Yesterday, I was surprised to learn that IBM is acquiring webMethods from Software AG (and also StreamSets, but I’ll focus on webMethods here). It surprised me for two reasons. First, private equity firm Silver Lake completed its acquisition of Software AG (previously a publicly traded company) on September 28. Second, IBM offers an API management and integration product that competes well with webMethods. Both vendors were Leaders in The Forrester Wave™: API Management Solutions, Q3 2022. Software AG was a Leader in The Forrester Wave™: Integration Platforms As A Service, Q3 2023. IBM also made a strong showing. Why did IBM make this acquisition, and what does it mean for customers?
This Was Probably The Plan All Along
This announcement comes less than three months after Silver Lake completed taking Software AG private and eight months after the announcement of that acquisition. webMethods is the premier product of Software AG. It provides the most revenue for the company. If you’re IBM and wanted to acquire webMethods when Software AG was publicly traded, imagine trying to convince shareholders to sell the goose that lays their golden eggs and leave shareholders with what’s left. It’s far easier to convince a private equity company to buy everything and sell you what you want while it finds a buyer for the remainders that you don’t want. Therefore, I have a hunch that Silver Lake already has a buyer lined up for the rest of Software AG and that we will hear a second announcement soon.
Why? To Be Anti-Competitive
webMethods fills no gaps for IBM. I rank its API management’s current feature set is somewhat stronger than webMethods but not by a significant difference. Although I believe that webMethods’ iPaaS is overall stronger than IBM’s App Connect, the latter is still a strong product. My instinct is that IBM did this to take out a competitor before someone else buys webMethods and turns it into a stronger threat, and I predict that IBM will cause one of these two product lines to wither on the vine: Milk it for as long as IBM can for revenue without any significant R&D, and let it live a zombie life of quiet desperation like other acquisitions. Will IBM starve webMethods, though, or will it pivot to webMethods and starve its previous product line? It’s too soon to know, but typically, it’s the acquired product that gets starved.
IBM Vs. Software AG: API Management
IBM is most notable for its beyond-REST support. It is a rare example that can support digital products composed of REST and Kafka topics, with user onboarding to both from the developer portal. Convergence of event-driven architecture and APIs is a key trend wherein IBM leads and Software AG lags. IBM’s recent acquisition of GraphQL startup StepZen signals that IBM may keep pushing beyond REST as interest in GraphQL rises, especially in retail and banking. On the other hand, Software AG has provided better support for service mesh integration and stronger API lifecycle management, including customizable lifecycles with transition policies.
IBM Vs. Software AG: Integration
Software AG boasts more connectors. Although IBM Sterling is the stronger brand for B2B integration, it is poorly integrated with the rest of its integration products. webMethods B2B, in contrast, has a very well-integrated user experience with the rest of webMethods. I also prefer webMethods’ ease of use in general. IBM, though, has invested more in AI-supported features than Software AG, positioning it for greater gains in user productivity. On the other hand, IBM has IBM MQ and Apache Kafka for message brokers. Software AG sells Universal Messaging, a broker that Forrester never hears about unless it’s a customer seeking to dump it. And given that it’s not under the webMethods brand, it is unclear if IBM will acquire Universal Messaging.
What’s Next?
Software AG shines when it comes to strategy. I have long found Software AG’s vision and roadmap more compelling than IBM. If IBM lets webMethods die on the vine, let’s hope that IBM can retain some of webMethods’ key leaders and visionaries into its product team. Buyers of either company’s product lines should work with IBM to gain clarity on what this acquisition means for them. Expect obfuscations about the real investments that it plans to make, so work hard to read between the lines.
Software AG’s latest marketing schtick has been “iPaaS: The Farewell Tour.” Turns out that Software AG is the one saying farewell to iPaaS.
