|By Avi Rosenthal||
|April 22, 2014 07:46 AM EDT||
If a vendor is not a monopoly, I am not happy to find that the probability that it will survive is lower than it was (Apple, HP etc.).
Even if it is a monopoly in specific markets and not a monopoly in others, I am not happy to find that its Survival probability is lower than it was (Microsoft).
The reason that I am not happy is that competition is good for my customers: They can buy better products and pay less.
This post is out of the ordinary. The probability that Software AG will Survive is now higher than it was when I wrote the post: Will Software AG Survive until 2019?
Software AG's Business Lines
In my previous Vendors Survival post on Software AG, I analyzed its two major Business Lines:
1. Mainframe DataBase, Development and Integration products
2. BPM and SOA products
I will repeat only the main point:
Software AG's Mainframe Business Line is gradually and slowly declining.
If another vendor will acquire Software AG, it will acquire it because of the BPM and SOA Business Line.
A company could be an Acquisition Target but it also could vanish due to inability to compete.
It looks like Software AG is not a potential failing or vanishing company.
It is a big, solid and stable company.
The following indicators support my view:
1. Software AG has more than 5,400 employees in 70 countries that serve 70 percent of the Global 1,000. (The information is updated to the end of 2012).
2. 1,047.3 million USDs revenues in 2012
3. Consistent revenues and earnings
4. According to the WikiPedia: "The company is the second largest Software vendor in Germany and the fourth in Europe and among the top 25 globally".
Transformation is the Name of the Game
In order to Survive and/or grow the company's difficult task is to transform itself from a Mainframe Software Vendor to Multi-Platform BPM and SOA Vendor.
There are two challenges types:
type 1: The Mainframe Software Business and Business models are unique
The Mainframe software uniqueness is hilighted in the following bullets:
- A limited number of customers and potential customers
- The customers are Large Enterprises, so each customer pays a lot more than a typical Open Systems customer
- Higher prices than prices in other software platforms. The minimal Software Products prices are tens of thousands USDs. Usually, DBMS's prices, such as Software AG's flagship product ADABAS prices are hundred thousands USDs.
- The Software prices are based on Site Licenses or on Computer models Groups. Larger Mainframes (more CPU MIPS) Groups prices are higher. Usually Capacity grows and new Mainframes with larger Capacity are included in larger Software Groups. The result is higher Software Products prices.
- A limited number of competitors. The main competition is IBM with its DB2 database and COBOL and Java programming languages. CA is another important competitor.
- A very limited number of new potential customers. Migration to Mainframe is unusual. There are few new Mainframe sites.
type 2: Competition in the BPM and SOA Markets
In a Press Release Software AG wrote: "Software AG's strategy has been strongly focused on growth in the Business Process Excellence (BPE) business line since 2012. AS a consequence, the company heavily invested in new products and the expansion of its sales teams."
The Business Process Management (BPM) market is a lot different. The following bullets highlights the BPM market:
- Growing. The BPM market is growing rapidly. The annual growth rate of Leaders could be two digits growth rate.
- Immature. Read my post: BPMS Next Generation: IBPMS and you will understand. It is a market that from time to time a new Use Case shakes the market. This time it was Intelligent Business Operation (IBO). Software AG was one of the Vendors, which were moved from Gartner Magic Quadrant Leaders Square (BPMS Magic Quadrant) to the Visionary Square in the IBPMS Magic Quadrant. Software AG was not alone: only three Vendors appear in the Leaders Square of IBPMS. Previous Use Cases added and changed vendors position, were Case Management and Human Processes.
- Crowded. In 2013, Forrester Research identified 52 different vendors competing in the BPM broader market (The Forrester Wave: BPM Suites , Q1 2013). Compare 52 to 2 (The significant competitors in the Mainframe DBMS market).
- Acquisitions. No wonder that Large Vendors acquire smaller vendors in a crowded market. BPM is not an exception. For example, IBM acquired Lombardi and FileNet. Software AG acquired WebMethods and IDS Scheer and Aurea Software acquired Progress Savvion.
- Competition. The competitors include Mega Vendors (IBM, Oracle), Pure BPM companies (Appian, PegaSystems) and Integration Vendors (Tibco, Vitria). I named only few strong competitors. Each of them has its Advantages (as well as Considerations) over other competitors, including Software AG.
As stated in the title of the previous paragraph: "Transformation is the Name of the Game". In the following sections I would try to evaluate Software AG's Transformation efforts.
Business Lines Contributions to Revenues
Software AG's revenues for 2012 were 1,047 Million USDs. The three major Business Lines contributions were:
Business Process Excellence 547 Million (52%)
Enterprise Transactions 375.2 Million (0.36%)
IDS Scheer Consulting 125.1 Million (0.12%)
The raw data was retrieved from Software AG's Annual Report 2012. I calculated the percentages.
Roughly, Business Process Excellence is BPM including SOA.
Roughly, Enterprise Transactions is Mainframe and Database, Development and Integration.
The ADABAS D and Natural business on other platforms is not significant.
Roughly, IDS Scheer Consulting is Business Process Analysis (BPA). BPA is a part of the BPM Life Cycle, so IDS Scheer Consulting is included in the BPM and SOA Business.
Conclusion: in 2012, BPM and SOA Business Lines revenues are more than 60% of Software AG's revenues. Mainframe revenues are more than 30%.
The Bottom Line: Software AG transformation from Mainframe Software company to BPM and SOA company was successful. It still has significant but gradually and slowly declining revenues from its Mainframe Business Line.
Acquisitions are complex you have to chose a suitable Acquisition Target and you have to execute the complex merging process. The complexity includes Organizational issues, Organizational Culture differences and Technological issues.
The wrong acquisition of Compaq by HP, many years ago, still hurts HP business.
You can also read my post: Acquisition is not simple: SAP-Sybase acquisition agreement, in order to understand the issues facing a company acquiring another company.
WebMethods acquisition was the first significant Software AG's acquisition. It looks like a plausible acquisition, because WebMethods was a Leader in the BPM, SOA and Integration markets.
Software AG branded its SOA and BPM suite as WebMethods and kept key WebMethods employees.
IDS Scheer was the second significant acquisition. A German company (Software AG.) acquired another German company (IDS Scheer). IDS Sceer's ARIS is a leading BPA product especially for ERP suites.
In order to improve its position in the new Intelligent Business Operation Use Case, Software AG acquired two companies:
Jackbe provider of Mashups and Real Time Business Intelligence platform and Apama a Complex Event Processing company. I already discussed these acquisitions in my post: IBPMS: BPMS Leader Software AG attempting to lead in IBPMS.
Bottom Line: Reasonable acquisitions and adequate merge execution.
WebMethod and Software AG products overlap: both companies had SOA products. However, Software AG did not develop a BPM solutions. The decision was to base the suite on WebMethods products.
Software AG's leading SOA Registry and Governance product: Centrasite (co developed with Fujitsu before WebMethods acquisition), is the Registry used in WebMethods suite.
After IDS Scheer Acquisition, its BPA products replaced WebMethods solutions.
The two BPM suites (WebMethods and IDS Scheer) were not integrated to a single suite, but tied the environments together. The quality of the mechanism of using artifacts from one environment in the other environment is good.
The Bottom Line:The technological decisions and implementations are reasonable.
In a previous post, I explained why SOA is implemented by more enterprises than BPM.
Few years ago, more than 50% of enterprises adopted SOA according to surveys results.
According to Forrester's survey results, only 26% implemented or expanding Business Process Management tools in 4thQ 2012.
According to The Forrester Wave: BPM Suites , Q1 2013, "Best Practices dictates that to get a good return on your BPM investment means scaling from project to program."
Program includes many Projects, is more strategic and more tightly coupled to Business.
SOA is not a Project it is a Program (or Initiative or a Journey). You may find positive correlation between SOA as a Project and failure in implementing it or not achieving enough Value for justifying the SOA effort.
Starting SOA or BPM by a project addressing a Pain Point is a good practice, however afterwards you should build a Program and not execute isolated and uncorrelated projects.
The main difference between SOA and BPM is the approach. SOA Program could be relatively slow and gradual. According to Best Practices, in BPM Program execution, shortening the time is more important than reducing costs.
The reason is that benefits could be realized quickly when the lack of Process Visibility is replaced by Process Visibility inherent in BPM.
As BPM will mature expect more BPM Programs.
According to Forrester Software AG major strength is "Software AG strikes good balance between project and program".
If other vendors will not catch up in "good balance between project and program", Software AG Market position could be improved.
Software AG's long transformation from Mainframe Software company to Business Process Management and Service Oriented Architecture was successful.
The largest Business Line in terms of revenues is BPM and SOA.
The company positioning in the crowded BPM market is good.
The Mainframe Software Business Line is declining slowly. Rapid decline could reduce the revenues significantly.
The company is one of the top 25 global software companies i.e only Mega Vendors can afford to acquire it.
The combination of all the factors cited in this paragraph is higher Survival probability in comparison to 2009.
However, inadequate strategy or inadequate execution could hurt its stability and profitability and reduce its survival probability.
It should be remembered, that even if Software AG will be as successful as it was in the last years, that does not guarantee that it will not be acquired.
Mega Vendor could acquire it. As long as the Mainframe Business Line is viable, it is unlikely that a Mega Vendor will do this.
For the Long Term, it is a possible scenario. If Software AG will become an Acquisition Target, I guess that the potential acquirer will probably be SAP.
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Jan. 30, 2015 11:45 AM EST Reads: 3,594
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrategies, will examine why IT must finally fulfill its role in support of its SBUs or face a new round of...
Jan. 30, 2015 11:45 AM EST Reads: 2,730
The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.
Jan. 30, 2015 11:30 AM EST Reads: 2,268
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
Jan. 30, 2015 11:30 AM EST Reads: 3,040
ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ -- IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's platform-as-a-service. The new platform enables developers to build ap...
Jan. 30, 2015 11:15 AM EST Reads: 3,092
Building low-cost wearable devices can enhance the quality of our lives. In his session at Internet of @ThingsExpo, Sai Yamanoor, Embedded Software Engineer at Altschool, provided an example of putting together a small keychain within a $50 budget that educates the user about the air quality in their surroundings. He also provided examples such as building a wearable device that provides transit or recreational information. He then reviewed the resources available to build wearable devices at home including open source hardware, the raw materials required and the options available to power s...
Jan. 30, 2015 11:00 AM EST Reads: 2,402
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover how hardware commoditization, the ubiquitous nature of connectivity, and the emergence of Big Data a...
Jan. 30, 2015 10:45 AM EST Reads: 3,180
The Internet of Things promises to transform businesses (and lives), but navigating the business and technical path to success can be difficult to understand. In his session at @ThingsExpo, Sean Lorenz, Technical Product Manager for Xively at LogMeIn, demonstrated how to approach creating broadly successful connected customer solutions using real world business transformation studies including New England BioLabs and more.
Jan. 30, 2015 10:45 AM EST Reads: 2,652
We certainly live in interesting technological times. And no more interesting than the current competing IoT standards for connectivity. Various standards bodies, approaches, and ecosystems are vying for mindshare and positioning for a competitive edge. It is clear that when the dust settles, we will have new protocols, evolved protocols, that will change the way we interact with devices and infrastructure. We will also have evolved web protocols, like HTTP/2, that will be changing the very core of our infrastructures. At the same time, we have old approaches made new again like micro-services...
Jan. 30, 2015 10:30 AM EST Reads: 2,526
Enthusiasm for the Internet of Things has reached an all-time high. In 2013 alone, venture capitalists spent more than $1 billion dollars investing in the IoT space. With "smart" appliances and devices, IoT covers wearable smart devices, cloud services to hardware companies. Nest, a Google company, detects temperatures inside homes and automatically adjusts it by tracking its user's habit. These technologies are quickly developing and with it come challenges such as bridging infrastructure gaps, abiding by privacy concerns and making the concept a reality. These challenges can't be addressed w...
Jan. 30, 2015 10:00 AM EST Reads: 3,175
The Domain Name Service (DNS) is one of the most important components in networking infrastructure, enabling users and services to access applications by translating URLs (names) into IP addresses (numbers). Because every icon and URL and all embedded content on a website requires a DNS lookup loading complex sites necessitates hundreds of DNS queries. In addition, as more internet-enabled ‘Things' get connected, people will rely on DNS to name and find their fridges, toasters and toilets. According to a recent IDG Research Services Survey this rate of traffic will only grow. What's driving t...
Jan. 30, 2015 10:00 AM EST Reads: 3,202
The Internet of Things is a misnomer. That implies that everything is on the Internet, and that simply should not be - especially for things that are blurring the line between medical devices that stimulate like a pacemaker and quantified self-sensors like a pedometer or pulse tracker. The mesh of things that we manage must be segmented into zones of trust for sensing data, transmitting data, receiving command and control administrative changes, and peer-to-peer mesh messaging. In his session at @ThingsExpo, Ryan Bagnulo, Solution Architect / Software Engineer at SOA Software, focused on desi...
Jan. 30, 2015 10:00 AM EST Reads: 2,380
Today’s enterprise is being driven by disruptive competitive and human capital requirements to provide enterprise application access through not only desktops, but also mobile devices. To retrofit existing programs across all these devices using traditional programming methods is very costly and time consuming – often prohibitively so. In his session at @ThingsExpo, Jesse Shiah, CEO, President, and Co-Founder of AgilePoint Inc., discussed how you can create applications that run on all mobile devices as well as laptops and desktops using a visual drag-and-drop application – and eForms-buildi...
Jan. 30, 2015 10:00 AM EST Reads: 2,869
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Jan. 30, 2015 10:00 AM EST Reads: 8,006
"For over 25 years we have been working with a lot of enterprise customers and we have seen how companies create applications. And now that we have moved to cloud computing, mobile, social and the Internet of Things, we see that the market needs a new way of creating applications," stated Jesse Shiah, CEO, President and Co-Founder of AgilePoint Inc., in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Jan. 30, 2015 09:30 AM EST Reads: 2,346
Jan. 30, 2015 09:30 AM EST Reads: 3,121
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, data security and privacy.
Jan. 30, 2015 09:00 AM EST Reads: 2,846
Things are being built upon cloud foundations to transform organizations. This CEO Power Panel at 15th Cloud Expo, moderated by Roger Strukhoff, Cloud Expo and @ThingsExpo conference chair, addressed the big issues involving these technologies and, more important, the results they will achieve. Rodney Rogers, chairman and CEO of Virtustream; Brendan O'Brien, co-founder of Aria Systems, Bart Copeland, president and CEO of ActiveState Software; Jim Cowie, chief scientist at Dyn; Dave Wagstaff, VP and chief architect at BSQUARE Corporation; Seth Proctor, CTO of NuoDB, Inc.; and Andris Gailitis, C...
Jan. 30, 2015 09:00 AM EST Reads: 2,803
Since 2008 and for the first time in history, more than half of humans live in urban areas, urging cities to become “smart.” Today, cities can leverage the wide availability of smartphones combined with new technologies such as Beacons or NFC to connect their urban furniture and environment to create citizen-first services that improve transportation, way-finding and information delivery. In her session at @ThingsExpo, Laetitia Gazel-Anthoine, CEO of Connecthings, will focus on successful use cases.
Jan. 30, 2015 07:45 AM EST Reads: 2,074
The industrial software market has treated data with the mentality of “collect everything now, worry about how to use it later.” We now find ourselves buried in data, with the pervasive connectivity of the (Industrial) Internet of Things only piling on more numbers. There’s too much data and not enough information. In his session at @ThingsExpo, Bob Gates, Global Marketing Director, GE’s Intelligent Platforms business, to discuss how realizing the power of IoT, software developers are now focused on understanding how industrial data can create intelligence for industrial operations. Imagine ...
Jan. 30, 2015 06:30 AM EST Reads: 1,970