Mergers Tie Marketplaces, Infrastructure

SAN MATEO (05/26/2000) - A relative nerwcomer to the business-to-business exchange platform realm, webMethods Inc. is acquiring EAI (enterprise application integration) player Active Software Inc. in a $1.3 billion deal that puts webMethods on the short list of exchange integration providers.

If webMethods blazes a successful trail, the acquisition could serve as a model for the joining of other EAI and b-to-b platform providers, said Kimberly Knickle, an analyst at AMR Research Inc., in Boston.

However, Knickle said these mergers of platform and plumbing vendors would not be happening so soon.

"Now that one [merger] has occurred, I think there will be a snowball effect," Knickle said. Even though there was a high level of buzz around webMethods before the acquisition, webMethods lagged behind top-tier players Software Technologies Corp. (STC), IBM Corp., BEA Systems Inc., and Vitria Technology Inc. as far as revenues were concerned, she said.

"Now it's instantly bigger," Knickle said, noting that the acquisition helps Vitria leapfrog into the top tier, which includes Mercator Software Inc. and Tibco Software Inc.

Active and Vitria have had parallel growth, but the strict EAI approach of Active has differed from the combined EAI, b-to-b, and workflow technologies making up Vitria's offerings, she said.

With the emergence of b-to-b commerce, users began to perceive that "it's not just about the external integration -- there's a significant effort needed for internal applications," Knickle said.

The webMethods acquisition is expected to close during the third quarter of this year. The combination of webMethods' external integration via XML and Active's focus on internal applications will eventually provide users with a single, comprehensive application integration path, said Phillip Merrick, president and CEO of webMethods. "It was driven in large part by customers," Merrick said. Both vendors have Federal Express Corp., Juniper Networks Inc., Hewlett-Packard Co., and AVNET as customers.

The higher performance integration to come will yield adapters that clarify internal and external security issues, determine access within an enterprise, and define business processes, said Jim Green, chairman and CEO of Active.

One of the clear targets of the acquisition is Vitria Technology, in Sunnyvale, California, which competes against both players with its combined b-to-b, EAI, and workflow offering, Merrick said, echoing Knickle's competitive assessment.

In response, Malcolm Lewis, director of marketing strategy for Vitria, said that with the shortcomings of both players, "it's the only thing they could do under the circumstances." In addition, although a combined plumbing-and-platform product will be forthcoming, the new company will lack the business process management piece that Vitria provides, Lewis said. "We have been expecting the smaller, niche players to start consolidating along these lines," he said.webMethods, in Fairfax, Virginia, is at www.webmethods.com. Active Software, in Santa Clara, California, is at www.activesw.com.

OnDisplay quits integration with acquisitionOnDisplay Inc. was taken out of the business-to-business platform integration market when Vignette Corp., maker of e-business content control software, acquired the XML server vendor for $1.7 billion in a stock swap deal, according to industry observers.

When the deal was announced last week, Vignette officials said they would integrate OnDisplay's b-to-b infrastructure technology into its own family of e-business platform offerings.

The move effectively removes OnDisplay from the market for third-party integration software because the developer's wares will now be subsumed in Vignette's product lineup, analysts noted.

Vignette's V/5 platform is an architecture and methodology offering that helps businesses create a unified view across the systems of multiple customers, partners, suppliers, and products involved in b-to-b commerce. Vignette will incorporate OnDisplay's trading networks and online marketplaces into its own.

OnDisplay expanded its integration offerings late last March when it acquired privately held Oberon Software and added tools to help trading communities integrate data and business processes.

OnDisplay's combined offerings are intended to serve Internet trading exchange and e-business portal customers such as Travelocity.com Inc. and Grainger.com Inc. as well as e-PurchasePro.com, FASTXchange Inc., Imetrikus Inc., and Harbinger Corp.

OnDisplay now moves into the content realm for b-to-b commerce, said Kimberly Knickle, an analyst at AMR Research Inc., in Boston. "I think it takes OnDisplay off the integration list," Knickle said.

After the transaction is completed during the third quarter of 2000, Vignette will consist of 2,000 employees and 870 customers.

Vignette Corp., in Austin, Texas, is at www.vignette.com. OnDisplay Inc., in San Ramon, California, is at www.ondisplay.com.

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