WebMethods Purchase Could Challenge IBM

Software AG today agreed to buy rival webMethods  for $546 million in cash. The deal helps forge a one billion euro software giant that will challenge IBM in the growing market for service-oriented architecture (SOA) products.

Software AG makes all kinds of infrastructure software that supports SOA  distributed computing models; but the Crossvision SOA suite is the German company’s major platform for supporting business processes.

WebMethods offers several similar products, including its flagship SOA suite, Fabric 7, which helps IT administrators integrate disparate applications and manage and monitor business processes.

Fabric 7, developed with software from webMethods’ purchase of Infravio last year, will be combined with Crossvision to expand the total SOA portfolio for Software AG.

Executives for both companies stressed that the deal will help Software AG double its customer base in a North American market dominated by vendors such as IBM  and HP .

“The acquisition adds more than 1,000 customers worldwide,” said Software SG CEO Karl-Heinz Streibich during a conference call today. “This is a significant potential for Crossvision cross-selling as well as the 3,000 customers of Software AG is a huge opportunity for the portfolio of webMethods.”

Together, Software AG and webMethods will count more than 4,000 customers in financial services, manufacturing and the public sector.

Streibich said the merger, expected to close in the second quarter this year, will help Software AG realize its goal of becoming a one billion euro company by 2011.

David Mitchell, webMethods’ president and CEO, said the agreement followed substantial strategic interest in the company, “and in the end we determined the transaction with Software AG was the most compelling one for the company and stockholders.”

ZapThink analyst Jason Bloomberg called the deal huge for companies that target the SOA sector, given that the combination of Software AG and webMethods will be second only to IBM in terms of both traditional integration and SOA capabilities.

“Software AG gets a much stronger North American presence, and they can now leave the likes of Tibco and Oracle in their dust,” Bloomberg said. “Mark my words, Larry Ellison is not going to be happy about this news.”

Bloomberg’s last comment alludes to the serious SOA push Oracle has made in the infrastructure space in recent years, which included adding business process management to its portfolio.

ZapThink analyst Ronald Schmelzer added that the acquisition helps raise Software AG’s profile with potential new customers.

“The company is now a major force in the SOA industry and can easily compete against any other market player in the industry,” Schmelzer said. “Are we witnessing the emergence of a new mega global brand?”