Analysts were predicting more consolidation in 2011, and it looks like the late-year acquisitions are happening again.

First, doc capture specialist Kofax has acquired Singularity, a BPM and case management provider.  Kofax has been part of many a BPM project, whether they realize it or not, as the doc capture element.  Almost every BPM project needs that transition from “physical world” to “electronic bits” or “process world” – and document capture is a common entry point.

Neil Ward-Dutton, of MWD, comments:

In a call first thing today, Kofax CEO Reynolds Bish highlighted that he expected the acquisition to double the size of the company’s addressable market – in large part through the expansion of sales coverage and effort for Singularity’s products, which Singularity itself had largely confined to the UK.

In other words, Kofax expects to expand the reach of Singularity, as well as of their product set itself.  Interesting, to me, was that Singularity’s revenue mix was 50% services, and that Kofax intends to adjust that downward.  Good news for Singularity partners or services experts.

Meanwhile, in another corner of the BPM world, Progress has acquired Corticon, a pure-play rules management (BRM) vendor:

Progress is pitching Corticon as a crucial ingredient as it continues to develop its RPM story, and this makes sense. Progress’ Savvion BPM technology already had a fair business rules capability (BizRules) as an integrated component, but my view is that Corticon’s technology is more widely-applicable, as well as being widely acknowledged for a very strong ease-of-use story, enabled by its heavily model-driven and graphical approach to rule specification. Its open stance towards rule management repositories will also serve it well, as Progress seeks to blend Corticon’s tools into broader capability mixes.

In a previous life, we used Corticon for rules for a while.  We didn’t find it particularly compelling and ended up writing our own, similarly non-compelling rules solution.  More often than not, customers would use ILOG or Fair Isaac or Drools. But it has been several years now, and no doubt Corticon has made some progress in that time (pun intended!) on their rules capabilities.

The conclusions I’m drawing from these acquisitions:

1.  BPM and Rules are a natural combination.  BPM seems to be the value driver, as it is the rules vendors getting gobbled up.

2.  BPM and Content Management or Document Management combinations are also happening.  But the major BPM vendors have (largely) already purchased Doc Management or Content Management solutions… So the remaining players in these spaces are forced to go pick off the weaker BPM vendors instead (OpenText acquired two of them, Lexmark acquired Pallas Athena, and now Kofax is in on the act).

3.  There’s still a lot of shakeout to occur in the market – and execution at a detailed level for each vendor is really going to matter.  At this point it isn’t all marketing fluff – real differences in product are apparent.  But the target keeps moving.  A well-integrated solution that is coherent to the end-user is going to win the day.

MWD has a great series of posts entitled “Calling BS on…”

In a recent installment, the topic was calling BS on “Our technology makes your business more agile.”  Of course, it is silly to think that any technology by itself can make your business more agile:

Making a business – or at least, the parts of it that make sense – more agile requires you to review and be prepared to change people’s incentives, business measurement systems, skills and training plans, information sharing and collaboration practices, operating models and procedures, and management culture – and probably more. Even if we just confine ourselves to the technology domain then increasing business agility is likely to require you to review architecture, governance, portfolio and change management practices. If you don’t at least think about this stuff, then the most you might be able to do is increase potential technology flexibility.

It’s nice to see some of the stereotypical pitches blown up in this series…!

As Neil says:

The key realisation here is that agility is something that – if you’re serious about it – has to be sustainable and sustained for the long haul. It’s not something you can just worry about for 6 months and then forget about.

Exactly.  Which is why it is so frustrating to hear pundits or analysts say that something like “continuous process improvement” is a pipe dream.  What they’re saying is that companies should throw in the towel and just stop trying to keep up with a changing world. That’s madness for a corporation.  If a corporation wants to be agile, it takes constant attention.  This isn’t a philosophical point, it’s just reality.

Neil Ward-Dutton may be late to the party with his post on the OpenText / Global360 merger, but it is a good read:

So, having set out to purchase Metastorm in February, Open Text has followed up less than 6 months later with the acquisition of Global 360. It’s not much of a secret that Global 360 was looking to be acquired; the hiring of some key webMethods executives in 2008 signalled the start of a concerted effort to shape the company up for a sale. Still, it caught many industry observers (including me) by surprise to see the company follow so closely in the footsteps of another BPM technology vendor and be snapped up by Open Text.

The surprise factor may be one of the reasons this acquisition made so much more news than the Metastorm acquisition.

Pega has has impressive financial performance over the last few years, as Neil Ward-Dutton documents:

The company is currently publishing full-year revenue guidance of around $430m for 2011 – up from $330m or so last year – which means it’s grown 30% in each of the last three years. As it digests its Chordiant acquisition and finds ways to combine the technologies it now has to hand for new customer scenarios, the company is clearly riding high and full of confidence[...]“

But Neil asks a few questions that I think are pretty interesting:

But – is it actually a BPM technology provider?

Well, it spent a lot of effort getting re-branded as a BPM provider a few years ago, when BPM was an up-and-coming tag for a category of software.  But Pega was never really a pure-play BPM software vendor. This is the first time I’ve seen an analyst of any kind question whether Pega is really in the BPM business.

So onto the other question, quickly: is Pegasystems a BPM technology provider? In his opening keynote, Alan Trefler claimed that the company’s recent growth makes it more than 10 times larger than its nearest pure-play BPM rival – but in truth this comparison is a little sneaky. Pegasystems isn’t really a BPM pure-play.

It is a BPM technology provider – but in the same way that SAP’s BPM investments make it a BPM provider.

It actually does matter – the difference between the mentality of a pure play and an SAP is larger than one might think.  The distance is so great, in fact, that IBM bought Lombardi to get that pure-play DNA into its veins.  But Neil doesn’t find that question nearly as interesting as whether Pega is selling to IT or selling to Business.  It is an interesting point:

They talk about Pega technology as a way to make the thorny tradeoff between the need for consistency in business execution, the need for competitive differentiation, and the need to specialise execution for particular markets and segments. They are fantastic advocates for the business benefits of working with Pegasystems. But these are not people who really naturally engage with the idea of ‘situational layer cakes’.

I’m sure Pega would argue that they just have to do both – sell to the business and IT.  That’s not a bad recipe.  But from reading Neil’s post, it sounds like Pega isn’t sure what its organizing principle is – what is the mission?  Improving business processes?  Improving customer service?  “Driving Customer Success” is admirable but bland -  it describes a whole host of companies in different industries…

I was surprised the OpenText acquisition of Metastorm didn’t garner a little more attention in the press.  It certainly got less airplay than the acquisitions of Lombardi and Savvion received last year.  Maybe it is just a sign of how busy things are for the people who cover the space.

MWD recently published their take on the acquisition:

OpenText is no stranger to acquisitions, of course – its 2009 acquisition of Vignette being the most high-profile to date. But with key competitors IBM and Oracle now very firmly in the BPM game and pushing forward with investments to combine ECM and BPM capabilities for case management applications, it’s no surprise that OpenText would be on the lookout for a suitable BPM tools vendor.

That’s about how it reads to me, too.

I’m a fan of MWD and their coverage of BPM and related topics.  They have a bit of edge to their analysis, and aren’t afraid to go out on a limb.

So it was with great interest that I clicked on the link to read the 2011 outlook for BPM.  Right off the bat, MWD notes that the BPM value proposition is holding strong even as the economy improves (something, I’ll note, that we at BP3 predicted in early 2010).  MWD reminds us of four value propositions from BPM:

BPM has four ways it can add value: driving operational efficiency and quality; driving product and service innovation; driving business model innovation; and lastly, driving improved collaboration between IT and business teams.

Typically everyone gets stuck on the first two.  Or, we dismiss the last one as not a value proposition in and of itself, but a constraint that needs to be addressed in order to achieve the value of BPM.

The one prediction MWD makes that I disagree with: the decline of the BPM Suite.  While the arguments MWD makes in this regard make sense and hold together, the force for consolidating SKUs among large software vendors is just too strong.  The labeling (BPM Suite) may change, and the specific components may change (perhaps BI, reporting, etc. will be split out… while rules and the like might be more explicitly included – we’ll find out!).  And bundling vertically in the stack (for example, including the application server with the BPM product) will likely continue.

I found MWD’s take on ACM interesting:

Adaptive case management (ACM) – Most importantly, perhaps, a group of vendors has spent significant marketing money and effort through 2010 attempting to “break away” from the BPM technology market segment, at least in part as a response to the impact in the market of activity from software platform vendors like IBM, Oracle and TIBCO.

That aligns with what I felt was going on with the ACM movement over the last year – more marketing and positioning than substantive differentiation.  Although, one can hardly blame them for trying to change the terms of debate, and the terms of product selection.  If you can create a new market segment you have a chance to be evaluated by every company in that segment. If you’re competing for the same market segment, many customers have already bought “one of those” and may not want to buy another one.

MWD also turns their attention to consultants and integrators, noting that their market momentum is increasing.  As MWD notes:  “Until a couple of years ago, almost all the activity from systems integrators and consultants associated with BPM practice was carried out by small, local specialist firms rather than the big players.”  MWD sees the big players finally getting serious about BPM practices – and he’s right.  But it is still the case that the most capable firms are these small, local, specialist firms – some might even say boutique(!) firms.  (As an example in the IBM Lombardi niche, I believe BP3 represents both the biggest and the most experienced firm for Lombardi BPM deployment.  We would definitely be considered a smaller firm, despite our ability to cover the US geography.)

Read the report – and get used to reading MWD’s analysis – it is among the best out there, and they often put out free or registration-only reports that can help keep you informed.

I was fortunate to finally meet Neil Ward-Dutton in person at IBM Impact this year.  We attended different sessions for the most part, so our one meeting was just for a few minutes by the escalators.  And I’ve often found MWD’s analysis of BPM vendors (and other adjacent markets) to be insightful and to the point. So I’ve been looking forward to seeing Neil’s writeup for MWD.

Neil starts with a little history of the IBM Impact event – how it has evolved from Websphere to SOA to BPM – and with a legitimate business track in effect now.  As Neil pointed out – BPM wasn’t the only theme getting traction at IBM Impact (though you might get that impression reading my blog posts, because that’s what I’m focused on) – but it did get its share of attention in they keynotes.

What was more telling here was not the platitudes about the importance of business processes – but the frequency with which technology from recently-acquired Lombardi was placed front and centre in those same keynote sessions (see Bruce Silver’s note). And as Scott Francis from BPM implementation specialist BP3 pointed out the Lombardi-specific breakouts were very heavily attended – this stuff clearly impressed attendees from what I heard and saw.

I agree-  the surprise was how they put Lombardi front-and-center.  It wasn’t the “what’s new” from Lombardi, it was the wholehearted adoption of the new acquisition that was surprising (and if you’re a BPM advocate, encouraging).

Neil identifies twin themes in IBM’s recent acquisitions of Lombardi and Cast Iron:  consumability of the software (ease of use), and consolidating vendor relationships that require smart competitive tactics. I’m going to write more about the first theme-  I think that ease of use will be critical for BPM success going forward.  It may be the most important factor in the end…

He goes on to say that time is of the essence in defining its go-to-market strategy – not because the customers must have an architecturally perfect solution tomorrow, but because the competition has gotten its act together, and BPM is hitting the mainstream – so firing on all cylinders now is critical for success.  I think his analysis is spot-on.

Neil Ward-Dutton has a great post about BPM vendor results that moves into a discussion of process improvement approaches:

The distinction between “old school” and “new wave” process improvement approaches (I’ve called these “high church” and “low church” before) is just continuing to get stronger. 10 years ago, the vast bulk of process improvement activity used to be driven by the “high church” crowd: lots of ceremony, burning of incense, and so on. Scientific improvement efforts driven by highly-qualified specialists are essential in situations where there’s a lot at stake (for example when you’re reengineering an auto manufacturing line: get it wrong and it’s going to cost you a lot to put it right). And don’t get me wrong: there’s definitely a place for this.

This description and the ensuing thoughts reminded me of our early experiences with BPM at Lombardi.  Lance and I (and others at Lombardi) were often running into process improvement experts with a grounding in Six Sigma or Lean (or less often, IDS Scheer, or Enterprise Architecture modeling).  We were sometimes supported by these folks, and sometimes they resisted our approach (and “BPM” in general).  On the whole, there was a lot of resistance, as our approach to process improvement was somewhat heretical.

So Lance (now CEO of BP3), embarked on a journey to get behind the curtain, to understand the vestments of the Six Sigma and process improvement community so that we could better work with these folks.  After going through the first rounds of training at the Green Belt level, he started to get others of us to go through the training as well.  And what we found was that you didn’t have to adopt the religion of Six Sigma to get the value.  The statistical tools are just that :  great tools you can use.  The “high church” trappings are wholly unnecessary but they do create an aura of authority for those who exercise them.  Lance went on to become a certified Master Black Belt, but we continued to apply what we learned from Six Sigma in an eminently practical way.  The point isn’t to be “pure” – the point is to get to value faster.  If statistics can do that for your business, then you use them.  In our mind, if a BPMS can do that for your business, then you use it.  Make the best of the tools at your disposal to get the maximum benefit.

Still, there are those whose self-interest is aligned with keeping the “high church” ceremonies and orthodoxy firmly in place.  The challenge is to keep it in perspective – scientific approaches can inform the “new wave” way of thinking without slowing things down.

One of the ironies now is that some of the newer entrants to the Business Process space now see BPM as the high church (old school) and their own approach as the new wave.

MWD Advisors has a post up about the coming move from “systems integrators” to “service integrators”.  Its a smart read, pointing out that customers who want to offload technical details to service providers are also likely to hand-off the technical lifting to integrate and coordinate these SaaS/Cloud services together to the companies that currently do systems integration.

Interestingly, if BPM vendors provide the right tooling, a SaaS BPMS (or even a hosted one) could be ideal tooling for pulling together these other services to support cross-functional processes for the business.

Well, after much celebration before announcing the details, we now have some (just some) facts about Appian’s 2009.

It sounds like it was a good year – as MWD reports, its license revenue was up 59% (but we don’t know from what base, much like Lombardi’s reported numbers before it was purchased), and customers doubled.  Of course, another way to phrase this is that ASP declined by 20% (if my math is right), or that revenue mix has shifted from prepay (enterprise license revenue) to either post-pay or subscription revenue.

MWD’s assessment is that international revenue will grow faster than domestic revenue.  And while this argument makes sense, having worked at more than one company Appian’s size in my career, I can attest that international revenue can be very erratic.  For a few reasons:

1. When starting from a small base, a single deal (or two deals) can dramatically affect the percentage growth internationally or in a region.  However, with so few data points, it may say next-to-nothing about going forward revenue.
2. Even off of a bigger base, international revenue has so much to do with your sales operation, and so little to do with your product.  There are other products out there.  There are big consulting shops out there. Whether you capture the money (revenue) that is being spent to solve the problems your software solves depends almost entirely on your sales and marketing operation.
3. American companies of this size rarely understand the international markets well enough, and make mistakes which cause big revenue swings up and down.  This is true because the executives usually lack field operational experience overseas, and though they may hire that experience, they may not be able to successfully evaluate those international experts and may end up throwing good money after bad.
4. I’ve seen a single sales rep bring in 30% or more of a small company’s revenue for a single year, only to bring in zero revenue the following year.  Individual sales rep performance is crucial to small enterprise software companies.

Appian may well overcome all of these pitfalls.  But revenue in both the US and Internationally is coming off of a small enough base that we should expect to see high beta for any of the smaller vendors.

The conclusions that Appian’s results really drive home:

• BPM is growing, not dying.  And growing faster than enterprise software generally. (Not just from this datapoint, but from Lombardi, IBM, Savvion, Pega reported results)
• The BPM pure plays were doing well in 2009.
• The remaining pure plays may still have legs and room to run while Lombardi and Savvion acquisitions are digested – even if those acquisitions are quite successful.

MWD Advisors has a post up regarding Running IT as a Business. As they put it, the main objections to this idea seem to be “daft” – that they depend on assuming that IT will run this business in the worst-possible “order-taker” fashion.

As MWD points out, there’s no requirement that IT run their business badly!  However, I will say I can identify with the skepticism that IT can be run like a business, because although “running X like a business” doesn’t have to be interpreted in the most simplistic order-taking terms, I’d be dishonest if I said I hadn’t seen just that happen.  All too often that over-simplification is what the company executives seem to think they want.

So, I think what we have here is a difference between what it should mean to run IT more like a business, and the reality of what people have confronted in their work life.  I think everyone would agree that when IT takes too myopic a view of their role in the success of the business, it is detrimental to everyone.  And if IT provides more business value… that’s good for everyone.

Where IT and Business meet is something that we have had a lot of experience with at BP3 because we’re involved in BPM projects.  You can’t do BPM projects without bridging the gap between IT and Business, and in our experience, the closer aligned IT can get with the business, the better.

I wanted to comment on MWD’s blog post to this effect but since I can’t get logged in there, I’ll just put the information here and hopefully it will get picked up by trackbacking.

MWD points out the risks that were observed in the CloudCamp session attended:

IT practitioners – They’re likely to have concerns about the ultimate impact on their jobs and the potential of Cloud to take power away from the IT department. Uncertainties regarding processes around platform change management and dependencies. Concerns about security. Concerns about integration, latency and lockin.

There is a new approach to some of the security, provisioning, etc. issues which is represented well by Conformity.

Neil/MWD, check out the Conformity Executive Webinar Series: The Enterprise SaaS Working Group, or check out their blog on the subject here.  This is a group of leading lights in the SaaS community talking about adoption challenges and approaches.  Hopefully there will be a playback afterward for those who miss it the first time around.

Previously, we wrote about the individual vendor assessments that MWD put out.  Macehiter Ward-Dutton recently (Dec 18, 2008) updated their individual vendor reports with a comparison/summary report, which does a pretty good job of bringing it all together.

It weighs in at 13 pages, and in combination with the individual assessments makes for a nice resource.  For the categories and vendors that I’m familiar with, the comparison seems to hit the mark – rating products of similar capability in an area with the same rating (from Very Strong to Weak).  However, A quick glance at the chart would give you a few impressions that I’m not sure fully bear out my experience.

For example, Appian and Lombardi look like the winners, with Appian having the most squares darkened as Very Strong, out of any of the vendors.  Lombardi is in second, as the only vendor with no Fair or Weak scores, as well as a lot of Very Strong rankings. However, I wouldn’t describe Lombardi as “Very Strong” in rules, nor Appian as “Very Strong” in optimization.

Second, IBM shows as very strong through the various capabilities in the “Scenarios” evaluation.  However, each of these “scenarios” requires one more different IBM products – it isn’t at all an integrated experience – so if you buy an IBM “BPM” product you won’t find yourself able to do all of these things.  It isn’t a criticism of any one product – its the total experience that customers find frustrating.  You’ll have to buy all the other software to be able to address these scenarios.  And as anyone who has installed a suite of IBM software applications and their requisite fixpacks can tell you, it may be more of an adventure than you expect.

I haven’t seen Software AG’s latest offering, but it is described as a well-integrated BPM suite… and yet the definition of the “ownership” evaluation is something about the pedigree of the software suite and whether it was cobbled together or built-in-house for example.  Software AG’s offering, to my knowledge was very much a product of many acquisitions by WebMethods, which was, in turn, acquired by Software AG.  In the intervening years Software AG may have made the investments to turn this into a polished and unified experience.

Another general note-  I would say all of the rankings are a little high – I would bump most of the evaluations from Very Strong down to Strong, from Strong to Fair, etc.  But how to *characterize* the ranking is really a subjective exercise, and a relative one (Very Strong as compared to what? as compared to an objective standard or as compared to the other vendors?)- so this is a bit of a nitpick – but I think it would come closer to representing how customers would perceive the vendors’ performance in each area if the rankings were all lowered a notch with just a couple exceptions for the truly exceptional vendor-coverage areas (customers being generally less impressed than vendors by the software in question in all categories, I think).

This is a great start to anyone’s software vendor analysis, and I imagine anyone who is serious would invest in getting access to the premium service that let’s you adjust the scoring to fit your scenarios.

I want to thank MWD for putting this research out in the public domain – hopefully my comments will be taken as constructive rather than snarky!

Just saw this come across my inbox: a new set of vendor assessments from MWD in the BPM space.  It looks like they sell a subscription service, but they’re offering these particular BPM assessments for free in exchange for registration information. Looks like they have assessments for Lombardi, Appian, IBM, Oracle, Software AG, TIBCO, and the newest addition, Pegasystems.

Not sure why they don’t have Intalio or at least some representative from the opensource world, but still its a good set of research to be able to lay hands on at only the cost of some contact information.  There’s also a teaser for a comparison report that will come out soon.

After reading two of the reports, there is a strong product-focus in the reports, but no discussion of financial viability or market presence.  In a way, that’s refreshing as you see too many of these kinds of evaluations colored by areas outside of product capability, as if a healthy balance sheet alone will make the software work better for you as a customer.

On the other hand, like most evaluations of software, some of the subtleties of the software capabilities are missed.  These products don’t all deal with versioning, simulation, integration, and reporting to the same degree of competency, but from reading the descriptions you might feel that they are equivalent in these respects.  I think this is because some of the difficulties of each platform (and strengths!) are not apparent from a demonstration or even the first 5 minutes, but require working on an end-to-end deployment to uncover.  There probably isn’t an economical way for an analyst-firm to get to that level of expertise on all the products in the BPM space.

My complements to MWD for getting these reports out in a publicly consumable way!