A series of multibillion dollar deals culminating in Compaq Computer's proposed $9.6 billion (£6.8 billion) purchase of Digital Equipment is transforming the worldwide information technology industry and determining the shape of enterprise computing for the next decade.

These deals coupled with strong organic growth, particularly in the personal computer and Internet/networking markets are creating an elite group of industry leaders, each with a commanding position within its segment of the £700 billion-sterling-a-year IT industry.

Significantly, all of the companies, which include: Cisco, the networking market leader; Intel, the world's biggest semiconductor manufacturer; and Microsoft, the world's largest software vendor; share a common strategy they intend to deliver products that span the range of customer requirements.

Thus, Compaq's bid for Digital Equipment the biggest deal in the global IT industry will create a new full-line computer industry powerhouse with products ranging from $600 hand-held and desktop PCs to $2 billion "enterprise servers" on which large companies run their mission-critical IT systems.

Similarly, Cisco, which already dominates the Internet switch and router market, is now targeting the small business and home markets; and Intel's microprocessor roadmap ranges from a new lowcost "family" due to be introduced next month to its "Merced" high-end 64-bit microprocessor, now under development.

Meanwhile, Microsoft is not satisfied with dominating both the desktop PC operating system and office application markets. With the introduction of its Windows CE and Windows NT operating systems, Microsoft believes it can provide the software platform for everything from set-top television boxes and handheld PCs, right up to high-availability clustered corporate servers.

Behind these deals is a growing conviction among IT industry leaders, including Mr Eckhard Pfeiffer, Compaq's chief executive, that their big corporate customers want to standardise on a limited number of suppliers able to deliver a full range of products and services.

For Compaq, the proposed Digital purchase follows the completion of last year's acquisition of Tandem Computer which manufactures large mainframe machines or "enterprise servers".

One key advantage of the combination will be that it places Compaq in a commanding position in the high-growth market for computer servers running Microsoft's Windows NT operating system one of the fastestgrowing segments of the IT industry.

Mr Pfeiffer said at the time of the announcement in late January that cementing a closer partnership with Microsoft was a "highlight" of the agreement. Although Compaq has long enjoyed close collaboration with Microsoft, "we had always been looking over our shoulder to see what Microsoft was doing with Digital", he said.

Now, Mr Andreas Barth, in charge of Compaq's European operations, adds that the Digital deal, "will accelerate Compaq's vision of becoming a global leader in enterprise computing solutions".

Such dreams are not new: in the 1970s and early 1980s, IBM grew big and fat providing a "one-stop-shop" to satisfy organisations' computing requirements it was the quintessential enterprise IT company. But IBM's customers eventually rebelled against the group's market dominance, driving it into the huge losses and restructuring costs that are now part of IBM folklore.

Nevertheless, after flirting with so-called open systems and struggling with the problem of incompatibility associated with using equipment from a wide range of vendors, many companies and other organisations have begun telling companies such as Compaq and Cisco that they want to move back towards relying on just one or perhaps two main IT suppliers.

Few, if any, big companies operate today in a straightforward or simple computer systems environment. Most rely on a hotchpotch of data processing and network equipment, operating systems and application software, stitched together.

As Mr John Chambers, Cisco's chairman and chief executive, notes, customers are increasingly demanding that information technology suppliers provide a full range of products and an integrated package of services. A former IBM employee himself, Mr Chambers says customers want the type of comfortable relationship that they once had with IBM, but without the arrogance and high-priced proprietary technology that were once associated with doing business with "Big Blue".

Cisco's customers told him they wanted the networking market leader "to make its products work even better together than they do today"; that they wanted Cisco to be able to design the network and help to solve problems across the network; and perhaps, most importantly, to help them focus on those business activities where they could recoup their investment.

The factors driving this shift back towards centralised control are straightforward. Among them, ever-shortening IT product life cycles mean that many corporate IT departments simply cannot keep pace with changes. As a result, IT users are increasingly dependent on their suppliers or outsourcing specialists such as EDS or Computer Sciences Corporation which is itself the subject of a hostile take-over bid by Computer Associates, the business software group to design, install and manage their internal systems.

In the networking sector, systems are becoming extremely complex at a time when skill shortages are getting worse in part because of the demands of year 2000 computer date conversion problem.

Today's desktop PCs and PC servers are highly complex, difficult to manage and costly to configure, in terms of manpower. As Mr Paul Mason, an analyst with International Data Corporation, noted recently: "The client/server revolution has brought with it many benefits, including easier access to data, rapid response to new business initiatives, and greater ease-of-use for the user."

But it has also introduced a set of problems of its own because the greater level of complexity involved has reduced reliability, maintainability and availability below the levels that were typical of mainframe applications. These handicaps also mean that IT systems and applications software fail to deliver their full value and business managers are often unaware of the root cause of the shortfall. Another result of this complexity is that the size of IT departments has had to expand dramatically to cope with system problems and help-desk requests.

Companies and their IT departments have responded to these challenges by investing increasingly large sums in distributed system and network management tools which are designed to restore the balance between centralised and distributed systems, and return control to IT managers.

Estimates for the size of the worldwide market for management tool software vary substantially. The market including mainframe management software

is probably worth between $6 billion and $7 billion a year and is growing rapidly. Within this, the market for distributed management tools is probably worth more than $2 billion, fuelled, in particular, by the growing use of distributed systems and Windows NT.

Meanwhile, some of the IT industry's most important customers, such as financial services companies, are under growing pressure to speed up development cycles and speed up time-to-market. They cannot afford to spend time evaluating new systems and sorting out incompatibilities. They want the latest technology and they want it to work immediately.

But perhaps most importantly, many companies are beginning to take a broader "holistic" or "enterprise-wide" view of their IT operations. They are re-integrating departmental networks that have grown up over the years and hooking together geographically dispersed sites and the wider Internet.

Fuelled by the phenomenal growth of the Internet and the widespread adoption of standards-based Internet technologies, they are building intranets and extranets to tie together their internal operations and those of their suppliers and customers and to provide a base for conducting electronic commerce.

But to minimise the risks associated with such projects, they are looking for "end-to-end" equipment suppliers that can provide them with all the network plumbing the hubs, bridges, routers and switches and the network management software they need to build and run their systems.

Overcoming geographic constraints and managing complex manufacturing and logistics operations are two factors that are driving the remarkable uptake of "enterprise resource planning" (ERP) software, such as that supplied by Baan of the Netherlands and SAP of Germany.

ERP software is used by companies to manage and plan business functions from order-processing to manufacturing and from accounting to personnel. The market is growing at about 35 per cent a year, a rise that partly reflects the globalisation of international business and the premium this has placed on IT systems that enable managers to control sprawling empires effectively.

SAP with a market share of more than 60 per cent is far and away the dominant player in a specialised software arena, where total sales were worth about $10 billion last year.

Baan is a much smaller player, but last year's growth gives it 13 per cent of the market and ranks it number three in the world behind SAP, and Oracle of the US, but ahead of US rivals such as PeopleSoft and J. D. Edwards.

Among other factors driving demand higher are moves by companies to control escalating IT costs, the shift from proprietary mainframe systems toward industry standard hardware and client/ server systems built around the Microsoft Windows NT operating system, and the so-called "millennium bomb" which has encouraged many companies to buy software rather than adapt existing packages.

Recognising the growing importance of this software segment, the new industry leaders, including Microsoft and Compaq, have formed close partnerships with ERP vendors.

Indeed, "strategic" partnerships - as an alternative to mergers and acquisitions - are another characteristic of the emerging CiscoCompaq-Intel-Microsoft axis.

Nevertheless, the new would-be leaders of the revisited enterprise computing revolution in the late 1990s will need all their skills to stay ahead in a market which is also undergoing structural, regulatory and technological changes.