Ghalimi sought to dispel recent speculation about Intalio’s future strategy in the wake of recent merger and acquisition activity (i.e. Tibco Software Inc’s acquisition of Staffware Plc) and rumors that the company is setting itself a new corporate agenda.
We’re not going out of the BPM market. Rather we’re focusing on the most profitable segment where our software is differentiated, he said.
The opportunity that Intalio is now chasing after is building and running process extensions for large packaged business applications, or in Intalio parlance application process extension. This is a segment of the BPM market where Intalio feels it can best leverage the competencies of its Intalio n3 process modeling and runtime execution platform.
We’re essentially building and executing customized processes that run on top of, and across, major business applications, Ghalimi said, adding that the benefit of Intalio’s neutral, standards-based platform approach is that it removes the need to do custom coding and reengineering of process logic within the native business application.
Ghalimi said the principal reason for sharpening the focus of the company is because the value proposition of BPM has become muddied as more and more software vendors recast their tools and applications under the BPM umbrella.
We’re no longer going after the wild BPM market which now includes everything from business rules engines to process modeling tools.
There’s no longer a clear value proposition for BPM anymore. We’re focusing on one opportunity within this space with a much clearer product and go-to-market strategy.
Intalio says it will initially focus on SAP and Siebel installations, though it also has its sights on PeopleSoft and Oracle.
Ghalimi sees a good opportunity to penetrate SAP installations, which he sees as a the most immediate and interesting market opportunity, in particular to help hoards of SAP customers to migrate over to newer platforms such as SAP R/3 Enterprise Core 4.7.
According to Ghalimi’s calculations, less than 1% of SAP’s R/3 customer base have moved onto 4.7. He estimates the upgrade cost will be on average $15m, a large chunk of which will be attributed to reverse engineering complex ABAP coded systems originally deployed in the late 1990s.
Intalio will make this less painful by taking the coding effort away from the SAP environment. Intalio’s platform will reverse engineer the process part of the migration and apply that to target version 4.7.
With a complete process-capable version of SAP NetWeaver [SAP’s own application integration framework] not due out for another two years at least, Ghalimi said, We’ll allow customers to delay upgrades until the last possible upgrade release.
So how big is this market potentially? It’s huge, according to Ghalimi. This is by far the largest segment for BPM. There are over 22,000 installations of SAP alone.
Ghalimi estimates that companies will be spending $13bn on migrating from what he regards as legacy business applications. It’ll be bigger than the Y2K bug, he claimed.
Intalio, having earlier this month closed an $11m round of venture funding (bringing its total funding to over $34m), is now set to reorganize itself around this new market segment.
The company issued a statement last week saying that it has created 10 new positions and eliminated 18 as part of the reorganization. Intalio stressed that 80% of its engineering has been preserved and that 50% of its direct sales force has been redirected to partner channels. In total the company’s headcount is around 40.
As part of the next corporate phase of its strategy the company expects to announce new software products that are currently being developed in stealth-mode under the codename APEX (application process extension) later this year. APEX is being developed in parallel with the core platform which has 15 customers.
We expect to go to market publicly in early September, Ghalimi said.
Intalio however is not the only company to address this space. You never want to be alone in a market, Ghalimi said pointing to internal developers as not only Intalio’s primary competitor, but also its potential champions as well.
Our first competition is expensive ABAP programmers doing coding manually.
These developers will want to become more productive, for fear of losing their jobs to Indian outsourcers, and will soon realize that manual coding is silly. Hence, ABAP developers may well be our best customers in the end, Ghalimi said.
Ghalimi also dismissed smaller vendors such as IntelliCorp Inc as a serious, long term threat.
These types of companies really offer SAP customization tools that simply generate ABAP code. They don’t provide a platform for running bits of a process in SAP or Siebel.
We go a lot further. We have process design tools and runtime tools to execute processes that span across SAP and Siebel, in effect integrating ERP with CRM.
Our beachhead market is the 800 or so joint customers of SAP and Siebel.
