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Will the enterprise market spend significant IT budget on Windows Vista in 2007?



CEO Spotlight: Phillip Merrick, webMethods

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

Angel Mehta: The Web services / integration market seems to have been through it’s own boom/bust cycle, so tell me a little bit about the state of the market today and how webMethods is positioned.

Phillip Merrick: I think that we’re differentiated in a couple of important ways. First, we simply have a broader product portfolio than our competitors and within that portfolio, things are internally integrated a lot more than with say, IBM, who would be our biggest competitor.

This thing that we call “integration” has evolved in a couple of important directions. The base infrastructure is conforming to standards; in particular, the Web services standards. Increasingly customers want to look at integration not on its own but as part of an approach to putting service-oriented architectures across their enterprise. We’ve made moves in the last six months to offer capabilities not just for doing business process integration with Web services, but also allowing customers to manage that service-oriented architecture across the whole enterprise and beyond. We’re doing that principally with a product we call, “webMethods Fabric”, so that’s what’s happening on the infrastructure side.

On the other end of the scale, you’ve got much more of an emphasis these days on delivering real business value out of IT projects.

Angel Mehta: That’s certainly not restricted to the integration market, though…

Phillip Merrick: Of course not, but the point is, we’re seeing it in spades. So at the other end of the scale, we find ourselves doing a lot more for customers in the area of business process… business process management and business activity monitoring. We’re seeing a lot of interest in it, particularly from large manufacturing and financial services customers.

Angel Mehta: Would not the business intelligence vendors be all over the opportunity for business activity monitoring? How is webMethods attacking the problem differently?

Phillip Merrick: Well first of all, we have a view of the business process right across the enterprise and it’s a real-time view. So as opposed to the approach of putting everything into a data warehouse and getting it done once a day or once a week or worse, we’re actually able to look at the key information, particularly key performance indicators, on a real-time basis. We can bring artificial intelligence technology to do things like event management… so we can actually instrument business processes across the enterprise, capture events out of that instrumentation, and then use things like neural network engines to analyze what obviously becomes a big series of events. The analysts effectively set some key metrics, decide what the right ranges are for those metrics, and then we use the event management engine to figure out whether these key indicators are staying within the specified range. If not, we set off alerts and take appropriate actions.

The point is, you have to look at business activity monitoring as not just being a static report on some snapshot state of the business - but as an active, living report about what’s happening in the business. If that’s the approach you take to business activity monitoring, then business process integration is actually a pretty good place to get started.

Customers and analysts both have confirmed this. In the end, business integration players will be the biggest beneficiaries of the adoption of business activity monitoring by large enterprises. So I think we’re in the right place at the right time.

Angel Mehta: During the bubble I think it was thought that B2B trading exchanges, the B2B market places, would drive that need for integration outside the firewall. How much of your business still comes as a result of those exchanges today? Or has the focus been completely removed from that area?

Phillip Merrick: We certainly did business with quite a number of those industry-backed exchanges, though typically not the smaller dotcom ones that have since fallen away. But the exchanges that were setup by the Global 2000 companies are actually moving along; they’re running into the billions in terms of the transaction value running through them. B2B is a very broad topic, of course. I will tell you that the interest in business-to-business integration is definitely back these days. The interesting thing is that the greater bulk of that interest is in applying older technologies, in particular EDI, to the Internet infrastructure and that’s where things like EDI INT and AS2 are becoming really significant, particularly with mandates from major companies like Wal-Mart and so on that their suppliers get off the bands and move EDI transactions onto the Internet using EDI INT and AS2 standards.

Angel Mehta: Last year, webMethods did a number of acquisitions. Tell me about some of the challenges involving your approach and why you chose to make the acquisitions you did.

Phillip Merrick: I think the Number 1 thing we think about is what more can we do for our customers? How can we help them more effectively solve their business integration and infrastructure challenges? So in one of those acquisitions you referred to, we acquired a leading edge portal technology. Not so much because we saw the pressing urge to move into the portal market but because our customers were telling us that was something that was incredibly interesting to them. In general I’ll tell you that we’re very careful about what parts of the market we move into. We’re in the integration business and the last thing you want is for the customer to look at your offering and say, “Wait a minute, your own product offering isn’t that integrated!”

With the acquisitions that we made last year in the October timeframe, we were looking for start-up companies that had already integrated their products with our products at actual customer sites. The business activity monitoring product, which we acquired from the Dante Group, had already been integrated with the webMethods Integration Platform at several key accounts, for example.

Angel Mehta: What about the operational challenges of the integration of the new company. Is there any advice you’d have for software CEO’s that are planning to broaden their product suite via acquiring external technology?

Phillip Merrick: The majority of all M&A transactions end up failing, as I’m sure you know, and my view on that is they don’t have to. Advice? Just the basics. Do the homework up front. Understand exactly what you plan to do with the acquisition and make sure that you can map details of all the things that are going to have to happen for the acquisition to be successful. If you’re acquiring for customers, for example, make sure that the customer relationships are as solid as people are making them out to be. If you’re acquiring for technology then obviously do heavy due diligence on architecture. These things sound like very straightforward things, I know, but it’s amazing how many times these things just never get done before M&A transactions are executed.

The second thing is to have a plan for integration and execute on it. I’ve talked to a number of folks on this topic and one of the common themes you hear is that in many cases, the acquiring company had a plan for integration but just never properly executed. And ultimately, corporate integrations are decided by the people involved. It’s very much a people matter - so you’ve really got to pay strict attention to what is happening on the ground day-to-day with the folks on both sides of the transaction. You need to quickly get to the point where everyone feels like they’re all part of one team… otherwise, you’re just setting yourself up for ‘us vs. them’ problems down the road and that’s ultimately what destroys the value.

Angel Mehta: You mentioned that many M&A integration plans don’t get executed on. Can you elaborate on WHY you think that is?

Phillip Merrick: Sometimes management has a tendency towards moving on to the next big thing. Particularly if the company is doing a lot of acquisitions, then there is this tendency to just focus on the deal. It’s the little things that always fall through the cracks… like making sure that everybody is outfitted with business cards that have the right logos on them. Things like that. I mean, that’s a pretty trivial example; but there are so many small items that make it obvious to the outside world that the company was never integrated. So in those cases, it’s that not enough attention is paid to the process. On the other hand, you can be totally over-bearing about the integration process and end up creating exactly the result you wanted to avoid – an ‘us vs. them’ mentality.

Angel Mehta: You mentioned IBM as your biggest competitor, though BEA has gone aggressively after the integration market as well. How do you view them?

Phillip Merrick: BEA is a fine company and they have a fine application server offering. We’re also told that their portal offering is quite reasonable. However, they have struggled mightily to bring a competitive product to market in the integration area. It’s relatively unusual for customers to consider the BEA product for heavy-duty integration. When they do make it on to the shortlist, they’re almost always eliminated if they’re up against a product like ours.


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