The Insider's Guide to Next-Generation BPM
By Tony Baer, Senior Analyst, Ovum , 04/06/2007
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With an eye toward bulking up its emerging SOA business, Software AG is offering roughly $550 million in cash to buy webMethods. The obvious rationale is getting critical mass. According to Gartner numbers, the combined entity’s SOA business would trail only that of IBM and Tibco respectively.
My colleague Jason Bloomberg of ZapThink pronounces this “huge news,” characterizing this as “a market share play and an SOA play entirely.” He concludes that “Larry Ellison is not going to be happy about this news.”
On paper this looks like a great deal. Both companies’ SOA lines were incomplete, webMethods needed deeper pockets and put itself in play (it evidently entertained several potential offers), and Software AG had a bed of cash to make it happen.
A few more details: while Software AG is about 2 – 3x the size of webMethods, its SOA business is barely a quarter of the size. Both companies’ geographic footprints are almost mirror images: While Software AG’s customer base is 56% Europe and 25% North America, webMethods’ presence is 62% in North America and 26% in Europe. And, excluding registry/repository (the stepping stones for SOA governance), and a more sensitive area around BPM (Business Process Management), there are few product overlaps.
In some respects this is a tail of two cities: Software AG, with an annuity legacy business, seeking to jumpstart growth in SOA where it sees its future. webMethods, with the more substantial SOA portfolio, which has been struggling to reinvent itself from its B2B/EAI roots. In a bit of irony (and to show the devaluation of IT dollars in the post dot com era), the company sold itself for less than half what it paid back in 1999 for Active Software, the EAI company that was supposed to be webMethods’ future.
In the past five years, webMethods has been through belt tightening and roughly a half dozen acquisitions. And a year ago, it looked like it was starting to get its old groove back with 12% profits. But in the next three quarters (Q4 numbers should come out any day), webMethods sank back into the red, which CEO David Mitchell blamed on poor sales execution and gaps in its SOA offerings.
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