Samsung slams Oracle, Cisco, IBM

Can Korean firm overcome foreign players’ B2B dominance?

By Cho Mu-hyun

Samsung Electronics’ head office in Seoul

Oracle’s head office in California

IBM’s office building in New York

Samsung Electronics is complaining that foreign information technology giants like Oracle, Cisco and IBM use their hegemony in business-to-business (B2B) system solutions as leverage to push unfair deals.

“Despite our increased recognition on the global stage, companies such as Oracle continue to use their dominance in B2B solutions to force us to make many concessions when signing contracts,” a Samsung official, who declined to be named, told The Korea Times, Monday. “It is frustrating for us. We have to purchase their B2B software and hardware in packages, so we buy things we don’t need.

“They usually have the last say. It’s not about the money we have to pay, but about inconvenience and poor business practice.”

Oracle, Cisco, IBM, and Microsoft all have formidable client lists here. Their main business is enterprise solution services and they reap huge profits from royalties and licensing fees.

These hardware, software and integrated solutions (each firm’s focus varies) are used by clients in building electronic systems and infrastructure. Their portfolios include data management, security, business, industry, technology, networking, cloud, application and hybrid systems.

The solutions are also foundations for lower-tier developers and providers to build on to or integrate with their products.

They usually maintain a client-based network or alliance that spans continents rather than countries and a large portion of the world’s companies are members. Korean conglomerates such as Samsung, LG Electronics, Hyundai, Kia and SK are no exception.

When offering theses services the multinational giants usually offer them in packages, meaning clients must sometimes pay for some they rarely use. “They compete fiercely among themselves, but the enterprise solution market has a high entry barrier,” said a local industry official, who declined to be named but wanted it to be known that he was not affiliated with Samsung. “They maintain their hegemony without many outside challenges. Cisco abuses its power by providing its network equipment in packages.”

“Oracle has a reputation of demanding high prices for providing its services to local partners such as Samsung or LG,” said a high-level official at an overseas solution provider, who spoke on condition of anonymity. “It can’t be helped. There are almost no alternatives for local firms in the B2B area.”

“Neither Samsung or LG can venture into creating enterprise solutions like those owned by Oracle, Cisco and Microsoft, at least not immediately,” he said.

Following its recent rise in consumer businesses thanks to success to its Galaxy smartphones, Samsung is planning to use the accumulated cash to invest in strengthening its enterprise business in mobile security.

Revenue from enterprises is more stable than fluctuating consumer businesses that change at the whim of customer inclinations. “That is why some think that Microsoft will survive longer than Apple. Microsoft’s mainstay has always been its B2B sector. Apple, on the other hand, relies heavily on the consumer sector and that is why its outlook prediction is more difficult,” said an official for an overseas computing company overseeing its enterprise division.

The Samsung official declined to comment on whether his company was preparing to aggressively enter into developing enterprise software.

An executive from a local parts supplier to the Korean technology giant said he believes that Samsung has the potential and funds to consider developing its own solutions and expand to the enterprise solution industry more seriously.

“Samsung is known for its quick initiatives and nimbleness. I estimate that if the top brass decide to create a division focusing on enterprise solutions, it can break into the market within two years,” he said.

An initiative will likely be in collaboration with information technology service provider Samsung SDS and solutions provider Samsung SNS, with Samsung Electronics, as the flagship subsidiary of the group and de facto decision maker, backing them up.

Representatives of Oracle, Cisco and IBM were unavailable for comment.

Microsoft spokeswoman Lee Sung-yeon said, “We provide a more diverse choice for our clients in solutions services. Clients can customize their choice rather than buying whole packages.”