One might imagine a merger and acquisition specialist in the software industry coming home from a hard day at the office and saying, "Honey I shrunk the SOA vendors."
Certainly the list of SOA vendors is a lot shorter than it was a little more than a year ago before Mercury Interactive bought Systinet and then Hewlett-Packard Corp. bought Mercury. Or since Progress Software Inc. bought Actional, and RedHat Inc. bought JBoss, and SOA Software Inc. bought Blue Titan, and BEA Systems Inc. bought Flashline. Then there was the acquisition of Infravio last summer by webMethods Inc., which was gobbled up this past week by Software AG. And that list doesn't include some of the smaller vendors gulped down by the hungry giants in the software business.
So when will it all end? Probably not in a year ending in the number seven, according to industry analysts interviewed for this article.
"The space is much smaller than it used to be," observed Ron Schmelzer, senior analyst with ZapThink LLC. He added it's likely to get smaller than it now. "This industry is consolidating very fast. We may find by the end of 2007 another two or three big deals."
It's possible that major players including Oracle Corp. and HP will be looking to fill out their SOA product lines. Schmelzer sees the management products of AmberPoint Inc. and the testing products of Mindreef Inc. as potential targets for Oracle. Those two, plus testing vendors Parasoft Corp. and iTKO Inc. might be on HP's wishlist. As evidenced by the webMethods deal, even larger SOA vendors are not immune. "Who knows," Schmelzer speculates, "maybe Oracle will pick up Tibco."
Getting to the bottom line he says, "It's looking less and less likely that strong independent companies will stay independent."
The end of this year might also look a little like "Back to the Future" in Schmelzer's view.
"By the time 2007 is over the vendor landscape is going to look awfully like the vendor landscape as it looked at the beginning of the SOA era," he said. "It's going to look like the same large vendors that we saw in 2000. IBM, HP, BEA, Oracle and Sun. And now we have to consciously think of Software AG because Software AG is now as big as some of those other companies. So people will have to think in terms of HP, IBM, Software AG, Oracle, BEA and Sun."
Dana Gardner, principal analyst at Interarbor Solutions LLC, isn't as sure the SOA vendors will shrink that severely.
"I don't think we need to say this is just going to be four gorillas fighting it out," he said. But he does see the acquisitions continuing for several reasons including the need to maximize the number of sales reps and consultants with feet on the street, which is one of the things that he believes made the Software AG acquisition of webMethods so attractive to both parties. They had feet on the street in complimentary geographic markets. "I think for Software AG and webMethods this is as much a mashup of geographies, where they have complimentary strengths," he said, "webMethods in the North America market and Software AG in Europe."
The larger vendors will also continue to buy up companies that have software that helps fill gaps in their product offerings.
"We're seeing companies patching and filling where they are deficient," Gardner said. "If you've got a company that's got a lot of data management, you might need to get an ESB. So you might see something like what Progress has put together through its acquisitions. If you've got the ESB, but not the data, you might seek some of that. Or if you're IBM, you want to gobble up as much as you can in order to consolidate your strengths and augment your weaknesses. We're at the stage where it's early enough to say the vendors are picking and choosing acquisitions based on polishing and augmenting their portfolios."
In Gardner's opinion: "These are going to be forces that are going to continue to foment more consolidation."
Tony Baer, principal at onStrategies LLC, is not sure IT departments seeking to buy software products for SOA projects will be gnashing their teeth at the prospect of having fewer vendors from which to make their product selections.
"Although you can't simply buy 'SOA in a box,' if you follow trends in the enterprise software space, customers typically want one throat to choke," he said.
Baer also sees the history of technology mitigating against any fears that merger and acquisition mania will dry up SOA innovation.
"Let's not confuse SOA vendor consolidation with the 1890s patent office, which somebody wanted to shut down because all the inventions had supposedly been invented," he said "There is still plenty of room for innovation in SOA. There are still many layers of the onion when it comes to governance, management, orchestration, verticalization and more."
Where the next SOA innovators will come from and what they might be is the subject of tomorrow's article.