Will Iona's Open Source Strategy Survive Progress Acquisition?
Call it a Route 128 SOA date. Progress Software is buying Iona Technologies for a little more than US$100 million in actual value, broadening Progress' service-oriented architecture (SOA) portfolio significantly and catapulting Progress into the open source software infrastructure arena.
Progress said Wednesday it is offering $4.05 per share in cash for Iona, a total equity value of $162 million, or $106 million net of cash and marketable securities. Both companies are publicly traded. The transaction is expected to be completed in September.
Both companies come from a long but quite distinct lineage, and both have their U.S. headquarters within a 20-minute drive around Boston's Route 128 technology corridor, from Bedford to Waltham. Progress has its roots in tightly coupled, client-server tools (Progress 4GL) and runtime platforms, while Iona, based in Dublin, Ireland, hails from the CORBA and middleware messaging and integration space.
The SOA Catalyst
Only a SOA mashup could make good bedfellows of these. That's because one company's lineage reaches back to the origins of client-server computing (Progress was founded in 1981), while the other reaches back to the emergence of the mainframe world into distributed computing (Iona was formed in 1991). SOA, of course, aims to make these worlds play well together and then build new services on top of the service-enabled older assets to offer business process advantages and efficiencies.
And yet despite their disparate origins, the companies match up quite well, on product capabilities, locations, direction and client verticals. Progress has already been acquiring in a SOA direction with the January 2006 acquisition of Actional, which became the Progress unit focused on SOA management, security and governance. Iona made a bold move to embrace open source for its SOA portfolio, supporting an open version of its Artix products, while also buying LogicBlaze in April 2007.
Combined with Iona's ESB and middleware products, Progress will emerge as a full-feature SOA infrastructure provider, but with a large installed base in deployed client-server and Web applications and a strong presence in Iona's stronghold of finance and telecoms.
Will Open Source Strategy Survive?
While there is overlap between the registry/repository capabilities for both companies, separate yet interoperable registry/repositories can operate well side by side and any consolidation is fairly straightforward. In other words, these products could work well together and then combine. The fact that both companies support SOA governance capabilities indicates more an overlap than a conflict.
UPDATE: And I'm reminded too that the Sonic purchase brought an early ESB function set to Progress. This means the combined companies will be supporting and offering several flavors of ESB. Given that IONA already offers several ESB approaches -- both commercial and open source -- this may provide confusion to customers of both companies. A clear and logical ESB story will then need to come from the companies.
Given we've seen more federated approaches to ESB in recent memory, there may well be a Progress Sonic-Artix-FUSE ecology play in the works, for a more complete ESB solution comprised of several actual products and open source options.
The larger question proffered by the merger comes in the relationship between commercial products and open source models. Progress has not shown as vigorous an interest in open source as Iona, which became practically a benefactor to the Apache Foundation on several notable SOA projects. Progress is very much a licenses software company at a time when the software industry is shifting to subscription and services-based approaches.
It's no surprise that Iona has been sold. Iona made it clear it would enter into acquisition talks last February. A rumored suitor was Software AG, which had recently absorbed WebMethods/Infravio. There were questions on whether Iona's open source strategy would survive any such acquisition, too.
I have to believe that the Progress-Iona merger means that Progress will welcome the diversification of business models that the Iona open source strategy entails, meaning a segue from per server and per seat licensing to more of a services, support, maintenance and training revenues model. The two companies can enjoy the commercial maturity of their current products while benefiting from the lower R&D and development costs of community-based projects for newer products.
The Best Defense
We'll have to wait to see how aggressively the soon-to-be expanded Progress Software ramps up on the open source SOA strategy. What's nice about open source SOA is that it plays well on offense and defense, meaning the supplier can offer the market products and services that can build on its strengths while attacking its competitors on the revenue sources it holds most dear.
Implications on partnering with the Progress-Iona merger will be important. A well-integrated Progress-Iona may be of significant interest to global systems integrators, as they seek options on infrastructure suppliers, and certainly appreciate a support and services model. Progress may find itself more in an ecology play with other open source providers, from HP to Novell to Ingres to, gasp, Sun (not too far away campus-wise in Burlington). Maybe Microsoft is serious about its newly forged openness and focus on supporting rather than subverting enterprise heterogeneity, and so may find Progress a ramping partner.
The merger also shifts Progress's competitive landscape, putting it more up against IBM, Oracle and Red Hat. I think the open source data base play for Progress therefore has some interesting implications. Perhaps Ingres may make more than a partner.
In the meantime, Progress can assist in its applications clients move to the more modern computing paradigms while Iona can help on the back-end for integration and high performance transactions while broadening Progress' share of wallet in more enterprises and verticals. And now, viola, Progress is an open source company. The best part of the deal, therefore, is how these two companies' installed bases give the combined firm a steady yet diversified revenue stream that should build on their legacies -- and their customers' legacies -- well.
Dana Gardner is president and principal analyst at Interarbor Solutions, which tracks trends, delivers forecasts and interprets the competitive landscape of enterprise applications and software infrastructure markets for clients. He also produces BriefingsDirect sponsored podcasts. Disclosure: Iona is a sponsor of BriefingsDirect podcasts.