The mainframe attraction

European powerhouse Software AG is focusing on the Middle East, and believes its crossvision suite can help its customers in the region harness the power of SOA

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By  Peter Branton Published  April 23, 2006

|~||~||~|Karl-Heinz Streibich, CEO of German software outfit Software AG, makes a slightly odd comment as he walks out of the interview: “We are a true European company,” he says. “A European alternative. Customers want that, you should remember that,” he adds. While Software AG is indeed one of the most distinguished names on the European IT scene surely any such parochial approach to the IT industry has had its day: the globalised supply chains and structures that firms employ today mean that locally focused packages are simply not as relevant as they once were. For a firm like Software AG, that has its roots very firmly in the legacy mainframe era, a charge of lacking relevance could seem to apply to more than its CEO’s use of geography to define his firm. Software AG made its name with a mainframe database system, which predates the relational databases now championed by such names as IBM, Oracle and Microsoft (the product is called Adabas, which stands for ‘a database system’: it could also be said to predate slick marketing descriptions). However, nobody should dismiss Streibich as yesterday’s man, nor should Software AG be looked at as some “Old Europe” outfit. While it is true that it was more famous in preceding decades than it is now, Streibich is confident that the firm can make best use of its legacy past to provide it — and its customers —with a very strong future. After all, while legacy is usually used with some disdain by IT industry figures, it can also mean something valuable — which is how Streibich sees it. Firms have enormous sums locked up in their existing IT systems, he claims, and Software AG has built up a range of products to help them to make the most of those investments. “After the bursting of the internet bubble and the problems IT had with the Millennium bug, there was a big disillusionment in IT,” he explains. “Now, 50% of the IT budget has been taken away from the CIO and is back in the hands of the business units again. Therefore they look more for return on inv- estment (ROI)-driven investments. This is the reason that modernisation of existing IT systems has become so popular: the IT guys were always focused on replacement: replace it, replace it and the result was a lot of silo systems side by side,” he states. The answer that Software AG has come up with to solve these sort of problems is an approach that it is not unique in adopting — but one it claims it is very well positioned to make work for users. That approach is to encourage customers to go down the service-oriented architecture (SOA) path. SOA is an approach that has been steadily gaining mindshare in the IT industry: with SOA, the user focuses on the type of service that needs to be delivered, rather than worrying about the underlying technology. This means that computer systems can be based on a range of technologies, drawn from different generations, be it the mainframe era, or open systems. “With SOA, use what you have becomes the name of the game,” Streibich states. “Modernise what you have, integrate what you have, rather than adding new systems all the time,” he added. “We are one of only two companies that have a complete suite of SOA deployment products,” claims Christian Barrios, senior vice president for Software AG’s South Region, which includes the Middle East, citing IBM as the other firm to offer the complete range of technology. “A year from now, two years from now, there will be 20 companies with this, but today we are in the forefront of technology,” he states. SOA has been dismissed as the IT user equivalent of going to the gym: everybody talks about starting but fewer seem to be actually doing it. This sort of argument cuts no ice with Streibich however. “Every big customer is doing it,” he states. “Every customer is about to grow into an SOA environment, but here is the point —SOA is not a switch on/switch off process for them to do. They start with opening mainframe applications to the web, turning legacy applications into web service by integrating applications, by automating processes and so on, it is an incremental approach,” he explains. “Therefore every company has started: they may have different levels of implementation, but every company has started to open applications to the web. This is the first start to modernising existing applications,” he goes on to emphasise. Indeed, the next decade will be “the decade of service-oriented architecture” Streibich believes, with SOA representing the latest wave of computing, after the mainframe wave, the client/ server wave, and the business applications wave. To help customers open their applications to the web, Software AG has made some investments of its own, most notably acquiring some software firms that specialise in different areas of software integration, especially extensible markup language (XML) products. XML helps to provide a common method for defining data on the web, and is widely used to underpin web services. While XML is not exactly new, Software AG can claim credit for having been among the forefront of firms to develop products based on it — it began developing its XML strategy in 1997 — so it can claim considerable expertise. Software AG has added to this experience with a number of acquisitions, such as Sabratec, a legacy integration software provider, and a piece of software called Ajax (asynchronous java- script XML), which is a tool for integrating software on the web. It now has a number of key products in the XML space, mainly focused on software integration. These products include its Tamino XML Server, for storing, managing, publishing and exchanging XML documents, and its EntireX XML integration software, designed to help customers leverage their legacy applications for e-business functions. “We know both worlds: we know the mainframe world, because we have been a world leader in mainframe databases, and we know the XML world, both help to modernise the existing systems for our customers,” says Streibich. Mainframe customers made investments in applications that were very literally built to last, with lifecycles of 20 years or more. Those customers now need to open those applications to the web, and adapt them for changing times, but they don’t want to throw them out altogether — it is just too expensive. “You know the key trend to the whole thing is that customers do not any longer think replacement when they think about modernising IT systems,” Streibich claims. “Replacement is not the name of the game but opening it, modernising it and this is exactly where our new product family crossvision is focusing on,” he adds. Crossvision is a suite of open standard software tools that Software AG launched earlier this year, aimed at helping businesses implement service-oriented architectures. It includes tools to help with such functions as legacy modernisation, by allowing the IT user to give equal priority to standard applications, legacy systems, best-of-breed and ho- me-grown systems. It also helps organisations to gain a single “view” of their data, cutting out the duplication that builds up within disparate systems. “It is very difficult to have automated processes when the input is not consistent,” says Streibich. He gives a practical example. “I spoke with the CEO of a big insurance company in the US. He told me ‘I thought we had 4.8 million customers, now we realise we only have 2.5 million’. The reason is John Smith, J Smith, Jonathan Smith are all the same guy, with the names written in different ways,” Streibich explains. Crossvision is open standards-based and is very flexible in its utilisation, Streibich claims, allowing users the freedom to decide which components to deploy — and to pay for. With mainframe giant IBM continuing to make investments in the platform — the z9 mainframe was released last September — Software AG can expect to still see healthy revenues from both its traditional mainframe products and XML integration products. “The mainframe is very definitely not dead,” says Streibich. “In the last ten years we have seen mips volume grow more than 500%,” he claims. Earlier this year it unveiled new versions of both its Adabas database and its software development tool, Natural. The firm can still claim to have many loyal customers who have built their systems on Adabas, using Natural. Overall, it is looking to grow licence sales (which are a key indicator for future performance, as they bring in lucrative maintenance and services revenues) 18 to 20% this year, having grown licence sales 19% in the fourth quarter this year. Revenues are strong in both the XML integration product lines, and the enterprise transaction systems. For the Middle East, the company is claiming that this year will see it make a big push in the region. It is here that the company’s European culture and background will come in useful, Streibich believes, explaining his earlier remark. As a European firm Software AG can claim to be more culturally diverse than US rivals, helping it to better understand the different ways of working and living that the region represents. While this may be dismissed as an example of European companies being quick to take advantage of any lingering anti-American sentiment, Software AG is going to back it up with solid investment in the region, its executives claim. For instance, it plans to launch a Middle East focused software development facility, it said at a press conference this month (the event which saw Streibich, Barrios and other senior executives fly into the region). However, as both Streibich and Barrios acknowledged at that same conference, these plans are far from concrete – rather, says Barrios, the company is open to approach from governments in the region who would want to work with it. The company has committed to opening a “minimum” of two new offices in the region, although it was unclear on what timescale. “In the last few years, with the rapid economic growth and increasing global integration, the Middle East has evolved as one of the fastest growing and most exciting software markets globally. Today, the global software market is growing at an average of approximately 12.5%, with the Middle East being the second largest contributor to this growth just behind Central and Eastern Europe,” he claims. “The Middle East is also one of the fastest growing markets and holds out high potential for Software AG as well. In order to optimally harness this growth we at Software AG have taken a strategic decision to substantially enhance our focus in the region,” he continues. This focus is actually a refocus, Streibich says, although he is also keen to point out that the firm has had customers in the region for over 15 years. “This new business line [crossvision] is for us the event to re-enter and to refocus on the Middle East,” he says. “We already have more than 25 customers here in the Arabic world, so we have been present here for a lot of years,” he adds. By being present in the region, and understanding how it operates, Software AG will be able to grow its business here, Streibich claims, referring again to the company’s cultural advantage as a European company. But if that argument of cultural compatibility doesn’t ultimately work for the observer, it can also draw strength from one aspect of its culture, Streibich admits. “We are a German engineering company,” he says. “Technically, we have a very good reputation for building software products that are very reliable,” he states. And that is something that customers definitely want. ||**||

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