By Rupert Colbourne, Chief Technology Officer at Orbus Software
The recently announced merger between Bizzdesign and MEGA International, together with an unspecified third party, is an exciting development in the Enterprise Architecture (EA) tools market and follows SAP’s acquisition of LeanIX in the last 12 months. It underpins just how much interest and activity there is in our thriving sector and reflects how EA continues to grow as a key strategic enabler of successful enterprise transformation.
As CTO at Orbus Software with 20+ years’ experience in the EA tools space, I’ve seen many twists and turns. The consolidation of these two (or three) legacy EA tool vendors continues a recent dramatic trend that will send further ripples of interest (and some confusion) through the market. It will force both customers and competitors to evaluate their next move.
I recall M&A of legacy EA tools over the past two decades: First, there was IBM’s acquisition of Telelogic in 2008; then Software AG acquired Alfabet in 2013; Planview acquired Troux in 2016 and in the same year, Erwin added Casewise to its portfolio. Interestingly, only one of these vendors, Software AG – a behemoth of enterprise IT solutions – remains a prominent player in the EA market today. Gartner’s Magic Quadrant and Forrester’s Wave for EA tools leave little doubt about this reality. However, those were all acquisitions by a larger non-EA (or adjacent) player, not the coming together of two or more legacy EA tools.
What does the future hold then? For the vendors involved, this merger will no doubt offer many opportunities, from expansion of product offering to consolidation of costs, and growth in enterprise value. However, alongside the opportunities will be the inevitable counterpart challenges relating to product integration, alignment of business strategy, and possible stagnation of innovation whilst technical debt has to be mitigated or replaced.
I’m stating the obvious here, but customers whose vendors are undergoing a merger – regardless of the industry – need to exercise caution. History tells us that M&A in the EA space brings a significant degree of uncertainty. As a result, customers and prospects of those vendors will be forced to ask difficult questions about the future of their EA tooling investments. As the digital transformation market becomes increasingly unpredictable due to advancements of generative AI and digital twins, as well as increasing demands for regulatory compliance, businesses need stability around the continuity, innovation, and support of the EA products that are deemed critical to their strategic decision-making.
Given this announcement, and putting myself in a customer’s shoes, here are the most pressing questions that jump out at me:
Will operational changes impact customer experience/service?
“Even the smallest operational change can have a significant negative impact on customers,” according to the Harvard Business Review.
Merging three businesses will likely require a close look at team structures and realignment. As a result, customers may lose direct contact with key customer success representatives, account managers or support personnel, leading to longer response times and a decline in personalized service. Relationships that have built up over months, years, or decades can be lost in an instant.
This may be compounded by the fact that the different company cultures/values across these EA tool vendors may clash, especially in terms of how customer service is managed. This may lead to inconsistent customer experiences as merged teams struggle to align their service approaches and standards, resulting in further potential dissatisfaction for their customers.
Will there be a cloud-native EA tool offering to come from this merger?
Customers of Bizzdesign and MEGA are likely hoping that this merger will result in a modern, cloud-native alternative to their current legacy (on premise/hosted) EA tool. It will be interesting then to see if the third (unnamed) vendor can bring a cloud-native offering to the party, although it seems unlikely given what we know about the current dynamics of the EA market.
Another possibility, albeit speculative, is that the new consolidated entity could develop a brand-new cloud-native offering. Speaking from first-hand experience, I know how long and costly it is for a vendor with an on-premise/hosted product to engineer and launch a ground-up cloud-native tool into a highly competitive EA market. Not to mention all the operational complexities, pricing challenges and personnel needed to make it a success. We launched OrbusInfinity some years ago to provide our customers with the benefits of a cloud-native product: agility, scalability, and integration advantages that only cloud-native platforms provide. We wait with anticipation to see if this merger can offer a truly modern, ground-breaking EA tool.
What does the product (which product?) roadmap look like and how much investment will go into innovation?
Speculating somewhat on the business strategy here, but let’s assume customers want to benefit from the different use cases that each of the acquired products provide. As a CTO or buyer, I’d be seriously weighing up the extensive effort required to integrate (or re-platform) multiple substantial products into one seamless offering. This opens up a can of worms and uncertainty regarding the future direction the product (or products) and the overarching product vison and strategy.
A key concern is the potentially significant investment needed to mitigate not just the existing, but now expanded, technical debt. The effort and cost to integrate legacy technologies will likely divert investment away from innovative, value-adding product capabilities. If I was a customer, I would be questioning which product strategy will be followed and which roadmap will dominate the others – leading to the next important consideration…
Will there be forced migration from either Bizzdesign or MEGA (or the third vendor)?
One likely option for this new entity is to select one of these EA tools to dominate whilst they execute plans to sunset the other two tools, essentially forcing customers to migrate. Ultimately, customers adopt and remain with an EA tool based on its differentiated capabilities and value. If they are forced to migrate, they will, by definition, lose the value from that differentiation. More broadly, a forced migration can cause headaches such as user confusion, downtime, and the need for additional training. Additionally, customer data migration poses risks of errors or data loss. There may even be a price tag attached to migration or unforeseen downstream costs as their existing adoption footprint is applied to a new pricing model. Which leads to my last consideration…
How will customers be charged going forward, and will it be within approved budgets?
The final consideration is commercial. Bizzdesign and MEGA (and the third vendor) may have different pricing models and may focus on different ‘value-drivers’ when pricing their offerings. It could be a subscription model or a perpetual license model. It could be user-driven or consumption-based. There will be volume discounts offered for different components of the pricing model.
The new entity will have the challenge of consolidating this, but it also poses a number of serious questions for their customers. How will they be charged going forward if they’re moved to a new or significantly altered pricing model? Will they be paying more? Will they be paying for capabilities they don’t need? Do they need to pay for additional training, or data migration? The list goes on…
Business cases for the investment in EA tools may account for periodical adjustment to pricing model but not for major shifts. Customers will need clarity on what their expected investment in their EA tool looks like for the next 3-5 years. The question is, how soon can they expect that clarity?
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Rupert Colbourne has been with Orbus Software since its inception over 20 years ago, playing a pivotal role in shaping the company’s direction and product strategy. His deep expertise in enterprise architecture, combined with a hands-on approach, has guided Orbus Software through the ever-changing landscape of the EA tools market. His insights and leadership continue to drive Orbus Software's success in delivering transformative solutions.