BPM is flying off the shelves – at least at Pegasystems

It’s always nice to be proved right. At the end of 2008, when Lustratus published its 2009 predictions for the infrastructure market, we highlighted BPM and predicted that 2009 would (at last) be its year.

In March I discussed the impressive 2008 for Pegasystemsin a previous Litebytes post, and now the company has made its 1Q09 announcement of earnings.

Briefly, we are talking about revenue increasing 29% YOY to $62.4M for the quarter, and license revenue up a storming 60% to $28M. Recession – what recession? Admittedly the results were skewed a little by a single large deal closing at around 12% of the total, which may put Pega under pressure for the next quarter, but this cannot disguise the point we made in our 2009 predictions – tactical, targeted BPM can deliver the real savings and flexibility to support broadening customer bases and types that businesses are looking for in the current economic downturn, or can respond to specific business channels such as tracking and reducing fraud.

The other point that these results reaffirm is that companies are looking for solutions that are geared to their own industry vertical needs – Pegasystems has a strong industry framework philosophy that responds to this need very effectively. The only possible ‘cloud’ on the horizon seems to be Peagsystems’ tentative move towards the dangerous ‘Platform-as-a-Service’ (PaaS) market segment – this area is a minefield at the moment and it is to be hoped that Pega do not find themselves sucked into the abyss by getting to wedded to this idea. Just stick to what you do best, guys!

In summary, for all those companies who have heard about BPM and then shied away, put off by the thought of the effort required to deployBPM across the enterprise for all processes, take another look with a tactical, laser-focused mind-set. BPM really can be selectively applied at a reasonable price, with rapid payback and an attractive ongoing benefit stream.

Steve

SAP takes a hammering in 1Q 2009 results

SAP released its first quarter results today – and they do not make pretty reading at all.

Although overall revenue was only slightly down overall it is the software license figures that are so alarming, crashing by a third compared to 2008. This may seem not to be important since the software license numbers are only a relatively small part of overall revneues, but in fact it is the software license performance that drives a lot of the other related activities, so weakness here will feed through over time. SAP points to the fact that 1Q08 was before the global problems had really taken hold, but while I think this is partially true, I think there is another problem evident here.

Companies are still investing in IT – there have been enough results in the last few weeks that show great growth for some, with Pegasystems and Sybase being two particular examples. However, the SAP results seem to show a greater weakness in the application package market – and this is only to be expected. The problem is that while companies like Pegasystems and Sybase are looking to help companies get immediate return through doing things differently (using BPM and going mobile respectively), SAP packages are SAP packages. They do what they do, and although it is generally a good idea to keep updating them and spreading them more widely, these tasks are

  • Very time-consuming and costly
  • Not exactly urgent

On this basis, most companies are electing to stick with what they have at the moment on the packages front, while concentrating on other areas of more immediate return in the infrastructure like BPM and Business Events implementations. This gives SAP a real headache in the near term. Eventually, once everyone is spending again, companies may well return to the question of their SAP application package portfolio, but at least in 2009 I suspect this will be put on the back burner. I guess that for SAP, 2010 can’t come soon enough.

Steve

Looking ahead to IBM 1Q09 results

IT market watchers are eagerly awaiting IBM’s 1Q09 results, to be announced in the next few days, anxious to see how IBM is finding the current global market conditions.

Putting my own neck on the block, I suspect the results will look pretty good despite the economic downturn. There are a number of reasons for this.

Firstly, Lustratus is seeing a lot of users looking for professional services assistance in reducing IT costs and increasing flexibility and agility. This is pretty natural in a downturn. Doing more with less is obvious, but also companies are looking to expand their customer bases into new markets with new offerings as quickly as possible to shore revenues up, driving the need for better agility and adaptability. This plays into IBM’s hands with its extensive services experience, so services revenue could well hold up OK.

Secondly, one thing users ARE looking for at the moment seems to be quick hits – do something that isn’t too costly and is not a major architectural shift to get a fast return. As I have blogged about before, BPM (Business Process Management) and Business Events processing offer two areas that fit beautifully with this need – and note this is not the BPM where a company sets about rewriting all its processes, but instead BPM targeted on fast return, pragmatic sweet spots. Both BPM and Events will tend to drag in SOA requirements (although again at the pragmatic rather than ‘change the world’ level) which is another strong area for IBM. Although other companies such as Oracle and SAP offer technology in these areas, the advantage of being able to link the products to services engagements from IBM’s massive services arm to help aim the investment most effectively is a big one for IBM. Given that IBM also has a large portion of software revenue on ‘contract’ basis, this means the software revenues should hold up well too.

Hardware may have taken a bit of a ding in 1Q09, but this is unlikely to do too much damage to the overall numbers.

So, a reasonable set of results to come from IBM? We shall see…..

Steve

TIBCO 1Q09 earnings (part 2)

Last week I was speculating on TIBCO’s 1Q09 results and its challenges in 2009, and of course the final results have now been released.

I have had a lot of interest in the original post and requests to do a follow-up once the figures were out, so here we go. However, please remember that these are only my personal opinions – I am a market expert, not a financial one!

Revenue declined 9% year on year, although perhaps half of this decline might have been currency fluctuations, and through smart cost cutting measures TIBCO has actually improved profitability. However, from my perspective the most important information was that new license revenue fell to 44.8M from $57.7M in the same quarter the previous year – a 22% fall. Services and maintenance was flat at $88M.

The fall in new licenses is quite dramatic, and certainly not attributable to currency. Of course, this may reflect the generally poorer conditions, but it will now be extremely interesting to see how some of the other SOA and BPM players do in their first quarters – for example, I was discussing Pegasystems yesterday, and in 2008 it showed a 50% increase in new license revenue – it largely sells BPM software. Its 1Q09 results will be an interesting yardstick for these TIBCO results.

TIBCO is proving to be very reliant on its messaging / SOA products, only 21% of revenue coming from its business optimization segment, and that shows how dependent it is on its traditional strength in messaging, but as I said last week this area is coming under threat and has forced TIBCO to adopt an appliance approach to try to defend its position. However in the 1Q09 period TIBCO says it did not make any major appliance sales. Anyway, although I am not familiar with TIBCO’s commercial arrangement with Solace Systems, its partner in the appliance deal, I have to believe that TIBCO will no longer be able to count on all of the revenue stream from the appliance. I can see no alternative but for this segment of TIBCO’s business to fall. it is not surprising that TIBCO is desperately trying to broaden its industry vertical coverage as fast as it can.

Apparently the company is actively looking to make more acquisitions. This could either be to fill in gaps in its overall solution, as its management claims, or could it be to provide non-organic revenue growth to bolster its figures?

I have to confess that personally these results have left me feeling a bit queasy about TIBCO’s future. We should know more when we see some of the other 1Q09 performances in the SOA space, but I did not see anything to make me think TIBCO is surging back…

Steve

Pegasystems points the way forward

There is a lot of chatter in the blogosphere at the moment about whether SOA (service-oriented architecture) has run out of steam – whether companies have stopped investing in it, got disillusioned with it or cast it aside for the latest new thing.

For me, this is a silly discussion – SOA is about a way of doing things more sensibly, just as structured program was many years ago. It is really all about architecting system design around the concept of a pool of shared services, and cleaning up the linkages between different programs and applications.

So on this basis SOA is not dead, but an active and important architectural underpinning of a number of different initiatives, many of which have been rolled into the ‘SOA’ term – things like BPM (Business Process Management), SaaS (Software as a Service), Business events management, BAM (Business Activity Monitoring and many others. But has the failing world economy stopped the whole SOA family juggernaut in its tracks anyway?

The answer Lustratus picks up from its clients is a resounding NO. BPM in particular seems to be seen as a powerful way to respond to the needs of operating in an economic recession. Indeed, Lustratus pointed to BPM as a shining light in its forecasts for 2009. Validation of this claim is evident when looking at the performance of Pegasystems a major provider of BPM solutions and technologies. Pegasystems is an important indicator of BPM health because it is one of the few remaining pure-play business process software vendors left. In its recent annual results announcement earlier this month, it showed a revenue increase for 2008 of over 30% to over $200M, and importantly a 50% increase in new license revenue. It is in such good financial shape that it has even just announced a quarterly cash dividend! Admittedly it is only paying 3 cents a share, but in these times this is not to be sneezed at.

Of course, these results in isolation may not be conclusive. After all, the Pegasystems rise in sales might simply indicate it is stealing market share from its rivals. However other big BPM players such as IBM are also claiming strong performance in the segment, so it is much more likely these figures shine a light on the way forward for users as they struggle to do more with less, and get a better level of control and governance over their processes.

Steve