Lustratus LiteBytes

Archive for the ‘Vendor news’ Category

So Progress Software has bought yet another software company; this time a BPM vendor, Savvion. But is this the right move for Progress?

Progress Software has spent most of its life growing through acquisition, making use of the piles of cash generated by its legacy mid-range database product to find new areas of growth. After all, the legacy business may be highly profitable, but its returms are dwindling by the year and Porgress desperately needs something else to shore up its balance sheet. Unfortunately its acquisitions have had a bit of a patchy record of success. Perhaps it will be different this time.

Savvion is a credible BPM (Business Process Management) software provider, and 2009 was a bumper year for BPM sales. Specialist companies like Pegasystems and Lombardi showed huge growth rates, bucking the downward trend triggered across many technology sectors by the economic upheaval. On top of this, Progress has been trying to establish itself as a viable SOA (Service Oriented Architecture) and business integration vendor ever since it launched the Sonic ESB in the early years of the last decade, and BPM was a glaring hole in its portfolio. For these reasons, it is easy to see why Savvion would seem a good fit.

There seem to be two problems for Progress, however. Firstly, BPM is now rarely a solution bought in its own right – hence the rapid consolidation of the BPM market with Pegasystems more or less the only major oure-play BPM left standing following IBM’s acquisition of Lombardi. Instead, BPM is deployed more and more as part of a business transformation strategy involving components such as SOA, application and data integration, business rules, business monitoring and business events management.  Secondly, the gorillas in the space are now IBM, Oracle and SAP. These companies all offer a full suite of products and more importantly services based around BPM and the rest of the modern infrastructure stack. Companies such as Software AG, TIBCO and Axway form a credible second tier, too.

In previous acquisitions, Progress has treated each acqusition as purely software products. This is not surprising, since selling databases is more about selling products than selling solutions. However, it is this factor that has been at the root of the patchy performance of Progress acquisitions. For instance, the Data Direct division of Progress, where it placed a number of acquisitions in the data space, has fared reasonably well. This is because it is more of a product business. However its attempts in areas such as ESBs and SOA governance have suffered due to a seeming reluctance to embrace a more industry-specific, services-based solution model.

With its acqusition of Savvion, Progress once again has the chance to try to show the market that it has learnt from its mistakes. BPM is absolutely an area where companies need to be offered solutions – products together with services and guidance to develop effective and affordable business solutions. It will be hard enough for Progress to cut a share of the BPM pie with all the big players involved, but it does have one outstanding advantage; it has a strong and accessible customer base in the mid-range market where the larger companies struggle. However, if it fails to take on board the need to hire industryvertical skills and solution-based field and service professionals then this acquisition could prove to be yet another lost opportunity.

Steve

IBM has agreed an acqusition of Lomardi, one of the few remaining pure-play BPM suppliers, with target of closing the deal in 2010.

 IBM has reaffirmed its position of strength in the burgeoning Business Process Management (BPM) space with this acquisition. Lombardi has three assets that IBM is particularly interested in; its human-centric BPM capabilities, its extensive professional services resources and its reputation and success with BPM at the departmental level.

For the uninitiated, business processes tend to span some or all of three distinct areas of usage – human-oriented processes, document-oriented processes and prorgram-oriented processes. Human processes involve such aspects as task lists that people use as they carry out their assigned tasks, document processes upgrade traditional paper-oriented models and program-based processes involve the dynamic interaction of applications. IBM has always been most experienced at dealing with program-to-program interaction, delivering its own WebSphere BPM offering. A few years ago it also acquired FileNet, a major player in document-based processing that had document-related BPM products. Now it is making the Lombardi acquisition to strengthen its human interaction BPM capabilities.

This is an exciting acquisition, closing out the weakest areas of IBM’s BPM solutions. However, the challenge for IBM will be to properly integrate the new product set with its existing BPM offerings. Frankly, IBM has not done a good job to date on this with its previous BPM acquisition of FileNet – IBM marketing collateral exhibits confusion over what are essentially two differnent product solutions that both claim to be BPM. Hopefully it will handle the Lombardi acquisition better.

Steve

Over the past two years, a little Canadian company called Teilhard has been suing IBM, Microsoft, SAP and many others over a data exchange patent it acquired from JuxtaComm, but all parties have now settled.

I have occasionally blogged in the past on this case, regarding a patent from a company called JuxtaComm (now owned by Teilhard which is in turn owned by Shopplex.com) on a ‘System for transforming and exchanging data between distributed heterogeneous computer systems’ (US patent number 6,195,662). Legal activities were leading up to a November 2009 trial date. Many people have contacted me recently to try to find the current status, since there is little information available in the public domain and what is available in the blogosphere seems terribly polarized one way or the other. In answer to these frequent contacts, I thought I would post an update.

Firstly, the trial is off. All parties reached mutually acceptable settlement agreements, and these agreements included protection for all parties from future legal action. It should be noted that no information has been released by any party yet on the terms of these settlements. Settlements are exactly what they say – the dispute has been settled between the parties, for good. The only other point to note is that settlement amounts reflect the confidence and risk for each party in continuing to trial – therefore settlements can be large or they can be small or even zero. It all depends how strong each party thought its case was, and how much each was prepared to risk in terms of legal costs and potentially unexpected trial outcomes.

Secondly, as part of the pre-trial legal process, the judge involved formalized definitions for the terms involved in the patent, for example ‘script’. By choosing unusually wide-reaching interpretations for these terms which programmers would find highly eccentric, the result was that the patent applicability was increased dramatically from what it had originally covered, that is ETL (extract/transform/load). In the ‘script’ example, for instance, while the defence argued that a script was “a series of text commands’ that were interpretively run sequentially by the script processor”, the judge decided that a script meant “a group of commands”! However, the reason this is important is that subsequent to these definition rulings, the US patent office is now re-examining the patent for validity based on the new definitions. This work should be finished in the new year, and will have a bearing on future legal actions against new perceived infringers.

The big question to some, particularly those who own shares in the private Canadian company owning the patent now,  is how big or small the settlements are. As I said, this will be determined by a combination of risk, confidence and desire to avoid burning legal costs unnecessarily. On the plus side for the patent holder, the judge’s definitions strengthened the case substantially, making it far more wide reaching and therefore widening the impact on potential infingers. On the negative side there were an awful lot of examples of software that seemed to do the same thing as the patent describes which predated the patent, although in legal terms this sort of prior art does not necessarily invalidate the patent or law suits, apparently. But in the end, the truth is no-one knows whether settlements were huge or miniscule.

The only trustworthy sources for this settlement information in my view would be any formal announcements from any of the parties involved. For example, if a company has had to make a large payment for settlement, then depending on how much this payment is as a percentage of its turnover it might be legally required to make a statement about it in its SEC filings. Similarly, if the patent holder announces any substantial dividends then that would be another indication of settlement sizes, since the patent-holder makes very little revenue in software sales and therefore any significant profit would have to have come from patent settlements. Perhaps the next six months or so will make things a little clearer, but don’t hold your breath; as a private company, the only people Shopplex.com is required to keep informed is its own shareholders – it is not required to make any statements at all to the wider public.

Steve

At Lustratus we have been doing a lot of research into Cloud Computing, as have many firms.

I must confess the more I have dug into it, the more horrified I have become at the hype, confusion, miscommunication and manipulation of the whole Cloud Computing concept.

In the end, I decided the time was right for an Executive Guide to Cloud – defining it in as simple terms as possible and laying out the Cloud market landscape. Lustratus has just published the report, entitled “Cloud Computing without the hype; an executive guide” and available at no charge from the Lustratus store. Not only does the paper try to lock down the cloud definitions, but it also includes a summary of some 150 or so suppliers operating in the Cloud Computing space.

The paper deals with a number of the most common misunderstandings and confusions over Cloud. I plan to do a series of posts looking at some of these, of which this post is the first. I thought I would start with the Private Cloud vs Internal Cloud discussion.

When the Cloud Computing model first emerged, some were quick to try to define Cloud as a public, off-premise service (eg Amazon EC2), but this position was quickly destroyed as companies worldwide realized that Cloud Computing techniques were applicable in many different on and off premise scenarios. However, there has been a lot of confusion over the terms Private Cloud and Internal Cloud. The problem here is that analysts, media and vendors have mixed up discussions about who has access to the Cloud resources, and where the resources are located. So, when discussing the idea of running a Cloud onsite as opposed to using an external provider such as Amazon, people call one a Public Cloud and the other an Internal Cloud or Private Cloud.

This is the root of the problem. This makes people think that a Private Cloud is the same as an Internal Cloud – the two terms are often used interchangeably. However, these two terms cover to different Cloud characteristics, and it is time the language was tightened up. Clouds may be on-premise or off-premise (Internal or External), which refers to where the resources are. (Actually, this excludes the case where companies are running a mix of clouds, but let’s keep things simple). The other aspect of Cloud usage is who is allowed to use the Cloud resources. This is a Very Important Question for many companies, because if they want to use Cloud for sensitive applications then they will be very worried who else might be running alongside in the same cloud, or who might get to use the resources (eg disk space, memory, etc) after they have been returned to the cloud.

A Public Cloud is one where access is open to all, and therefore the user has to rely on the security procedures adopted by the cloud provider. A Private Cloud is one that is either owned or leased by a single enterprise, therefore giving the user the confidence that information and applications are locked away from others. Of course, Public Cloud providers will point to sophisticated security measures to mitigate any risk, but this can never feel as safe to a worried executive than ‘owning’ the resources.

Now, it is true that a Public Cloud will always be off-premise, by definition, and this may be why these two Cloud characteristics have become intertwined. However, a Private Cloud does not have to be on-premise – for example, if a client contracts with a third party to provide and run an exclusive cloud which can only be used by the client, then this is a Private Cloud but it is off-premise. It is true that USUALLY a Private Cloud will be on-premise, and hence equate to an Internal Cloud, but the two terms are not equal.

The best thing for any manager or exec trying to understand the company approach to cloud can do is to look at these two decisions separately – do I want the resources on or off premise, and do I want to ensure that the resources are exclusively for my use or am I prepared to share. It is a question of balancing risk against the greater potential for cost savings.

Steve

I am doing a lot of research into Cloud Computing at the moment, and spent an enjoyable morning with Salesforce.com, one of the largest Cloud vendors.

However, one thing that particularly piqued my interest was the discussion on Cloud lock-in. One of the most frequent concerns I hear from companies thinking about Cloud is that they are worried about vendor lock-in. After all, with Cloud being so new, what if you lock into a supplier who does not survive?

The discussions with Saleforce.com highlighted an interesting aspect to this debate. One of its offerings, force.com, provides a ‘Platform as a Service’ (PaaS) cloud offering, where users are presented with an environment in the cloud complete with a whole host of useful tools to build their own applications to run int he cloud or customize existing ones. However, Salesforce.com offers its own programming environment which is “java-like” in its own words. This immediately raises the lock-in concern. If a company builds applications using this, then these applications are not portable to other Java environments, so the user is either stuck with Salesforce.com or faces a rewrite.

A bad thing, you might think. BUT Salesforce.com claims that the reason it has had to go with a Java-like environment is that this enables it to provide much improved isolation between different cloud tenants (users) and therefore better availability and lower risk. For the uninitiated, the point about Cloud is that lots of using companies share the same cloud in what the industry calls a multi-tenancy arrangement, and this obviously raises a risk that these tenants might interfere with each other in some way, either maliciously or accidentally. Salesforce.com has mediated that risk by offering a programming environment that specifically helps to guard against this happening, and hence differs from pure Java.

So, is this lock-in a bad thing or good? I don’t know whether Salesforce.com could have achieved its aims a different way, and I have to admit that to a cynic like me the fact that solving this problem ‘unfortunately’ locks you into the supplier seems a bit suspicious. However, this is irrelevant since the vendor is doing the work and has chosen its implementation method, which it is of course free to do. Therefore, the question facing the potential force.com user is simple – the strategic risk of being locked in to the supplier has to be balanced against the operational risk of possible interference from other tenants. Depending on how the user reads this balance, this will determine how good or bad the lock-in option is.

Steve

Software AG seems to be defying predictions and surprising the market at every turn.

Once seen as a sleepy European software house based largely around legacy system technologies, it has taken major strides to transform itself into a major global software industry player. Its acquisition of webMethods a few years ago surprised the market, with many analysts unconvinced that it could make a go of the move into integration / SOA middleware, but it has done a fair job of building some momentum by tying the webMethods portfolio up with its own CentraSite governance technology, providing service-oriented architecture (SOA) with integrated governance.

Then it once again shocked the market by snatching IDS Scheer, the well-known supplier of modelling tools, from under SAP’s nose. Given that the IDS Scheer technology is used by most of the major SOA suppliers across the world for modelling, and in particular is a key part of the SAP portfolio, this would appear to give Software AG lots of cross-sell opportunities across the two customer bases and throughout the SAP world.

Now it has announced its 2Q09 results, and they make pretty good reading ont he surface. A 9% increase in product revenues is particularly noteworthy give that so many companies are struggling to show any year-on-year growth in product sales. However, before getting too carried away it is worth delving a little deeper into the numbers. The product revenue numbers include maintenance as well as license sales. Licensesales actually fell, as with most other companies. Maintenance revenues jumped by 20% – does this mean that the company has built a much larger maintenance base, or is it actually a reflection of a more aggressive pricing policy? Then there is the split between the legacy business (ETS) and the SOA/BPM business(webMethods). License revenues in this segment were down 15% – not very encouraging since this is the strategic business unit. Also, it is noticeable that maintenance revenue in each segment increased by about 20%, suggesting that this rise does indeed reflect a price hike.

However, taking all this into consideration, Software AG is still looking to have moved forward substantially from a few years ago, and assuming the IDS Scheer acquisition goes through OK there should be lots of opportunities for the company. Of course, a cynic might point out that by adding IDS Scheer to the webMethods portfolio, the company has made itself a highly attractive acquisition target to someone – perhaps SAP?!

Steve

There have been many reports recently on the problems with SAP’s Software as a Service (SaaS) offering, Business ByDesign – see for example the article by Timothy Morgan here.

To summarize, SAP is backing off its initial, bullish claims on SAP Business ByDesign, saying that it is now going to proceed at a much slower pace than originally planned. Of course, the SAP trade show Sapphire, which is being held this week, might provide more info, but I somehow doubt it.

So, what is going on? Why the sudden backtrack? After great trumpeting 18 months ago from SAP about Business ByDesign being the magic bullet for SMEs, offering the ability to run remote copies of SAP applications on a per user basis without having to cough up for a full license, why the hesitation?

I suspect the truth of the matter may be partly political, partly execution oriented and partly financial. There are those who would argue that SAP does not really WANT a SaaS market for its packages to come rushing into existence. After all, from a supplier point of view wouldn’t you prefer to sell more expensive licenses that lock the user in rather than a cheap usage-based service that the user can walk away from at any time?  So the conspiracy theorists would say SAP deliberately tried to freeze the market for SAP SaaS offerings to discourage competition and slow down the emergence of this market.

On the execution side, perhaps it is possible that SAP did not realize that selling SaaS solutions is a world away from selling large application suites directly to big companies. SaaS solutions are low-cost high-volume as opposed to high-cost low-volume, and hence need much more efficient and layered distribution channels – and SMEs are used to picking up the phone to ask someone whenever they have to change something, not a great strength for SAP’s support structure.

Then finally, the financial side. Many SaaS suppliers have discovered an uncomfortable truth – while in a license model the user pays a substantial sum of money for purchase followed by maintenance, in a SaaS model the risk position is reversed, with the supplier having to put the resources in place up front to support the POTENTIAL usage of the infrastructure by all those signed up users and then receiving revenues in a slow trickle over time. Is it possible that SAP just didn’t like the financial implications of having to continually invest while looking at payback times of years? Did they therefore decide to deliberately throttle the number of new customers, giving them a chance to make some money before making more investments?

Maybe SAP will tell all at Sapphire … or maybe we will just have to keep guessing.

Steve

As one might have expected, Microsoft tried to ignore the Enterprise Service Bus (ESB) movement for a long time, but eventually it had to do something to answer demands of its customer base looking for SOA support.

Its response was Microsoft ESB Guidance, a package of

architectural guidance, patterns, practices, and a set of BizTalk Server and .NET components to simplify the development of an Enterprise Service Bus (ESB) on the Microsoft platform

Let’s be honest. This is a typical Microsoft ‘fudge’. Microsoft ESB Guidance is not a Supported Product, but is instead a set of guidelines and one or two components. It is a Microsoft Patterns and Practices offering – in other words, you are on your own. This may be fine if you are a Microsoft development shop, but far more worrying if you are real business user with extensive Microsoft presence. It has a lot of the disadvantages of Open Source, but you still have to pay for Bizt Talk etc..

So what does the future hold? Will trying to bring the Microsoft server world into the SOA domain always be a matter of risk and going it alone? Will Microsoft productize Microsoft ESB Guidance? Are there any alternatives other than just consigning the Microsoft platform to run in isolation on the fringes of the enterprise?

Fortunately, the Microsoft model may actually be working here. I do not believe Microsoft will ever productize ESB Guidance – after all, they have had two years and are still maintaining there are no plans to do this. However, what this position does do is it encourages opportunists to jump in and develop products based around the Microsoft technology and guidance materials. An example is Neuron-ESB, from Microsoft specialists Neudesic.

So, while Lustratus strongly cautions users about the effort, cost and risk of using Microsoft’s own ESB Guidance package, the idea of utilizing a Microsoft-based supported ESB product from a specialist vendor is much more attractive. Of course, whether these new Microsoft-based ESBs are any good is yet to be seen….

Steve

It’s always nice to be proved right. At the end of 2008, when Lustratus published its 2009 predictions for the infrastructure market, we highlighted BPM and predicted that 2009 would (at last) be its year.

In March I discussed the impressive 2008 for Pegasystemsin a previous Litebytes post, and now the company has made its 1Q09 announcement of earnings.

Briefly, we are talking about revenue increasing 29% YOY to $62.4M for the quarter, and license revenue up a storming 60% to $28M. Recession – what recession? Admittedly the results were skewed a little by a single large deal closing at around 12% of the total, which may put Pega under pressure for the next quarter, but this cannot disguise the point we made in our 2009 predictions - tactical, targeted BPM can deliver the real savings and flexibility to support broadening customer bases and types that businesses are looking for in the current economic downturn, or can respond to specific business channels such as tracking and reducing fraud.

The other point that these results reaffirm is that companies are looking for solutions that are geared to their own industry vertical needs – Pegasystems has a strong industry framework philosophy that responds to this need very effectively. The only possible ‘cloud’ on the horizon seems to be Peagsystems’ tentative move towards the dangerous ‘Platform-as-a-Service’ (PaaS) market segment – this area is a minefield at the moment and it is to be hoped that Pega do not find themselves sucked into the abyss by getting to wedded to this idea. Just stick to what you do best, guys!

In summary, for all those companies who have heard about BPM and then shied away, put off by the thought of the effort required to deployBPM across the enterprise for all processes, take another look with a tactical, laser-focused mind-set. BPM really can be selectively applied at a reasonable price, with rapid payback and an attractive ongoing benefit stream.

Steve

SAP released its first quarter results today – and they do not make pretty reading at all.

Although overall revenue was only slightly down overall it is the software license figures that are so alarming, crashing by a third compared to 2008. This may seem not to be important since the software license numbers are only a relatively small part of overall revneues, but in fact it is the software license performance that drives a lot of the other related activities, so weakness here will feed through over time. SAP points to the fact that 1Q08 was before the global problems had really taken hold, but while I think this is partially true, I think there is another problem evident here.

Companies are still investing in IT - there have been enough results in the last few weeks that show great growth for some, with Pegasystems and Sybase being two particular examples. However, the SAP results seem to show a greater weakness in the application package market – and this is only to be expected. The problem is that while companies like Pegasystems and Sybase are looking to help companies get immediate return through doing things differently (using BPM and going mobile respectively), SAP packages are SAP packages. They do what they do, and although it is generally a good idea to keep updating them and spreading them more widely, these tasks are

• Very time-consuming and costly
• Not exactly urgent

On this basis, most companies are electing to stick with what they have at the moment on the packages front, while concentrating on other areas of more immediate return in the infrastructure like BPM and Business Events implementations. This gives SAP a real headache in the near term. Eventually, once everyone is spending again, companies may well return to the question of their SAP application package portfolio, but at least in 2009 I suspect this will be put on the back burner. I guess that for SAP, 2010 can’t come soon enough.

Steve