I usually leave my investment research to my own web site (there’s a link over to the right somewhere) but the May 14 announcement that Metastorm is going public is important to business process management (BPM) users as well as investors.
Metastorm is not the typical initial public offering (IPO) in that Metastorm itself is over 30% owned by another public company, the Internet Capital Group (ICGE). But the offering still serves the purpose of legitimizing the market for those of you who are arguing with your boss about whether BPM is legitimately a separate software function or just a part of an ERP suite (as I discussed here).
And the offering also gives us analysts a sanity check on market sizing estimates. I estimate there was about $2.5 billion spent on BPM software and services in 2007. This is roughly consistent with the Gartner estimate provided in the Metastorm S-1 that the market will grow to over $5 billion in 2011, with a 2006-2011 compounded annual growth rate of 24%. Sizing the BPM market is particularly difficult because most of your BPM market choices (and my estimating data points) come from companies that also have other product lines. That group includes Adobe, AT&T/Sterling Commerce, Autonomy/Verity/Cardiff/Dralasoft, Axway/Cyclone, BMC/Remedy, DST Systems, EMC/Documentum, Fujitsu, Global 360, GXS, Handysoft, IBM/Filenet, IDS/Scheer, Microsoft, Oracle/BEA/Collaxa/Fuego, Pegasystems, Red Hat/JBoss, SoftwareAG/webMethods, SAP, Sun/SeeBeyond, TIBCO/Staffware, TSA/ACI, Vignette, Vitria and W4/Akazi. These companies either do not report BPM as a separate business segment because it is still a minor part of their revenue under SEC (or equivalent) regulations or they do not report their revenue at all because they are private companies.
That leaves Appian, Cordys, Intalio, Lombardi, Mega, Metastorm, Savvion, Ultimus and a few others as “pureplays.” In fact, even Metastorm does not identify itself solely as a BPM provider in its SEC S-1 filing. NOTE: I do not recognize “pureplay” as a separate market research segment and don’t think you should consider pureplay as a feature when looking at BPM (or any other software) choices. There is no reason why a company that only offers BPM should have a better BPM product than one that offers multiple types of software.
But publicly traded pureplays sure make market sizing easier. Metastorm’s S-1 indicates that it did about $40 million in revenue in 2006 (as I had estimated) growing to close to $60 million in 2007 (my 2007 research on the BPM market size is not completed). The S-1 numbers are probably not backcast for 2006/2007 acquisitions (because that is not required under Generally Accepted Accounting Principles) so the growth rate is not quite as high as advertised but still appears to outstrip the market’s. Metastorm has a reasonable presence (30% of revenue) outside the United States, which is important in convincing the boss that it can grow with your company. The products appear to be particularly popular in the government sector, which accounted for 26% of Metastorm’s business in 2007
Along with legitimizing that there is a separate BPM market (after years of acquisition of BPM players by larger ERP software suppliers), market sizing estimates are another proof point for you to take to the boss.
-- Dennis Byron
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