Welcome!

Java IoT Authors: Ruxit Blog, Sematext Blog, Elizabeth White, Craig Lowell, Greg O'Connor

Blog Feed Post

Will Software AG Survive until 2019? - Revisited

I am not happy to Revisit a Vendor Survival post saying that my prediction that a vendor will not survive was correct (for example, SUN).

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.  

Positive Indicators
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).
  • 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.  

Evaluating Software AG's Transformation
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
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.

Technology
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. 

Implementing BPM 
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.  
  
My Take
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.

 

Read the original blog entry...

More Stories By Avi Rosenthal

Ari has over 30 years of experience in IT across a wide variety of technology platforms, including application development, technology selection, application and infrastructure strategies, system design, middleware and transaction management technologies and security.

Positions held include CTO for one of the largest software houses in Israel as well as the CTO position for one of the largest ministries of the Israeli government.

@ThingsExpo Stories
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
With so much going on in this space you could be forgiven for thinking you were always working with yesterday’s technologies. So much change, so quickly. What do you do if you have to build a solution from the ground up that is expected to live in the field for at least 5-10 years? This is the challenge we faced when we looked to refresh our existing 10-year-old custom hardware stack to measure the fullness of trash cans and compactors.
The emerging Internet of Everything creates tremendous new opportunities for customer engagement and business model innovation. However, enterprises must overcome a number of critical challenges to bring these new solutions to market. In his session at @ThingsExpo, Michael Martin, CTO/CIO at nfrastructure, outlined these key challenges and recommended approaches for overcoming them to achieve speed and agility in the design, development and implementation of Internet of Everything solutions wi...
Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is expected in the amount of information being processed, managed, analyzed, and acted upon by enterprise IT. This amazing is not part of some distant future - it is happening today. One report shows a 650% increase in enterprise data by 2020. Other estimates are even higher....
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, will deep dive into best practices that will ensure a successful smart city journey.
DevOps at Cloud Expo, taking place Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long dev...
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.
SYS-CON Events announced today that 910Telecom will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Housed in the classic Denver Gas & Electric Building, 910 15th St., 910Telecom is a carrier-neutral telecom hotel located in the heart of Denver. Adjacent to CenturyLink, AT&T, and Denver Main, 910Telecom offers connectivity to all major carriers, Internet service providers, Internet backbones and ...
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business in 2016. However, IoT is far more complex than most firms expected. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, a renowned visionary and thought leader, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology and business models to adopt and leverage IoT. He will drill down to the components in this fra...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
19th Cloud Expo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterpri...
SYS-CON Events announced today Telecom Reseller has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
Pulzze Systems was happy to participate in such a premier event and thankful to be receiving the winning investment and global network support from G-Startup Worldwide. It is an exciting time for Pulzze to showcase the effectiveness of innovative technologies and enable them to make the world smarter and better. The reputable contest is held to identify promising startups around the globe that are assured to change the world through their innovative products and disruptive technologies. There w...
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Digital Transformation, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportuni...
I wanted to gather all of my Internet of Things (IOT) blogs into a single blog (that I could later use with my University of San Francisco (USF) Big Data “MBA” course). However as I started to pull these blogs together, I realized that my IOT discussion lacked a vision; it lacked an end point towards which an organization could drive their IOT envisioning, proof of value, app dev, data engineering and data science efforts. And I think that the IOT end point is really quite simple…
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abil...
Is the ongoing quest for agility in the data center forcing you to evaluate how to be a part of infrastructure automation efforts? As organizations evolve toward bimodal IT operations, they are embracing new service delivery models and leveraging virtualization to increase infrastructure agility. Therefore, the network must evolve in parallel to become equally agile. Read this essential piece of Gartner research for recommendations on achieving greater agility.