Why Progress bought Actional

It looks like the market underrated Actional. Its technology is "vastly superior" to that of competitors, Progress Software's CTO Gordon Van Huizen told me yesterday in the wake of the company's latest SOA-related acquisition (although probably not its last, of which more later). But he conceded that Actional had not been winning the battle for visibility, so it was not getting on customers' shopping lists as often as it should have done.

Since customer traction is what counts when valuing companies these days, it follows that Progress has probably picked up Actional cheaply at $32 million in cash and stock. Actional will become part of the vendor's Sonic Software subsidiary, whose ESB product line has attracted lots of customers in the SOA marketplace, many of whom may have only just started to realize they need a management capability. "Over the last six months, organizations have become a lot more savvy about what they're trying to achieve with SOA," Van Huizen told me — one factor in a "rapid uptick" he claimed Actional had seen in its sales success in recent months.

Of course, it's hardly a surprise that Van Huizen would want to talk up Actional's merits. But on the technology, he was able to quote detailed test results that showed Actional's message interceptor does its work in as little as 25 to 50 microseconds, compared to milliseconds of latency with competitor products. In fact, he revealed that it had been quite an education comparing the various vendors' offerings when Sonic set out to make its choice: "I was astounded in the difference in implementations in what seemed to be similar products from a handful of vendors," he said. "In terms of robustness of the architecture, the depth of infrastructure in the Actional stuff is vastly superior."

The Actional product will now benefit from Sonic's worldwide sales organisation and market presence, so if the technology really is as good as Van Huizen says it is, Progress will quickly reap a return on its investment. That's more than you can say of Actional's backers, who over the years have plowed at least $78 million into the company (searchWebServices reports an even higher figure of $85 million). The latest figures I have are as quoted in Loosely Coupled's SOA Management Report 2005: $50 million of funding in Actional before it merged with Westbridge, itself funded to the tune of $15.1 million, and then a further $12.9 million on merger in October 2004. Whatever the final tally comes to, $32 million must be disappointing as an exit sum, although at somewhere in the region of 40 cents on the dollar (assuming all investors are treated equally) it's better than nothing. With any luck, there's also some upside on the Progress stock included in the deal, as the company seems to be gearing up for a new spurt of growth with all its recent acquisitions (it bought legacy-to-SOA specialist NEON Systems last month and event stream processing specialist Apama in April, two product sets that are enhanced by bringing Actional on board).

By the way, as long ago as February 2004, I made this prediction: "I wouldn't be surprised to see ESB specialist Sonic Software acquiring some web services management technology". And as I pointed out back then, it's inaccurate and sloppy for analysts to glibly classify all this acquisition activity as "consolidation." What we're seeing is more a case of vendors buying their way into an expanding market they're eager to exploit — or filling out gaps in their current offerings — rather than existing vendors in a slowing market having to merge because there isn't enough business to go round.

Although positioned as an ESB vendor, I've been arguing for quite a while now that Sonic offers more of a complete SOA infrastructure than just an ESB stack. That's even more the case now with the Actional acquisition, but if Sonic really wants to cover all of the ground then it has to do something now to plug its SOA governance gap. When I put this to Van Huizen, he agreed with me, pausing only to rephrase it as a need for "a metamodel and a repository that can be used across development and runtime environments. That's an area we are hugely interested in further development." Although he went on to say that it's not something Sonic is yet seeing customers asking for in any volume, it's an area the company is investing in, and he agreed that Sonic would be making a move in this area before long. "What we've done is acquire the other pillars. SOA governance is the last one to drop in."

posted by Phil Wainewright 10:22 PM (GMT) | comments | link