Welcome!

Server Monitoring Authors: Liz McMillan, Yeshim Deniz, Pat Romanski, Carmen Gonzalez, Ken Schwaber

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
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at @ThingsExpo, James Kirkland, Red Hat's Chief Archi...
The current age of digital transformation means that IT organizations must adapt their toolset to cover all digital experiences, beyond just the end users’. Today’s businesses can no longer focus solely on the digital interactions they manage with employees or customers; they must now contend with non-traditional factors. Whether it's the power of brand to make or break a company, the need to monitor across all locations 24/7, or the ability to proactively resolve issues, companies must adapt to...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settl...
Organizations planning enterprise data center consolidation and modernization projects are faced with a challenging, costly reality. Requirements to deploy modern, cloud-native applications simultaneously with traditional client/server applications are almost impossible to achieve with hardware-centric enterprise infrastructure. Compute and network infrastructure are fast moving down a software-defined path, but storage has been a laggard. Until now.
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
DXWorldEXPO LLC announced today that the upcoming DXWorldEXPO | CloudEXPO New York event will feature 10 companies from Poland to participate at the "Poland Digital Transformation Pavilion" on November 12-13, 2018.
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
The best way to leverage your CloudEXPO | DXWorldEXPO presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering CloudEXPO | DXWorldEXPO will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at CloudEXPO. Product announcements during our show provide your company with the most reach through our targeted audienc...
JETRO showcased Japan Digital Transformation Pavilion at SYS-CON's 21st International Cloud Expo® at the Santa Clara Convention Center in Santa Clara, CA. The Japan External Trade Organization (JETRO) is a non-profit organization that provides business support services to companies expanding to Japan. With the support of JETRO's dedicated staff, clients can incorporate their business; receive visa, immigration, and HR support; find dedicated office space; identify local government subsidies; get...
DXWorldEXPO LLC announced today that All in Mobile, a mobile app development company from Poland, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. All In Mobile is a mobile app development company from Poland. Since 2014, they maintain passion for developing mobile applications for enterprises and startups worldwide.
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
As data explodes in quantity, importance and from new sources, the need for managing and protecting data residing across physical, virtual, and cloud environments grow with it. Managing data includes protecting it, indexing and classifying it for true, long-term management, compliance and E-Discovery. Commvault can ensure this with a single pane of glass solution – whether in a private cloud, a Service Provider delivered public cloud or a hybrid cloud environment – across the heterogeneous enter...
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smart...
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
Founded in 2000, Chetu Inc. is a global provider of customized software development solutions and IT staff augmentation services for software technology providers. By providing clients with unparalleled niche technology expertise and industry experience, Chetu has become the premiere long-term, back-end software development partner for start-ups, SMBs, and Fortune 500 companies. Chetu is headquartered in Plantation, Florida, with thirteen offices throughout the U.S. and abroad.
Bill Schmarzo, author of "Big Data: Understanding How Data Powers Big Business" and "Big Data MBA: Driving Business Strategies with Data Science," is responsible for setting the strategy and defining the Big Data service offerings and capabilities for EMC Global Services Big Data Practice. As the CTO for the Big Data Practice, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He's written several white papers, is an avid blogge...