Two different approaches to service-oriented architecture (SOA) merging into one product offering where the whole
is more than the sum of the parts is how Progress Software Corp. is positioning its acquisition of Iona Technologies Inc.
In particular the two companies have tackled the enterprise service bus (ESB) from different directions. The Sonic ESB from progress has a messaging foundation, while the Artix product from Iona has a distributed agent architecture.
"These product lines only have about a 10 percent overlap," said Hub Vandervoort, CTO SOA Infrastructure Products at Progress, explaining the acquisition after it was announced Wednesday. He described the Progress and Iona product lines as 90 percent synergistic.
That argument held some weight with Jason Bloomberg, senior analyst with ZapThink LLC.
"It's nice to finally see an SOA infrastructure deal that makes good sense on both sides," Bloomberg said. "Iona gets to be part of an organization that has strong sales and marketing, as well as a deep customer base, and Progress gets some of the higher quality technology on the market at what is arguably a fire sale price."
The "fire sale price," in Bloomberg's opinion refers to the announced terms of the deal in which Progress is buying Iona for $4.05 per share in cash, which it said "represents a total equity value of approximately $162 million."
Offering a brief financial history lesson, Bloomberg said: "True, no one would expect Iona to go for anything like their dot.com bubble high of almost $100 per share, but even so, their $4.05 per share deal price is still less than half their post-bubble high of around $8.60 reached in the spring of 2004."
The $4.05 per share offer was unanimously approved by Iona's board of directors, according to the Progress announcement, which noted that it was a 16 percent more than the average share price during the six months prior to Feb. 8, when Iona first announced that it was talking to a potential buyer.
Beyond the deal maker issues, Bloomberg supported Vandervoort's contention that the two companies' enterprise service bus products, Iona's Artix ESB and the Sonic ESB Progress acquired in early 2006, are more complementary than competitive. The ZapThink analyst also noted that Iona also provides CORBA technology that pre-dates the SOA approach.
"While Iona brings a reasonably solid legacy CORBA clientele, perhaps the biggest gem in the rough is the Artix technology, a brokerless ESB that complements the MQ-based Sonic ESB reasonably well," Bloomberg said. "In a way, Artix isn't technically an ESB, because it doesn't offer a traditional bus in the way that Sonic ESB does. Rather, it provides a fully distributed architecture that removes the limitations in scalability and performance associated with other approaches that rely on a centralized server or hub-and-spoke architecture. Artix uses distributed endpoints to support both incremental adoption and dynamic configuration, which provides greater flexibility than a traditional ESB."
Will customers want different ESBs?
Vandervoort said the Artix and Sonic technologies are so complementary that the two companies have customers that are using both. He pointed to AT&T as an example.
"If you look at AT&T, Artix and the CORBA technology are very widely deployed," Vandervoort said. "It is mission-critical. It runs a lot of their high-end transaction processing in a mainframe environment. At the same time, the Sonic ESB has been the backbone for some of their largest initiatives such as LightSpeed [AT&T's fiber optic network for homes]. Those systems both work together and interoperate together. Artix was chosen because of strong CORBA alignment and strong mainframe capabilities around CORBA and C++. Sonic was chosen for its distribution, federation and heterogeneous deployment capabilities. This is an example where our products were not competitive, couldn't be used interchangeably, but both found their way into the solutions that AT&T needed to deploy."
Randy Heffner, vice president at Forrester Research Inc., is guarded in his assessment of the complementary nature of the two product lines.
"When Progress says there is little overlap, they are looking at it from a close-in vantage point," Heffner said. "They both have ESBs, but the products have different strengths. Furthermore, Iona has an additional ESB strategy based on open source (FUSE). Other areas of the Artix line have either functionality or ways of packaging that are distinct from things Progress has. There is some dead overlap, like both have BPEL engines. Both have data services products. But there are indeed areas of non-overlap like registry, SOA management and various technology connectors."
Beyond the technology overlap, the Forrester analyst did see some positive non-overlap that may actually strengthen Progress in its sales and marketing of the combined product lines. Iona has a customer base that may prove valuable to Progress. He said the legacy CORBA customers, for example, will represent a "tech-savvy crew" that will understand "potentially intricate architectures like SOA" when the Progress sales reps come to call.
Eclipse, Microsoft and open source
Beyond the ESB and CORBA technology, Vandervoort said Iona has additional assets that will be valuable to Progress, not the least of which is Iona's technical brain trust. He said he has already been exchanging e-mails with Eric Newcomer, Iona's CTO.
Newcomer has been a leader in Iona's support of Eclipse and standards development in support of SOA. Vandervoort said Progress intends to continue the work with standards bodies as well as Eclipse, and the rest of the open source community.
Another asset Progress gains is the work Iona has done with Microsoft to integrate Java and .NET for SOA development, Vandervoort said.
"Iona brings to Progress sanctioned Microsoft Windows Communications Foundation (WCF) support that allows Java and .NET to play seamlessly together," he said. While Progress has worked with Microsoft in the past, it does not have a "sanctioned" status that Iona has gained, he added.
After the acquisition is completed, which is expected by the end of summer, Progress will unveil a more complete roadmap for the newly merged SOA products, Vandervoort said.
Heffner said the challenge will be to gain synergy from the combined technologies.
"At a high level, there is significant overlap but, at a more fine-grained level there are many opportunities for synergy," the Forrester analyst said in his bottom line assessment of the deal. "As always, the proof is in the execution, but that is even more true in a case of the closeness of these two product lines."