As he promised, @neilwd sought some clarification from Progress Software Corporation (PSC) around their decision to divest most of their middleware products, and posted the subsequent update to his original post. Some of the key points (remembering that this is now third-hand):
Firstly, Bates and Smith were very clear in saying that the company needs to find a space where it can be truly different for a profitable market segment, and use this to drive growth. It’s focusing on what it calls “Application Platform as a Service” (aPaaS) and at this point, its intention is to get to be the “number 1 provider of application development and deployment platforms in the Cloud”.
My PoV: it’s a worthy goal, in an interesting (exciting, even) marketplace. There’s certainly some upside here if PSC can execute (see below for more on that).
The current enterprise IT middleware business (combining the business from Savvion, Actional, Sonic, et al) just isn’t providing enough of a growth engine for shareholders;
My PoV: I’m cherry-picking a little here, but this to me seems a key point – PSC is emphasising a shareholder view over any concerns its customers may have, which strikes me as (to use the Australian vernacular) “arse-about” if you’re interested in a long-term future (i.e. anything longer than 3 – 6 months).
and the company’s leadership also feels that Progress has struggled to focus sufficiently as it’s been fighting on a large number of fronts.
My PoV: this could be a fair point – the current PSC product portfolio is fairly broad after a decade or so of acquisitions, and may require some pruning.
My take is that if Progress can execute on the plan it shared with me, then it could do something really interesting – particularly for small and medium sized application vendors. But I also think it’s got a hell of a task ahead of it to get all these additional products – all of which are built for on-premise installation – and re-engineer them sensibly for PaaS. What’s more, because things are moving so fast in the PaaS world, I think its window of opportunity might prove very tight to squeeze through.
My PoV: Aha! the execution problem rears its ugly head – this was my initial reaction … the new products don’t actually exist yet, or at least not in the required form for this strategy – how long will it take to get to market in any sensible shape? This makes the whole announcement sound like a premature exclamation; both the new product development AND the divestment strategy should have been further progressed before making it.
Secondly, although Progress plans to divest the product businesses as laid out above to help it focus much more clearly, it’s currently looking at ways it can continue to make use of some of the Savvion technology in combination with OpenEdge – so it can continue to offer what it currently calls OpenEdge BPM (particularly of interest to its ISV partners).
My PoV: Oh oh … now we’re getting mixed messages, and muddied waters. Do they want to divest the middleware kit, or not? How would any cross-licensing/partial carve-out of functionality work, and how much does that affect the value of the middleware assets?
the company is prepared to go on record to say “While [the] intent is to divest the Savvion (BPM) and Sonic (ESB) products, [Progress is] committed to supporting features that are essential for building and deploying agile, next generation applications.”. This is something that anyone interested in the future of OpenEdge needs to watch carefully.
My PoV: more mixed messages – at this stage I would guess that any potential purchaser of the middleware products is getting confused, and possibly walking away.
Third, Progress is going to try to find buyers for its divested product lines as soon as possible; it understands that while there’s uncertainty in the market about what will happen next, those businesses could very easily freeze. Its business plan does assume some short term revenue decline as part of this strategy shift, but my view is that nevertheless Progress needs to work very quickly and diligently from here on
My PoV: agree completely; in fact I’d go further and suggest that these product lines may already be dead in the water, or at least drastically written down by the marketplace. I hope I’m wrong, for any number of reasons, but … Neil’s
advice to any nervous customers using the to-be-divested products is to keep a very close eye on where those products go. Your strategy could be affected if a key technology you rely on ends up being owned by an outfit primarily concerned with milking maintenance revenues.
… or someone with a competing product, in which case they could disappear without a trace.
Again, while I appreciate that PSC has some disclosure obligations around share price-sensitive information, this seems half-baked. This additional information does nothing to alleviate my original concerns, and adds some ambiguity around PSC’s continued use of some of the middleware in its new direction. I also see no compelling argument for the divestment other than PSC’s lack of confidence in its own ability to execute on the PaaS play while hanging on to its existing portfolio, and I see a very unsettling effect on customers at a point when they really need to keep customer belief high.
In short – I like the new direction; but don’t think product divestment is necessary to accomplish it. I DO think the divestment, and the way it is being handled, damages customer relationships (damage that will linger) in favour of shareholders (who will have forgotten all about it in a month’s time).