webMethods Inc. today said it will buy Infravio Inc., an independent service-oriented architecture (SOA) registry and governance provider, in a $38 million cash deal that the business integration software vendor hopes will elevate it to the upper echelon of end-to-end SOA management.
The announcement comes on the heels of last month's acquisition of the assets of Cerebra Inc., a purveyor of SOA-based semantic metadata software.
To date, webMethods has been known solely for its business integration and business process management technologies, sewn into its flagship product, webMethods Fabric. Cerebra and now Infravio -- both of which will be integrated into Fabric as early as December -- add metadata management and governance that enforces IT policies and procedures, respectively.
During a conference call this morning to announce the Infravio deal, webMethods president and CEO David Mitchell noted that the biggest barrier to SOA adoption is the lack of governance. "We believe the SOA market has reached an inflection point from proof of concept to enterprise-wide adoption," he said during the media and analyst call.
According to WinterGreen Research Inc., the collective market for SOA products was $450 million last year, and is expected to reach $18.4 billion by 2012. SOA promises systems development and operational flexibility, which is driving investment within the manufacturing space and throughout other industry segments. But as Mitchell pointed out, "it requires the right tools to build SOA-based business solutions and the appropriate management around service throughout the entire IT lifecycle."
According to industry experts, Infravio, with its SOA registry, has one true competitor, Systinet, which was scooped up by Mercury Interactive Group earlier this year. Subsequently, Hewlett Packard Co. announced plans to buy Mercury Interactive in a $4.5 billion deal that will add the Systinet Registry to its product portfolio.
In addition, IBM and Computer Associates are also in the midst of building out full service SOA management suites as are Oracle Corp., SAP AG, and Microsoft Corp., which positions webMethods in a small pond with some big fish.
The good news for webMethods is that Infravio has strong brand recognition in the context of SOA governance and its registry software is said to ensure that organizational rules are followed when developing and linking SOA applications, analysts have said. And governance, as Mitchell noted, is no longer an option when it comes to scaling a SOA across and between enterprises.
"A lot of people don't believe a registry is a required component for SOA, but that's only because they haven't gotten to the point where things turn into chaos," said Anne Thomas Manes, vice president and research director for The Burton Group. "A registry becomes a single point of [access] and links to all information like an index. A repository provides metadata content management ...[including] content control, version control, and lifecycle management. The combination a registry and repository are extremely valuable."
To that end, the webMethods executive team saw an opportunity to cost-effectively add a critical element of SOA management into its offering. Infravio, a seven-year-old company that generated just under $1 million in sales this year, employs 65 people -- 50 of whom are engineers in its development facility in Chennia, India. Infravio also has a small U.S.-based direct sales staff, which webMethods will meld into its larger global sales channels.
The deal, which is scheduled to be completed by the end of this month, is expected to be accretive to webMethod's earnings per share in the company's fiscal fourth quarter, ending March 31, 2007. webMethods reported sales of $208.8 million for its fiscal year 2006 and GAAP net income of $15.9 million, or 29 cents per diluted share.
webMethods officials declined to offer specifics on how Infravio's registry would be integrated into Fabric, or what roles Infravio's founding brothers, Srinivas and Mukund Balasubramanian, will take on, except to say they will remain with the company focusing on the integration effort and product development.