BPM Market Consolidation – Tibco Swallows Staffware

This morning, Tibco Software Inc announced it had reached an agreement to purchase UK-based Staffware plc for approximately $217 million.

While Tibco is well known for its message bus software and has a strong EAI heritage, particularly in high-end applications and industries like financial services, it has had difficulty over the past couple of years moving beyond its integration heritage. Likewise, while Staffware’s workflow (and to a less extent, BPM software) has strong penetration on the UK and Europe, it has struggled over the past couple of years to create a viable strategy for the U.S. market.

Upside Uptake
This move is another indication of the maturing of the BPM market, and probably not the last acquisition of a BPM company that we’ll see this year. From a pricing perspective, Staffware did well, reaping $217m against revenues of approximately $76M for 2003, and boding well for the valuations of other BPM companies.
Upside Research believes that this is a solid acquisition for Tibco, and a reasonably good exit strategy for Staffware, especially at that price. On the surface, each company complements each other nicely from a geographic and technology perspective, and both are accustomed to high-end, enterprise sales cycles and deployment requirements.

Despite a broad array of integration/workflow/BPM technology, Staffware’s software growth had stalled somewhat over the last year and it was unable to gain a strong foothold in the U.S. market despite repeated attempts. Instead, they remained fairly dominant in the UK and Europe, complementing Tibco’s U.S. strength. Despite Tibco’s acquisition of process-oriented vendor InConcert a few years ago, it has not been able to make a name for itself in the business process arena-remaining in most people’s minds as the enterprise message bus and EAI company.

However, there are some questions. Staffware’s enterprise projects tend to involve significant services component and many engagements require a repository and content management capabilities-capabilities that may go beyond the Tibco/Staffware technology stack. Also, in order to be successful, Tibco will need to par down the extensive Staffware process and integration options, while clearly delineating when and where customers should Tibco integration capabilities vs. Staffware. And while Staffware has heavily marketed its newer, iProcess business process engine, it’s not clear how many companies have actually deployed it. Despite repeated attempts, Upside Research has yet to talk to fully deployed Staffware customer actively using the iProcess engine.

Another challenge for a successful acquisition will be Tibco’s ability to move from its traditional message bus, IT-oriented perspective to the sales and deployment of higher-level business process solutions. While there’s no doubt that Tibco has an enterprise pedigree, the Tibco’s challenge is to move its sales force and marketing message to a more business oriented level.

Given the magnitude of this deal, along with the geographic considerations and product line questions, Upside Research believes that in the short term (through the end of 2004) this acquisition may actually benefit the other BPM companies more than Tibco/Staffware. However, if Tibco is able to address the issue raise above, provide prospects with a solid technology roadmap for the combined product set, and articulate a higher-level business process oriented message, it could become a leader in the BPM market in 2005.