Tuesday, August 18, 2009

BriefingsDirect analysts discuss Software AG-IDS Scheer acquisition and lackluster prospects for Google Chrome OS

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Welcome to the latest BriefingsDirect Analyst Insights Edition, Volume 44. Our topic this week on BriefingsDirect Analyst Insights Edition, and it is the week of July 13, 2009, centers on Software AG's bid to acquire IDS Scheer for about $320 million. We'll look into why this could be a big business process management (BPM) deal, not only for Software AG, but also for the service-oriented architecture (SOA) competitive landscape that is fast moving, as we saw from Oracle's recent acquisition of Sun Microsystems.

Another topic for our panel this week is the seemingly inevitable trend toward Web oriented architecture (WOA), most notably supported by Google's announcement of the Google Chrome operating system (OS).

Will the popularity of devices like netbooks and smartphones accelerate the obsolescence of full-fledged fat clients, and what can Google hope to do further to move the market away from powerhouse Microsoft? Who is the David and who is the Goliath in this transition from software plus services to software for services?

Here to help us better understand Software AG's latest acquisition bid and the impact of the Google Chrome OS are our analysts this week. We are here with Jim Kobielus, senior analyst at Forrester Research; Tony Baer, senior analyst at Ovum; Brad Shimmin, principal analyst at Current Analysis; Jason Bloomberg, managing partner at ZapThink; JP Morgenthal, independent analyst and IT consultant; and Joe McKendrick, independent analyst and ZDNet and SOA blogger. The discussion is moderated be me, Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:
Morgenthal: The acquisition seems to be focused heavily on IDS Scheer's association with SAP, and that the move seems to be driven by more of a business relationship than a technical relationship. If you look at the platforms, there is some overlap between the webMethods platform and the ARIS platform.

So, it would make sense that, if they were going after something, it wouldn't be just more design functionality. There has to be something deeper there for them to grow that business even larger, and certainly SAP is a good target for going after more additional business.

SAP probably doesn't believe that they need an SOA partner, but I think that the fish are starting to nip around the outer boundaries. SAP customers are to the point now, where they are looking for something more immediate, and obviously the redevelopment of SAP as a complete SOA architecture is a long-term endeavor.

So, how do you start moving there in an incremental fashion? A lot of SOA platform vendors are starting to identify that there is a place for them on the outer edges, until SAP gets to make its full transformation.

The combined effort of a Software AG with webMethods and IDS Scheer actually becomes one of the feeders on the outer edges of the SAP market. While SAP is in its cocoon, it needs to turn from caterpillar into SOA butterfly, and heaven knows whether that will actually survive that transformation.

There are a lot of SOA platforms starting to eat at the outer edges of the cocoon, feeding off of that, and hoping the transformation either fails or that there will be a place for them when the SOA butterfly emerges.

Kobielus: What's really interesting here is that, clearly Software AG is on a tear now to build up their whole SOA stack. ... People didn't realize that IDS Scheer is actually now a business intelligence (BI) vendor. They've got a self-service mashup BI product called ARIS MashZone, in addition to the complex event processing (CEP) product and an in-memory analytics product.

IDS Scheer, prior to this acquisition, has been increasingly positioning themselves in the new generation of BI solutions. That's been the one area where Software AG/webMethods has been deficient, from my point of view. In these SOA wars, they're lacking any strong BI or CEP capabilities.

Now, IDS Scheer, their BI, their CEP, and their in-memory analytics is all tied to business activity monitoring (BAM), and all tied to BPM. So, it's not clear whether or when Software AG, with IDS Scheer on board, might start turning all of that technology or adapting it to be more of a general purpose BI CEP capability. But, you know what, if they choose to do that, I think they've got some very strong technologies to build upon.

Baer: You can't separate the technology from the strategic implications of this deal. ... There are other dimensions to this deal, which is that Software AG's webMethods business gets a much deeper process-modeling path. I don't know how redundant it is with the existing modeling. I don't think there are many BPM modeling languages that are deeper than ARIS, and that's selling pretty awesomely. As a matter of fact, you can look at Oracle, which uses it as one of the paths to modeling business process, along with the technology they picked up from BEA.

For Software AG, [the acquisition gives them] immediate access to the SAP base, and that's huge. It also basically lays down a gauntlet to IBM and Oracle, especially Oracle, which has an OEM agreement [with IDS Scheer]. All of a sudden they have an OEM agreement with a major rival, as they're trying to ramp up their Fusion middleware business and their SOA governance story.

Shimmin: Look to the governance. About two years ago, most of the vendors were OEM. That certainly has turned around, such that these vendors are now very much providing in-house stacks. That's why I think this is such a big deal, and, as Tony was saying, why it's so disruptive.

It's not just that they have a fuller stack now, but there is a more complete stack for SAP customers. NetWeaver has been hanging in there. SAP definitely thinks it is middleware, but then why else would there be so many players on the outside, providing integration services for SAP applications running on not NetWeaver

It's now a class society, where you have the big players -- the IBMs, Oracle, SAPs, and now Software AGs of the world -- and then you have the rogue players in these open-source space that are coming up, that have room to play. ... When you have this really bifurcated environment, it gives you fewer acquisitions and more competition, and that's what's going to be great for the industry. I don't see this as leading to further consolidation at the top end. It's going to be more activity on the bottom end.

Bloomberg: This IDS Scheer announcement really doesn't have anything to do with SOA. That is surprising, in a way, but also consistent with some of the fundamental disconnect we see within Software AG, between the integration folks on one hand and the BPM folks on the other.

There are some people within Software AG, typically the CentraSite team, Miko Matsumura and his strategy team, who really understand the connection between SOA and BPM. But, for the most part, basically the old guard, the German staff, just doesn't see the connection.

If you read the BPM For Dummies Book that Software AG put together, for example, they don't even understand that SOA has any connection to BPM. Software AG released a press release a few weeks ago that described SOA as a technology. Whoever wrote the press release doesn't even understand that SOA is architecture. It makes you wonder where the disconnect is.

With the IDS Scheer acquisition, if you read through what Software AG is saying about this, they're not connecting it with their SOA story. This is part of their BPM story. This is a way for them to build their vertical BPM expertise. That's the missing piece.

Kobielus: Let me butt in a second, because in Forrester we've been discussing this. We don't think that Software AG understands fully who they are acquiring, because they don't really fully understand what IDS Scheer has on the SOA side. They don't understand the BI and CEP stuff.

So, I agree wholeheartedly with what Jason is saying. They're acquiring them just for the BPM, but that really in many ways really understates what IDS Scheer potentially can offer Software AG.

Bear: There has always been a huge cultural divide between the business folks, who felt that they own BPM, versus the IT folks, who own the architecture or the technology architecture, which would be SOA. What’s really interesting and what's going to stir up the pot some more -- and this is still on the horizon -- is BPMN 2.0, which is supposed to support direct execution.

Bloomberg: You're right that a lot of organizations still see SOA as technical architecture, as something distinct from the BPM, and those are the organizations that are failing with SOA. That part of the "SOA is dead" straw man is that misconception of SOA as about technology. That's what’s not working well in many organizations.

On the plus side, there are a number of enterprises that do understand this point, are connecting business process with SOA, and understand really that you need to have a process driven SOA approach to enterprise architecture.

Kobielus: What gives me hope on the Software AG-IDS Scheer merger is the fact that what I heard on the briefing is that Software AG realizes they need to shift from a technology and sales driven model towards more of a solution and consulting driven business model. First of all, that's the way that you lock in the customer in terms of a partnership or an ongoing relationship to help the customer optimize their business and chief differentiation in their business.

What I found really the most valuable thing about the briefing on the acquisition that we got from them the other day was IDS Scheer adding significant value to Software AG. Software AG pointed to the business process tools under ARIS. That's a given. They focused even more on the EA modeling capabilities that IDS Scheer has, and even more on the professional services on the vertical solution side and the BPA consulting side -- consulting, consulting, consulting, relationship building, solution marketing.

On Google Chrome OS ...

Shimmin: I just think it's reflective of the shift that's already under way. When you look at Google Chrome OS, it's Linux, which is a well-established OS, but certainly not something you would call a web-oriented OS. Chrome OS is really something akin to GNOME or KDE running on top of it. So, technologically, this is nothing spectacularly new.

I think that what Google is doing, and what is brilliant about what they're doing, is that they're saying, "We are the architectural providers of the web, people who make the pipes go, and make all of you able to get to the places you want to go in the web through our index. We're going to build an OS that's geared toward you folks. We're going OEM and through vendors that are building netbooks, that are definitely making a point of contention with Microsoft. Because Microsoft, as we know, is really not pleased with the netbook vendors, because they can't run Vista or eventually Windows 7."

Morgenthal: I have differing opinion, and of course an opportunity to tick off the entire Slashdot audience. Everyone thinks this is an attack at Microsoft. I'm looking at it as a Mac user and see a huge hole in the market. I've got to pay almost $2,000 for a really good high-powered Macintosh today. All they did was take BSD Unix and really soup it up so that your basic user can use it.

People on the Linux side are like, "Oh, Linux is great now. It's really usable." I've got news for you. It's no way nearly as usable as Windows or the Mac. As far as usability, Linux is still growing out of the proverbial slime.

But, if you take that concept of what Apple did with BSD and you say, "Hmm, I'm going to do that. I'm going to take Linux as my base and I'm going to really soup up the UI. I'm going to make it really oriented around the network, which I already did, and I have a lot of my apps in the Cloud, I don't necessarily need to build everything large scale. I still need to have the ability to do video, tie things in, and make that usable, but I'm also going to be able to sell it on a $400 netbook computer."

Now, you're right down the middle of the entire open market, because people can't stand Windows XP running on these netbooks. As was previously said, you can't yet run Windows 7 yet or Vista. We don't know what Windows 7 is going to look like, as far as usability, and the Mac is costing way too much.

There is a huge home run right through the middle. You just run right up the center and you've got yourself a massive home run. It doesn't have to be about going after the enemy. It's not about hurting the enemy. It's about going after your competitors.

... If you can deliver the equivalent of an Apple-based set of functionality and the usability of the Mac on a $400 netbook, or a bigger if you want, you hurt Apple. You don't hurt Windows.

Kobielus: People keep expecting the big "Google hegemony" to evolve or to burst out, so everybody keeps latching onto these kinds of announcements as the harbinger of the coming Google hegemony and all components of the distributed internet-work Web 2.0 world. I just don't see that happening.

They've got all these kinds of projects going, but none of them has even begun to deliver for Google anything even approximating the revenue share that they get from search-driven advertising.

So, this is interesting, but a lot of Google projects are interesting. Google Fusion Tables are interesting for analytics, but I just can't really generate a big interest in this project, until I see something concrete.

Shimmin: I am sorry to interrupt you, but Apple has netbook coming out in October too, so they're trying for that market as well.

Baer: I'll grant you that point. The important thing mostly is that it does point to a new diversity of clients. Some may need netbooks. Some may want smartphones. Some, like myself, still deal with regular brick computers. It's just a diversity.
Listen to the podcast. Download or view a full transcript. Find it on iTunes/iPod and Podcast.com. Charter Sponsor: Active Endpoints. Also sponsored by TIBCO Software.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

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