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Wednesday, May 16, 2007

Agile System Gets Acquired

I wrote a brief note on Oracle’s acquisition of Agile Software. While the top-tier vendors boast of wide ranging integrated functionalities with deep pockets, specialized solutions like PLM, SRM, MDM, Content management, BPM, Document management, Compliance solutions, Vertical solutions coming from best - of - breed players continue to remain attractive to buyers of different spectrum. Finding it difficult to beat them in their own game, cash rich mega vendors are doing what they are best at doing : buying out point vendors.

I was sitting next to the amiable Bryan Stolle, Agile's chairman in a recent meet. Agile is the last standalone PLM standalone solutions company, after the acquisition of its closest competitor, Matrix One, by Dassault Systems last year. After its 2003 acquisition of Eigner, which gave the company a solid foothold in the European discrete manufacturing market, it acquired Cimmetry in early 2005. Cimmetry’s visualization flagship product, AutoVue, now has over 9,500 customers in a number of vertical industries, including manufacturing, electronics, architectural/engineering/construction, and industrial. Agile is expanding its product portfolio to support the CPG industry. In mid-2006, Agile announced the acquisition of Prodika, a PLM applications vendor with a focus on CPG.

Oracle has acquired more than 25 companies – of varying size & color to shore up its strength in the enterprise application space. The acquisitions have been in almost every enterprise category, ranging from ERP (enterprise resource planning) to CRM (customer relationship management) and grid computing to business intelligence. This is part of oracle’s stated strategy of acquiring scale and depth by acquiring complementary products and customer bases which it can cross sell a wider range of products to, in competition with MIS players in the MISO family. Agile provides Oracle with a decent set of solutions in the SCM and PLM enterprise solutions space. The thinking behind the merger is that there is limited or no overlap between oracle’s existing product range and that of Agile. Oracle has committed approximately 5.0x maintenance revenue multiple for Agile – a position that is more or less its benchmark based on previous acquisitions. On paper, this appears to be a sound deal for Oracle - Agile has a significant customer base and its maintenance renewal ratio is also said to be on the higher side. For Oracle, looking at increasing its footprint in the manufacturing space, this opportunity is a god send one.

In the enterprise PLM software space, clearly vendor consolidations will reduce the number of players and further strengthen those that already hold a substantial share of the PLM market. This would force collapse a number of products to be highly feature rich. This would mean that typically functionalities that two years ago were still offered as separate modules/products may become part of larger product suites. Oracle shall clearly gain with this acquisition as it braces to take on the likes of IBM, Dassault & SAP. Read the full note here.

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