SOA - Integration Industry Pulse

Today Software AG announced the acquisition of webMethods. Frankly, I find this truly exciting news. While the consolidation trend is not exciting in itself (at this point there are few integration vendors left that have NOT been acquired) I think this acquisition is a true synergy. Each vendor has some very compelling solutions that are underappreciated in the market. Together the combination provides a complete infrastructure for SOA.

I listened in to the analyst call this morning, which was mostly about the CEOs and CFOs of both companies talking to the financial analysts. Hey I get it, financial analysts, unlike us techie geeks, effect stock price. No technical analysts got to ask any questions, while a few financial analysts did have some technical questions.

Here's the quick and dirty on the financial side. Software AG is offering a cash buyout of $9.15 per share, which is a 25.7% premium over webMethods closing price yesterday of $7.28. Karl-Heinz Streibich, CEO of Software AG, spoke about the synergies between the two companies which he thinks will add up to one billion Euro software giant. These include synergies in market areas, geographies and revenue streams. While Software AG's business is 56% Europe, 25% America and 19% rest of the world, webMethods business is 62%America, 26% Europe and 17% RoW. Combined the two companies will have 4500 customers including 1500 webMethods customers and 3000 Software AG customers. Clearly webMethods will help Software AG gain a larger presence in the Americas, something it has tried to do before unsuccessfully (do you remember SAGA?).

According to a chart taken from Gartner numbers, this acquisition is going to put Software AG as the #3 player in the leading SOA/BPM players.

IBM $387m
Tibco $199m
Software AG & webMethods $156m
Microsoft $155m
webMethods $122m
Oracle $116m
Sun Microsystems $102m
Sybase $ 68m
BEA $ 60m
Axway (SOPRA) $ 57m
Sterling Commerce $ 57m
Vitria $ 52m
Software AG $ 34m
Hitachi $ 30m
Fujitsu-Siemans $ 24m
SAP $ 18m

While I predict the financial geeks will find the numbers interesting, frankly from a purely technology view, I think this acquisition is positively exciting. Both companies have some industry leading next generation technology that has been underappreciated in the market. But while they were downplaying the overlap and playing up the synergies, there is actually considerable overlap that will have to be reconciled.

They identified 5 areas of technology for what they have identified as the SOA/BPM market (hey let's stick with the hot buzz words here - helps the stock price). But in any case, the 5 areas are a pretty good representation of a complete infrastructure required for SOA:
• SOA Governance
• BPM/BAM
• Application Composition
• Application Integration
• Legacy Modernization

So let's take a look at the overlaps and synergies in each of these areas.

In SOA Governance Software AG has made a considerable investment in CentraSite, a registry and repository which is a joint development effort between Software AG and Fujitsu, and which includes a community and .org site. In September of 2006 webMethods acquired Infravio, another governance product. My guess is that CentraSite is going to win out here. There might be a possibility of bits and pieces of Infravio ending up in CentraSite, especially if the Fujitsu partnership falls apart now that Software AG will no longer need Fujitsu InterStage as its BPM solution.

Currently Software AG's BPM solution is reselling Fujitsu's Interstage. However, webMethods also brings a BPM/BAM solution to the table. On the call Karl-Heinz Streibich make it clear that in the near term Software AG salespeople will continue selling Fujitsu, the CentraSite so-development partnership will continue, but the webMethods BPM solution will be the clear winner, as it should be. webMethods has industry leading, next generation BAM technology. In February I spoke with Susan Ganeshan, VP Product Management for webMethods Fabric. Quite frankly, she knocked my socks off, and that's saying a lot as I have listened to thousands of vendor pitches, and this one was probably the 15th in the course of 2 days. webMethods has some of the best BAM technology out there. It has predictive capabilities, great visualization and a host of other goodies. I think the closest competitor to its BAM capabilities is Tibco. But the combined Software AG and webMethods offering surpasses Tibcos' platform capabilities. For example, Tibco does not have application composition.

Software AG will actually now have two Application Composition offerings - their own under their Crossvision brand name, and webMethods Fabric, which has been positioned as a composite application platform.

While on the call they indication that webMethods was bringing the Application Integration capabilities, there is quite a bit of overlap in this area. Interestingly, on the call they cited Forrester as saying that Software AG is the leading Enterprise Service Bus provider. This truly surprised me, not because Software AG doesn't have a good ESB, it's actually a robust multi-protocol ESB. However, I can't imagine how Forrester did the numbers. After all, IBM renamed a few products as their ESB, and MQ Series already had a leading market share for messaging. I guess Forrester didn't carry those numbers over. Anyway, these days an ESB is often in the eyes of the beholder.

Software AG bundles its integration/SOA/BPM offerings under the brand name of Crossvision, which includes:
• Crossvision Application Composer - for designing SOA interfaces
• Crossvision Application Designer - for creating XML, AJAX apps
• Crossvision Business Process Manager - which is Fujitsu's Interstage BPM product
• Crossvision Service Orchestrator - the ESB
• Crossvision Information Integrator - includes semantic data integration
• Crossvision Master Data Manager - for master data management
• Crossvision Legacy Integrator
• CentraSite™ - SOA Governance

Out of this list, the legacy integration, master data management, and information integration represent added capabilities that webMethods does not yet have (well, WM has legacy integration, but Software AG's technology is more likely to win out here). What is really exciting to me is Software AG's Information Integrator, which I believe represents the next generation of semantic integration capabilities. I'm totally convinced that semantic integration will provide the next great leap forward in integration productivity because it enables automatic semantic integration through metadata alone. While those graphical mapping tools make integration easier, someone still has to go in, understand the semantics behind the data and create the maps. When a new system or partner needs to be integrated, new maps need to be created. Software AG's Information Integrator has an inference engine and provides the metadata for semantic integration. It's industry leading technology that frankly hasn't really gotten the recognition it deserves yet. Probably because it is still ahead of the curve and the rest of the industry hasn't yet caught on to the value and importance of semantic integration.

As a side note, when I was writing the book with webMethods last year on SOA and Integration, we had some discussions about including information integration. They argued that since webMethods didn't have it, it wasn't important and shouldn't be included in the book. I stuck to my guns and we included it, because I truly believe this is where the next great leap forward in productivity is going to come from.

While I'm usually more of an observer than a cheerleader, I must admit to being a fan of Software AG's Information Integrator and webMethods BAM solutions. After many years of observing this industry the sad truth is the best technology does not always win. Success much more depends on market strength. Maybe in this case the acquisition will create a stronger company which will propel some leading technologies to the forefront of the market and challenge the other vendors to step up. That will be a good thing for the industry in general. In the meantime, while Software AG may be able to soft pedal the overlaps in the webMethods and Software AG offerings, it's clear that they are going to have to do some rationalization, or confuse their sales people and customers. That would be good for no one.