Not so long ago, Oracle ( ORCL) CEO Larry Ellison dismissed smaller competitors, the so-called "best of breed" software companies that do just one thing but do it really well. "Best of breed only works at dog shows," he quipped imperiously.

When asked about his remark six months later, the usually combative billionaire said simply: "I was wrong." Better "plumbing" and a savvy new generation of application makers have given new life to the specialized, independent software vendor, he said.

To be sure, the admission was self-serving. After all, Ellison made it on the witness stand last week during the trial of the government's antitrust lawsuit. The government is trying to block Oracle's takeover of rival software maker PeopleSoft ( PSFT), claiming it will stifle competition at the highest end of the software market, leading to higher prices and a slowing of innovation. Oracle's major defense is that there's more than enough competition now -- and likely in the future -- to keep the market lively.

With the first phase of the trial now concluded -- a verdict isn't expected until August or September -- Ellison's point is well worth noting, no matter what his motives. The steady march of industry consolidation hasn't stopped, but technological change and the mind-numbing complexities of running the information systems of major businesses mean there's still room for a plethora of smaller players.

Sheryl Kingstone, a veteran software analyst at the Yankee Group in Boston, has been writing about the trend toward consolidation for years. Now she finds herself contradicting some of her earlier work. "The world isn't always so simple. There are contradictory trends we have to think about," she said.

Search for Simplicity Gets Complex

For the last few years, conventional wisdom held that large businesses were tired of busting their budgets trying to make software from a plethora of competing vendors work together. The answer: mega-suites and platforms that not only include the software to run business applications, but the infrastructure to support them.

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