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Wednesday, February 4, 2004

Consolidation runs amok

The impending acquisition of Confluent Software by Oblix has thrown a spanner in the works of analysts' neat predictions. It's been a constant mantra that the web services management sector is "ripe for consolidation," and at first glance this latest deal seems to confirm a continuing trend of larger, established management software companies picking up smaller, struggling web services startups.

Except that Oblix doesn't fit that profile. You may recall we ran an article about one of its customer implementations in December, Information access waits on ID standards. It's a specialist identity management software company, itself regarded as a struggling startup until quite recently. This wasn't the sort of consolidation the analysts had in mind at all.

In fact, the more you look at the pattern of what is being described as consolidation in the web services management sector, the less appropriate the moniker becomes. Sure, we're seeing some acquisitions, but we're not seeing anybody going out of business. The pattern seems to be that companies either build strong customer bases and thrive, or they build weak customer bases and get snapped up. The VCs must be very happy with those odds — heads you make a sustainable profit, tails you score a trade sale. That's a very palatable downside risk.

Rather than consolidation, I'd say it's much more a case of rampant expansion. Web services management is proving to be such an important technology that it's careering off in all kinds of directions, and in the process becoming attractive to a broad range of buyers. Remember we saw EAI vendor webMethods buying The Mind Electric last fall. I wouldn't be surprised to see ESB specialist Sonic Software acquiring some web services management technology, either. Perhaps you can call this a realignment or a rationalization. But to portray it as the established vendors coming in and mopping up — which is the sort of image analysts are conjuring up when they talk of consolidation — is to give those vendors more credit for being on top of whatever's going on than they deserve.

I expect we'll writing more about the Oblix-Confluent deal in the next few days here on Loosely Coupled. Meanwhile, here are some links to press coverage of the story so far:

[UPDATED Feb 5th:] More coverage:

  • Oblix Agrees To Acquire Confluent Software — A succinct summary by TechWeb explains how the two company's products will likely fit together.
  • Oblix makes Web services bid, buying Confluent — Best of the bunch is IDG's coverage, which includes comment from both companies, and doesn't once mention the 'consolidation' red herring.
  • WSM — The Market That Never Was? — To finish up, some intelligent commentary from CBDi: "As yet another WSM vendor is acquired we wonder if whether this market really exists ... Yes, there are web services, and yes, clearly they need managing. But does that mean it warrants its own market space, with dedicated WSM tools? ... Having been seen as one of the emerging Web Services markets of 2003, WSM could be set to disappear just as quickly — subsumed into the pre-existing markets of systems management, network management, application integration, security management and message broking."

posted by Phil Wainewright 7:34 PM (GMT) | comments | link

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