Welcome!

Java IoT Authors: Pat Romanski, Liz McMillan, AppDynamics Blog, Dana Gardner, Automic Blog

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
The IoT has the potential to create a renaissance of manufacturing in the US and elsewhere. In his session at 18th Cloud Expo, Florent Solt, CTO and chief architect of Netvibes, discussed how the expected exponential increase in the amount of data that will be processed, transported, stored, and accessed means there will be a huge demand for smart technologies to deliver it. Florent Solt is the CTO and chief architect of Netvibes. Prior to joining Netvibes in 2007, he co-founded Rift Technologi...
Unless your company can spend a lot of money on new technology, re-engineering your environment and hiring a comprehensive cybersecurity team, you will most likely move to the cloud or seek external service partnerships. In his session at 18th Cloud Expo, Darren Guccione, CEO of Keeper Security, revealed what you need to know when it comes to encryption in the cloud.
We're entering the post-smartphone era, where wearable gadgets from watches and fitness bands to glasses and health aids will power the next technological revolution. With mass adoption of wearable devices comes a new data ecosystem that must be protected. Wearables open new pathways that facilitate the tracking, sharing and storing of consumers’ personal health, location and daily activity data. Consumers have some idea of the data these devices capture, but most don’t realize how revealing and...
What are the successful IoT innovations from emerging markets? What are the unique challenges and opportunities from these markets? How did the constraints in connectivity among others lead to groundbreaking insights? In her session at @ThingsExpo, Carmen Feliciano, a Principal at AMDG, will answer all these questions and share how you can apply IoT best practices and frameworks from the emerging markets to your own business.
Basho Technologies has announced the latest release of Basho Riak TS, version 1.3. Riak TS is an enterprise-grade NoSQL database optimized for Internet of Things (IoT). The open source version enables developers to download the software for free and use it in production as well as make contributions to the code and develop applications around Riak TS. Enhancements to Riak TS make it quick, easy and cost-effective to spin up an instance to test new ideas and build IoT applications. In addition to...
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
Ask someone to architect an Internet of Things (IoT) solution and you are guaranteed to see a reference to the cloud. This would lead you to believe that IoT requires the cloud to exist. However, there are many IoT use cases where the cloud is not feasible or desirable. In his session at @ThingsExpo, Dave McCarthy, Director of Products at Bsquare Corporation, will discuss the strategies that exist to extend intelligence directly to IoT devices and sensors, freeing them from the constraints of ...
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...
The best-practices for building IoT applications with Go Code that attendees can use to build their own IoT applications. In his session at @ThingsExpo, Indraneel Mitra, Senior Solutions Architect & Technology Evangelist at Cognizant, provided valuable information and resources for both novice and experienced developers on how to get started with IoT and Golang in a day. He also provided information on how to use Intel Arduino Kit, Go Robotics API and AWS IoT stack to build an application tha...
With an estimated 50 billion devices connected to the Internet by 2020, several industries will begin to expand their capabilities for retaining end point data at the edge to better utilize the range of data types and sheer volume of M2M data generated by the Internet of Things. In his session at @ThingsExpo, Don DeLoach, CEO and President of Infobright, discussed the infrastructures businesses will need to implement to handle this explosion of data by providing specific use cases for filterin...
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, provided tips on how to be successful in large scale machine learning...
Early adopters of IoT viewed it mainly as a different term for machine-to-machine connectivity or M2M. This is understandable since a prerequisite for any IoT solution is the ability to collect and aggregate device data, which is most often presented in a dashboard. The problem is that viewing data in a dashboard requires a human to interpret the results and take manual action, which doesn’t scale to the needs of IoT.
What does it look like when you have access to cloud infrastructure and platform under the same roof? Let’s talk about the different layers of Technology as a Service: who cares, what runs where, and how does it all fit together. In his session at 18th Cloud Expo, Phil Jackson, Lead Technology Evangelist at SoftLayer, an IBM company, spoke about the picture being painted by IBM Cloud and how the tools being crafted can help fill the gaps in your IT infrastructure.
"delaPlex is a software development company. We do team-based outsourcing development," explained Mark Rivers, COO and Co-founder of delaPlex Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
"C2M is our digital transformation and IoT platform. We've had C2M on the market for almost three years now and it has a comprehensive set of functionalities that it brings to the market," explained Mahesh Ramu, Vice President, IoT Strategy and Operations at Plasma, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Traditional IT, great for stable systems of record, is struggling to cope with newer, agile systems of engagement requirements coming straight from the business. In his session at 18th Cloud Expo, William Morrish, General Manager of Product Sales at Interoute, outlined ways of exploiting new architectures to enable both systems and building them to support your existing platforms, with an eye for the future. Technologies such as Docker and the hyper-convergence of computing, networking and sto...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, 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. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.