Plans to Focus on aPaaS Market Signal Challenges Ahead for Progress


Archived Published: 30 April 2012 ID: G00234797

Analyst(s):

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Summary

Progress Software will divest its application infrastructure and middleware business and focus on core development and application platform as a service. While future-oriented, Progress will still compete in a crowded market.

News Analysis

Event

On 25 April 2012, Progress Software announced that it would focus on application development and deployment platforms. As part of this realignment, Progress plans to:

  • Divest 10 product lines

  • Reduce operating costs by $55 million

  • Repurchase more than $350 million worth of shares

The product lines that Progress is selling are:

  • Actional

  • Artix

  • DataXtend

  • FuseSource

  • ObjectStore

  • Orbix

  • Orbacus

  • Savvion

  • Shadow

  • Sonic

Analysis

Despite a product portfolio that includes many well-designed components, Progress has suffered from poor sales and management performance. Faced with subpar results in previous quarters and a looming proxy fight, Progress has decided to exit several businesses and focus the company on its application development and event processing businesses, with the intent of becoming an application platform as a service (aPaaS) player. While the aPaaS market is forecast to grow at a compound annual growth rate of over 30% in the next few years, Progress is going from being one of 10 or so vendors in the middleware and application infrastructure space to being one of 40 or so in the aPaaS arena.

Some of the products that Progress is planning to sell, such as Actional, Shadow and Savvion, have likely buyers because they are part of other companies’ offerings or are a good strategic fit. For others, such as Sonic and DataXtend, the likely future owner is not obvious and the outcome will be more variable. Several product lines, notably Orbix and ObjectStore, will likely be sold to organizations wishing to monetize the installed base. Those product lines that do not find buyers shortly will face skills attrition within the Progress organization, making restarting them as viable products increasingly difficult.

Progress will keep its core OpenEdge business as well as its Corticon, Apama and Control Tower products. The independent software vendors (ISVs) and enterprise customers that have used this technology are not likely to suffer any immediate impact. The entire future strategy is based on returning the company to profitable growth within the next 18 months. If this does not happen, we believe the new aPaaS strategy that is designed to accelerate growth will not come to fruition.

Recommendations

Customers of OpenEdge, Apama, Corticon and Control Tower, which are the products that Progress plans to retain:

  • Expect sufficient support over the next year.

  • Closely monitor the progress of the company during that time to ensure that Progress maintains its product and support investments.

  • Implement exit strategies if the maintenance and support of these products appear to deteriorate.

Customers of Artix, ObjectStore, Orbacus and Orbix:

  • Devise exit strategies immediately, and strongly consider halting new investment and transitioning to alternative products or designs. Gartner believes that these products are unlikely to gain ongoing investment even with new owners.

Customers of Actional, Sonic, DataXtend, Savvion and Shadow:

  • Develop an exit strategy and limit new investments, but do not start to actively migrate away from these products.

  • Implement your exit strategies only if buyers do not come forward to support these products within the next nine to 12 months.

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