Tech Industry

Commentary: WebMethods deal may trigger industry consolidation

Gartner believes that this business combination will result in a company large enough to achieve the critical mass required to support business-to-business initiatives of any size.

See news story: WebMethods to buy Active in $1.3 billion stock deal

By Roy Schulte, Ross Altman and Sanjeev Varma, Gartner Analysts

This deal represents the combination of two companies that have solid positions in the two sides of the application integration market.

Active Software has a competitive product line, with particular strengths in adapter development. Active also provides pre-built adapters for a large number of packaged applications. The company has demonstrated strong revenue growth and a solid vision concerning the current and future requirements for the integration of enterprise applications.

WebMethods has established itself as a strong company in the business-to-business side of the application integration market. Its strengths are in establishing communications links between enterprises across the Internet. In addition, it has been successful in establishing partner relationships with enterprises heavily engaged in business-to-business initiatives. Some examples include Dell Computer, Federal Express and Eastman Chemical.

The company has also established relationships with mySAP.com, Ariba and Commerce One--early leaders in the business-to-business electronic market.

Gartner believes that this business combination will result in a company large enough to achieve the critical mass required to support business-to-business initiatives of any size. The companies' technologies will not represent a great deal of overlap; furthermore, they have been installed together at several accounts, so much of the integration work is complete. However, while the two companies bring complementary strengths to the table, we believe that some areas of functionality must be improved--in particular, business process management.

Another challenge will be establishing more of an international presence. Although the two companies combined represent themselves as having a fairly significant international presence, with seven international offices, significant markets exist worldwide where the combined company will have limited or no presence.

WebMethods and Active are still in the building phase of their international operations. Companies that already have strong international operations will be able to continue to point to their international presence as a competitive edge.

This will not be the last acquisition of its kind in 2000. The time required to close this deal and effectively integrate the operations of these two companies--from the fourth quarter of this year until the first quarter of next year--will provide competitors Neon Software, Mercator Software and Software Technologies with the opportunity to match this move through mergers or acquisitions.