Software AG Announces IDS Scheer Acquisition: Is The Tail Wagging The Dog?

By Clay Richardson, Ken Vollmer, and Connie Moore

Only two years after acquiring webMethods, Software AG shakes up the BPM world once again with its announcement to acquire leading process modeling vendor IDS Scheer. Since the webMethods acquisition, Software AG has continued to push the envelope on combining solid human-centricandintegration-centric capabilities under a single vendor roof. With the IDS Scheer acquisition, Software AG is sending an indisputable and clear message to the market: We are a major BPM player, hear us roar! Or should it be, "hear us bark?"

In many ways IDS Scheer has more brand cachet in business process improvement circles than Software AG, leading us to wonder: Is the tail wagging the dog on this deal? Is Software AG buying IDS Scheer, or is IDS Scheer really buying Software AG? The truth is that Software AG is buying a global brand that has the potential to completely remake Software AG into a process improvement powerhouse.

On the surface, Software AG has positioned this acquisition as a vehicle for opening up new global markets they are trying to further penetrate - such as Latin America and Asia Pacific.  Specifically, they expect to expand their consulting footprints in these markets in order to support increased license sales. No doubt, Latin America is poised for growthand Software AG has timed this acquisition to capitalize on projected growth in Brazil and Venezuela, which continue to see single and double digit increases in technology spend.

Looking beyond surface observations, we see three key reasons why this acquisition makes sense and why it will play well in the market place:

  • The Need For Execution IDS Scheer needed an execution engine in order to remain relevant and credible in the eyes of process pros responsible for expanding enterprise BPM initiatives. Although the majority of IDS Scheer's customers use Aris for SAP implementations, many of these customers are looking for simpler alternatives to SAP for process execution. Looking forward, Aris customers could build out their process models and decide whether to deploy to SAP or webMethods (or another BPM environment) - depending on the process, complexity and reliance on SAP data and applications.
  • The Need For Business Empowerment. Since the webMethods acquisition, Software AG has struggled to break away from its "integration-centric" roots.Ask the average CIO about webMethods and she's likely to say, "Yeah, they really do a great job with EAI."e; However, the reality is that over the last three years webMethods has completely revamped the platform to truly support human-centric processes while maintaining key integration-centric components. With the IDS Scheer acquisition, Software AG doubles down on its commitment to empower the business to align process initiatives with key strategic goals and objectives.  
  • A Seat In The C-Suite Ultimately, this acquisition will increase Software AG's stature and profile within large enterprises - moving webMethods from a technology component in the IT stack to a key ingredient in their customer's process strategy. Keep in mind that IDS Scheer is well regarded as a platform for supporting large BPM Center of Excellence efforts, which typically enjoy healthy support from CEO's and COO's.  
  • So, what's it mean?

  • Aris customers shouldn't sweat Aris customers should breathe easy, since Software AG has agreed to treat Aris as a separate entity, with its own roadmap and strategic direction. This was a smart move by Software AG, in order to not rock the boat with key Aris partners SAP and Oracle.
  • Watch for SAP's response Middleware consolidation is accelerating.The acquisition of IDS leaves SAP with no viable options to shore up the NetWeaver stack other than to look at Informatica or Software AG, though it’s been rumored for some time that SOA software was on their target list. Rumors have also been rampant about a potential SAP acquisition of Software AG. In addition to regaining control of the IDS Scheer modeling capability, there are additional factors that could make such a move beneficial for SAP.For example, replacing NetWeaver XI/PI with webMethods would solve a persistent problem of interfacing SAP applications with the outside world.It would also provide native EDI capability that SAP customers must currently obtain via SAP partnerships with CrossGate and Seeburger.
  • M&A activity will continue in the BPM space In the current economic environment, many smaller BPM vendors are running out of runway to launch their companies to the next level. These vendors are beginning to face the reality of acquisition or failure, and larger stack vendors (with cash) realize that now is the time to go bargain hunting for struggling vendors. We expect M&A activity to continue in the BPM space; however, it will not be in the most obvious pairings - as signaled by the Software AG and IDS Scheer situation.
  • Our Point Of View

    Overall, Forrester expects this to be a successful deal for both Software AG and IDS Scheer customers, with minimal disruption and adverse impact on combined customer portfolios.Software AG customers will benefit from an extensive process analysis modeling platform and professional services organization that can support multi-million dollar, multi-year BPM initiatives; and IDS Scheer customers will benefit from a robust execution engine that can support human-centric and integration-centric business processes.

    The big loser is SAP - and to a lesser extent Oracle. Both use IDS Scheer to augment their internal process modeling capability. Now they will have to rely on a competitor for this functionality.

    In the end, it really doesn't matter if the tail is wagging the dog - all that matters is whether the dog's bite matches its bark. And in this case, the combined Software AG / IDS Scheer offering seems to be a good match.

    Sound Off

    We want to hear from you. Let us know what you think of the IDS Scheer acquisition. Do you think this acquisition will have a net positive impact on the BPM market? Do you think the combined technology portfolios of Software AG and IDS Scheer are complimentary and will improve their customers’ process improvement efforts?How do you think SAP will respond? Post your thoughts in the comment section or feel free to shoot us a quick e-mail at crichardson@forrester.com or kvollmer@forrester.com.

    Comments

    re: Software AG Announces IDS Scheer Acquisition: Is The Tail W

    To clarify, SAP AG is a co-owner of Crossgate and the relationship involves joint solution development in addition to joint sales and marketing activities.

    re: Software AG Announces IDS Scheer Acquisition: Is The Tail W

    Great analysis.Peter Kuerpick, Management Board Member of Software AG and Chief Product Officer has publicly stated that the strategic partnerships between IDS Scheer and Oracle and SAP (as well as others including TIBCO, IBM and Microsoft) should be continued. Both Oracle and SAP have invested substantially in integrating their solutions to ARIS, and those ongoing strategic relationships are certainly important for IDS Scheer and for Software AG.As an independent provider of Business Infrastructure Software, Software AG has a number of offerings, Centrasite Business Service Repository for example, which can either be a core part of the Software AG suite or can be included as highly interoperable best-of-breed components that play well with other vendor products.In keeping with this tradition, I think SAP, Oracle and others should find Software AG to be a supportive partner in these efforts.thanks,Miko MatsumuraSoftware AG