BPM vendors and their stakeholders will be delighted that Tibco Software paid a 40-percent premium to buy Staffware yesterday. Now that Tibco has made its move, others are sure to follow, making BPM the latest hot property in what we on this site have taken to calling the loosely coupled business automation market.
The synergies between Tibco and Staffware take in cultural considerations as well as products and technologies. Both companies are pioneering pureplays, founded in the mid-1980s, who have doggedly pursued their early visions to create substantial businesses though without ever breaking through to achieve 500lb-gorilla status. Both also have strong links to the UK and to the global financial services industry.
Although based in Palo Alto, in the heart of Silicon Valley, Tibco was bankrolled by London-listed financial information group Reuters, which acquired the original company in 1994 and then spun it out to list on Nasdaq in 1999. Until January this year, Reuters still owned 49% of Tibco. An offering of new shares in January plus sales of its existing holdings reduced its stake to 8.8%, ending its automatic right to claim a seat on Tibco's board.
The company name is an acronym for The Information Bus (TIB) Company (CO). Tibco was the first company to successfully commercialize publish-subscribe messaging, recognizing that the information needs of financial markets had a particular requirement for the scalability and performance advantages of this approach to messaging.
British companies have a poor track record of making money from their US investments; Reuters' investment in Tibco is a rare exception. Staffware, on the other hand, has been much more in the traditional British mold, and the sale to Tibco was largely motivated by a desire to expand into the US market without risking the pitfalls of organic growth or acquisition that often trip up British companies when they venture across the Atlantic.
Linking up with Tibco, given its strong historic link to Britain through its Reuters parentage, must have seemed far less daunting to Staffware's management than joining forces with a company that had had little experience of dealing with Europeans. Cultural dissonance is often a contributor to failed mergers, so this element of synergy reduces the risk of problems ahead. At the same time, Staffware considerably bulks up Tibco's European presence, so the cultural fit has been achieved while bringing together two complementary customer bases, both of them strongly skewed towards the finance and financial services industries.
Like Tibco, Staffware is no stranger to the pioneering spirit. It was one of the first companies to offer workflow software as a means of integrating enterprise processes, many years before notions such as composite applications and business process management began to become buzzwords. When it started developing its software, back in 1984, computerized workflow was something that typically involved scanning in lots of paper documents and then passing them around a proprietary office network. Right from the start, Staffware took a much broader enterprise-level view of workflow and process, and although its name is not well-known outside the specialist sectors of workflow and BPM, it is a sector leader today in terms of both product capability and its customer base. It listed on the London Stock Exchange in 1996 and posted sales of close to $80 million in its last full-year results, compared to Tibco's $264 million. Tibco is buying the company for $217 million in shares and cash.
So what does Tibco gain from the acquisition? There are several elements that make this look like a good deal:
Growth: Tibco's sales fell last year, Staffware's grew. In addition, each company's customers are likely prospects for the other's products. As discussed above, there are geographic synergies as well as product synergies to exploit.
Momentum: Adding Staffware's revenues will keep Tibco well ahead of its closest EAI rivals, webMethods and SeeBeyond, in the race to achieve 500lb-gorilla status. Tibco executives have made no secret of their desire to become a billion-dollar company. Being seen to lead the sector with a clear strategic direction is an essential ingredient in fulfilling that dream.
BPM credibility: When Loosely Coupled looked at EAI vendor strategies last year in Integration: Free at last?, it was evident that Tibco and its rivals saw business process management as their main opportunity for value-add in the future. Acquiring an acknowledged sector leader like Staffware brings Tibco instant BPM credibility that it previously lacked.
But has Tibco chosen the right BPM specialist to link up with? Staffware's workflow roots and veteran status lead many of its younger rivals to characterize it as something of a dinosaur, lumbered with the baggage of having had to engineer enterprise-class solutions before the advent of standards-based messaging and transformation technologies. That's mostly unfair to a company that's succeeded in keeping its product fresh through two decades of rapid innovation and change in enterprise application integration. But there can't help but be an element of truth in the caricature, given the company's background. That Staffware made the ability to define "skinny processes" a feature of its latest product release does suggest by implication that its default processes have tended to be more fat than thin.
Tibco's rivals raise similar criticisms, and thus the most important cultural fit between the two companies could be one that reinforces a mutual tendency towards expensively engineered, feature-rich products that, while they play well at the high end of the enterprise market, are vulnerable to attack by more nimble next-generation solutions if such solutions exist and prove viable.
On the whole, Tibco's acquisition of Staffware should play well with both companies' enterprise customer base, and thus with investors. It may even make Tibco an interesting acquisition target for a company like IBM or Oracle. But it may leave the way open for a rival to make a smarter acquisition by buying into the disruptive-technology end of the BPM market. That's something we may well choose to explore in the next issue of the Loosely Coupled monthly digest, due out in May. In the meantime, here's a brief roundup of some of the coverage of this story elsewhere: