Analysis: Behind Software AG’s Acquisition of webMethods

The deal helps position Software AG as an ascendant SOA player in both North America and the EU

Earlier this month, Software AG snagged enterprise application integration (EAI) specialist webMethods Inc. for $546 million in cash. According to Gartner Inc, the deal helps position Software AG as an ascendant SOA player in both its strongest market region—the EU—and in North America, where Software AG has enjoyed more sporadic success.

"This deal is a strong statement that Software AG is willing to risk and invest to strengthen its position and pursue its vision of becoming a key player in the SOA infrastructure market," write Gartner analysts Massimo Pezzini, Benoit Lheureux, and Jess Thompson. The trio cites a number of drivers for Software AG, including the likelihood of geographic expansion (thanks to webMethods’ strong presence in the U.S. and Asia-Pacific), entry into new verticals, customer growth—specifically, the addition of 1,500 webMethods customers—and the addition of mostly complementary technology. Software AG’s move should also help dispel the "viability issue" that’s hampered webMethods over the last few years.

Those are the long-term drivers, according to Gartner. In terms of immediate impact, webMethods should help recast Software AG as one of the top 10 middleware vendors. It should also strengthen Software AG’s position in the North American region: 56 percent of the German company’s revenues are derived from EU sales, while, conversely, webMethods generates nearly two-thirds (62 percent) of its revenues from sales to U.S. customers.

Elsewhere, the acquisition helps lend Software AG much-needed credibility on the business-to-business (B2B) integration front. It also gives Software AG access to webMethods’ "impressive" roster of software and systems integration partners, according to the Gartner analysis.

All won’t be smooth sailing for Software AG, of course. Its primary challenges are part and parcel of any takeover scenario: it must manage to retain key technical, marketing, and sales people—a fact that’s complicated, Gartner suggests, by Software AG’s relative lack of experience assimilating acquisition targets of webMethods’ stature.

Software AG must also keep webMethods clients satisfied—a requirement that will be hampered, to a degree, by the usual competitive FUD-mongering. Finally, Software AG must develop a reconciliation roadmap that identifies (and accentuates) areas of complementarily, but which also identifies—and eliminates—areas of overlap. The goal, the Gartner analysts say, is coherence and complementarity.

In the final analysis, Software AG customers, especially, can expect to benefit from the acquisition. "[Customers should] expect to gain a portfolio of leading products and technologies to enhance your SOA infrastructure," Gartner counsels. "However, examine the resultant product road map, since marginal Crossvision products—particularly those from third parties—may be replaced with webMethods technology."

Nor is the acquisition only a positive development from Software AG’s perspective. The German software veteran should bring a steady hand to the helm of the somewhat shaky webMethods argosy. "[Customers should] expect to benefit from increased stability and vision," the trio write. "The long-term viability of key webMethods technologies is reasonably assured, although some marginal products may succumb to Crossvision equivalents."

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.