Oracle. The vendor's multibillion-dollar acquisitions of application developers like PeopleSoft and Siebel get most of the attention, but Oracle remains most strategic as the No. 1 database vendor ("unbreakable" or not). It might be easier to swap out your house's foundation. Meantime, with its recent acquisition of Sun Microsystems, Oracle is positioning itself as a one-stop supplier of integrated software stacks optimized to run on its hardware appliances . It's a bold move worthy of maverick CEO Larry Ellison.

5. Cisco. No IT vendor dominates like Cisco, whose many networking competitors are vying just to be No. 2. So why isn't Cisco among the top two or three strategic vendors? While "Cisco shops" abound, it wouldn't be a monumental feat to piece together an alternative using other vendors' products. Still, Cisco's hegemony is impressive. Having all-but-cornered the routing and switching market, Cisco now has its sights on the "single-fabric data center," where virtualized servers, storage, and networks are managed and secured as one (Cisco) architecture. The company is also looking to leverage its tight relationships with CIOs to bolt on network-based collaboration applications: telepresence, Web conferencing, unified communications, and more.

6. Hewlett-Packard. What, the world's largest IT vendor sneaks in at only No. 6? Despite a string of software and IT service acquisitions over the past few years, HP is still known more as a PC and printer vendor-hardly strategic stuff. Perhaps HP doesn't get enough credit for the strategic stuff it does; it and IBM (and Oracle-Sun) are the only companies that really do enterprise-class hardware, everything from data center design to disaster recovery planning and management infrastructure. And HP's reputation may start to change if it lands more long-term deals like the one it announced last week with Fortune 1 Royal Dutch Shell, which has tapped HP to develop a wireless sensing system to locate oil and natural-gas reservoirs. Expect HP to move up a future list.

7. Teradata. The smallest among our ranked suppliers, with annual revenue of $1.71 billion (slightly below VMware's $2 billion), this former NCR unit is nonetheless among the most strategic. Marquee customers like Wal-Mart, Coca-Cola Enterprises, eBay, and attribute much of their success to the competitive intelligence they mine through their "partnership" (and that's the word they use most often) with this leading data warehouse and analytics software vendor. Overstock CEO Patrick Byrne, for one, says Teradata "is unbelievably good and has been a big help to us."

8. VMware. EMC treats the No. 1 virtualization software vendor as a separate company, so for the purposes of this ranking so will we. VMware still commands anywhere from 75% to 80% of the hottest enterprise software market, though Microsoft, Citrix, and Red Hat are hot on its heels. Pundits go so far as to speculate that Microsoft and its commoditization of the virtualization market could do to VMware what Microsoft did in a previous generation to the likes of Novell and Netscape. But for now, VMware is king of this strategic sector, and most of its customers are loyal.

9. EMC. Like Cisco in networking, EMC remains almost synonymous with storage, though also like Cisco, its "shop" status doesn't rule out customers going in another direction. Years ago, EMC started acquiring myriad software companies (including VMware) in the event storage would become a commodity, but storage still pays the bills, accounting for 76% of its $14 billion in revenue and a healthy chunk of its profits. (Read Art Wittmann's column, " Practical Analysis: The Storage Stockholm Syndrome, " for his analysis of why customers are poised to consider storage alternatives.)

10. Your Outsourcer. This one's a bit of a cop-out, but for a lot of companies, their Accenture or CSC or Wipro or Infosys is their strategic partner-but only if the CIO makes it that kind of relationship.

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