With its December 2007 acquisition of a portion of application modernization specialist Jacada Ltd., Software AG has continued down an acquisition path that was punctuated earlier in 2007 by its takeover of IT integration provider webMethods.
When Software AG announced its $546 million purchase of webMethods in spring 2007, some observers wondered whether the move would pay off.
"We were skeptical when the acquisition was announced for various reasons," says Massimo Pezzini, a Gartner vice president and distinguished analyst based in Milan. The reason for Gartner's wait-and-see approach was an overlap of products between the two companies and the challenge of integrating the Germany-based corporate culture of Software AG with the American-bred webMethods.
The company has performed well on both scores, Pezzini says. "The acquisition, so far, has proved very successful. Because of the webMethods acquisition, Software AG's relevancy in the SOA, middleware, and BPM market has grown significantly."
Which is precisely what company executives had hoped for.
Software AG is working "to become the biggest independent vendor of integration technology," says Peter Kuerpick, chief product officer for the webMethods business line and Software AG board member.
The integration of the two companies will be complete by the middle of 2008, according to Kuerpick. Eventually, he expects revenue from the webMethods division to eclipse that of Software AG's original database management business, growing from its current 45% contribution to as high as 70%.
Pezzini says the company faces numerous challenges, including what he sees as a weak marketing presence, improving collaboration with systems integrators and software vendors, and a prudent approach to future acquisitions.
In addition, Software AG must compete in an integration market that is drawing more interest every day. SAP and Oracle are both on the march with SOA initiatives, hoping to trade on their outsize name recognition to build customer bases.
"I don't think that the mega-vendors ... are going to drive the good applications infrastructure vendors out of business, especially around the integration technology," says Gartner analyst Jess Thompson.
Kuerpick evinces little concern over the encroachments. "The more they do it, the more there is space for us," he says, noting that more competition will likely expand the heterogeneous IT environments that demand integration.
In the coming months, he says, Software AG will look to add to its integration capabilities, including technologies for rules, data integration, and modeling, And that means more acquisitions, though Kuerpick won't divulge
potential targets.
"These days you either buy or you are bought," Pezzini declares.
And while Oracle has finally reached an agreement to acquire Software AG rival BEA Systems and oddsmakers expect Tibco to be snatched up as well, Software AG is likely to remain a predator, not prey, Kuerpick says.
Peter Schnell, the company's founder, has transferred all his stock — amounting to 30% — to the charitable Software AG Foundation, one of Germany's largest.
"It makes it impossible, unless somebody convinces the founder to sell all of his shares, to acquire Software AG," Kuerpick says.
This article originally appeared in the February 2008 issue of Managing Automation.