Wiring the Web for E-business

By Lindsey Townsend

Sterling Software is betting the business on e-business.

As a leading provider for the application development, information management, and system management markets, the software giant already has products in use by more than 90% of Fortune 100 companies. Worldwide revenues last year were $476.7 million.

Now the Dallas-based company is positioning itself to pour the highways and set up the traffic lights of cyberspace business as well. In September, Sterling purchased Information Advantage, Inc., a Minneapolis-based provider of web-based business intelligence software, for $168 million. “The acquisition of Information Advantage takes Sterling Software to the forefront of the business intelligence market,” said Sterling L. Williams, president and CEO. “Portal technology is changing the rules of business intelligence, and with this acquisition, we’re helping to write those rules.”

Industry watchers agree that the purchase of Information Advantage dovetails with Sterling’s mission to go after fast-growing markets where they can attain leadership status. “Sterling is a solid company financially that has exhibited terrific execution of its business strategies over the years. The recent acquisition of Information Advantage definitely helps them fill in one of their weak spots and fulfill their mission of developing Internet applications,” said Brian Goodstadt, equities analyst with Standard & Poor’s.

“The acquisition gets them into the information portal business, which is an exciting area for them with high growth potential,” Robert Johnson, a senior technology analyst with ABN AMRO. Sterling’s voice mail products, which include system management solutions and intranet products that add Web capabilities to legacy data and applications, are also “very much the future. They’re very smart to be doing that,” he said.

With the recent Information Advantage purchase, Sterling announced the creation of its new Business Intelligence Division, which will include the EUREKA product family-from a web-based integrated query, analysis and reporting product for typical business users to a high-end server-based production analysis tool for enterprise analysts. EUREKAIntelligenceTM, a new 100% Java, web-based tool, enables users to “slice and dice” and drill into live data via graphical, interactive views including charts, reports and tables. All the products are touted to be flexible, scalable and open.

The enhanced flexibility of such enterprise application packages, which now allows them to interoperate with custom applications or third-party software products, is a major industry shift and greatly broadens their appeal to many different industries, according to a recent article on key trends in application development in Software magazine (October 1998). “E-business is creating a race to implement responsive software architectures,” according to John P. Desmond, editorial director.

Driving this trend towards scalability and flexibility is the continuous need for IS managers to increase connectivity and portability of applications and build systems that interoperate while still demonstrating the business value of a major technology investment to corporate management. IS and non-IS managers alike can be frustrated at the cost and complexity of the task when it comes to the daunting task of turning data assets into real information

“What we are seeing now is that information can be available to anyone, anytime, anywhere. The real trick is going forward and learning how to pull out the knowledge from the scads of information that’s out there in all of its various formats…corporate databases, slide presentations, Excel spreadsheets… To be able to extract information and present it in a uniform capability is something we excel at,” said Geno P. Tolari, executive VP and COO of Sterling Software. “We have end-to-end capability in that process, because we also have the tools to make sure that the information is accurate and secure, along with backup and storage management capabilities.”

Tolari said that the development of e-commerce is having more of an impact on business than any technology since the telephone. “All of these organizations now are trying to embrace the Internet as a method for doing their business electronically. We offer the tools to enable and integrate mission-critical applications for businesses in an e-based environment, and we also have the systems management capability to ensure that those applications are up and available 24 hours a day,” he said.

Some industry observers agree that Sterling’s migration to web-enabled applications makes sense. “I think those applications are a critical area for them to be focusing on, and their COOL product line addresses the need for development of the enterprise e-based solutions,” said Carl Sutherland, president of Corprasoft, which develops productivity software solutions for legal departments. One of Sterling’s flagship lines, Sterling’s COOL products offer solutions in component-based development as well as the enterprise application development tools market.

“We’re the vendor of choice today for enterprise-scale or very high-end applications…Component-based development (CBD) is the choice of the future in application development, along with integration. As companies continue to consolidate, acquire,and merge, they need the state-of-the-art tools to integrate their legacy systems and applications,” said Tolari. “We’re a leader in that area.”

Sterling’s strong emphasis on systems management is also critical to their continued success, according to Sutherland. “People are finally waking up and realizing the benefit that good systems can deliver to an application in helping them achieve their organizational goals. McDonald’s is a good example. Not many people would say they make the best hamburger in the world, but the products offer an end quality that is pretty uniform, whether you purchase them in Singapore or Dallas. Those systems are really crucial, because they can be the key to enabling and facilitating an organization’s long-term growth,” he said.

Worldwide, the system integration services market is estimated to grow to $76 billion in 2002 from $53.3 billion in 1999, according to IDC. This represents much of the investment that IT organizations will make in building the software infrastructure needed to compete in the 21st century.

And according to the Newport Group, an IT research group, the investment that corporations are making in web applications as a percentage of their total IT budget is rising fast-from 10% in 1998 to 23% by the year 2000-with a projected 30% by the year 2005.

But some experts warn that Sterling will have to stay on its toes to stay ahead of the pack for good. “They’ve done an outstanding job of rolling up a lot of small companies into their existing structure, which is hard to do. But their ideas are pretty well known, and there is a lot of competition out there. If they have problems with software or their service is not good quality, they could get into trouble. And while they claim that their Java application is scalable, I don’t see that they have that critical component right now to ensure true scalability. If I were them, I would look at that very carefully,” said Sutherland.

And in an industry that is still consolidating rapidly, including the recent acquisition of Platinum Technology by Computer Associates, “My only caution to Sterling would be to keep their pedal to the metal in their acquisition quest,, or they could be one of the companies that gets consolidated themselves,” said Johnson. With the purchase of Information Advantage, Sterling completed its 35th acquisition.

While Tolari acknowledges a tremendous amount of competition, he said that it also increases the opportunities the company has for “coopetition,” in which vendors work closely together to meet customer needs. “A lot of people think that the competition is a problem, but I see it as an opportunity to maximize the potential that we have out there. We have to stick to our knitting and continue to be a leader wherever the new technologies are converging. That’s how we maximize the return for our shareholders,” he said.

Meanwhile, analysts are watching this particular chess game with a keen eye. “There’s a huge opportunity in the industry, but there are a lot of players in it right now. No one is very clear on how it will all play out,” said Goodstadt.