Software AG analyst briefing at Integration World

Thanks to Air Canada’s ever-shifting schedule (why does the same flight number that I flew to Orlando two weeks ago now leave an hour later?), I arrived too late to the analyst briefing to hear the Peter Kurpick and David Mitchell of the webMethods division, but did sit in on the latter half to hear about the enterprise transaction systems division, which includes their Adabas and Natural products. There’s a press release in the packet about a new Software AG release due for tomorrow: Natural for Ajax, reminding me that there’s a ton of companies out there with Adabas and Natural applications on their mainframes that are still supported by Software AG, and need to find some alternatives to keep the life in those systems. I have a few financial services customers that have mission-critical Adabas/Natural applications, and they have no intention of rewriting them for some other software platform.

Simply replacing the mainframe with some other technology platform isn’t always the best solution, and is a total non-starter in many situations where there’s a significant amount of legacy business logic and data in those systems. I’ve been referring to mainframes as "just big servers" for quite some time now, and there’s no reason not to think of them that way: big database and back-end application servers that serve a useful purpose within large organizations. You might not start building a new system from scratch on a mainframe, but there’s often good reasons to keep them around if they’re already in place. Software AG, by providing tools such as Natural for Ajax, is providing some of the tools that organizations need to make the transition into more modern technology, without requiring a full rip-and-replace. I’m not sure that I completely agree with their vision of a mainframe Renaissance, however.

We had 20 minutes of corporate financial review from the CFO, which reminded me firmly why I went into engineering instead of accounting; I’m sure that there’s many capable financial analysts who have written about the numbers so I can slack off here. In looking at the overall financials, I’m reminded of the presentation that I saw at the New Software Industry conference earlier this year about how the proportion of product to services shifts as a software company ages: if you ignore software maintenance revenue — which is about 2/3 the size of the licence revenue — then the product-to-service ratio is about 1:1, and if you include maintenance in services, then the ratio goes to about 3:5. The theory is that as software companies age, they get better at providing services, and therefore it’s more profitable, hence tend to encourage the growth of that part of their business. This is completely off on a tangent, but I’m trying to keep my mind on the presentation as the CFO discusses the "Brazilian effect", and I have no idea what he means (since I assume that he’s not talking about the type of Brazilian effect that you get at a salon).

I had a chance to review the materials from the presentations that I missed, and there’s some interesting things there. This is a condensed version of what will be presented to customers here at Integration World, and I have a one-on-one meeting with Peter Kurpick on Wednesday so will undoubtedly see this again over the next two days. And hopefully have some more insightful comments at that time.

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