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A Winning Combination: Software-as-Services Plus Business Consulting and Process Services
By Laurie McCabe
January 30, 2004

UPDATED: Consolidation in the growing Web services management software space continued as Digital Evolution acquired Flamenco Networks for an undisclosed sum.

The deal ends speculation about the status of Atlanta-based Flamenco, which had not issued product upgrade news since October 2003. The company makes specialized network infrastructure for enterprises that want to install secure, service-oriented architectures based on the SOAP protocol.

Flamenco’s software allows IT network and security operations to enforce security policies, provision access and make it possible for trading partners to help themselves to services. Digital Evolution has already added these features to its SOA management platform and its flagship product, the Digital Evolution Service Manager.

Web services, sometimes lumped with the broader SOA category, is a software model typified by application-to-application communication. Over the last few years, the software space has shown a trend of moving toward Web services to automate their networks, making it easier for IT personnel.

With their clout, IBM, Microsoft and BEA Systems are leading the way in the market. Yet smaller companies, including Flamenco rivals Infravio, Westbridge Technologies, Systinet, Amberpoint and Actional, have come to the fore in a space that research firm ZapThink says will be worth several billion dollars over the next few years.

Ian Goldsmith, vice president of product marketing for Digital Evolution, said the company considers itself the No. 1 player in the broader market for “SOA fabric,” which goes beyond Web services management to include security, metadata management, provisioning quality of service and hosted services.

“This is our alpha-male release,” Goldsmith told internetnews.com. “We’re the big dog of the space that’s basically saying ‘here we are, come get us.’ Right now, we don’t have any competition that’s within striking distance.”

While Goldsmith declined to say if Digital Evolution would acquire more companies, he did say the company would likely develop its business process management offerings over time.

“This acquisition makes sense for both Digital Evolution and Flamenco Networks,” said ZapThink analyst Jason Bloomberg. “Flamenco’s strength in managing B2B Web Services, as well as their ability to provide the infrastructure for a hosted Services environment, complement Digev’s strengths nicely, and will enable Digev to bring a deeper, more comprehensive product to market.”

Bloomberg said it became obvious Flamenco was in trouble when Network Computing magazine gave Flamenco’s technology a failing grade. However, he noted the grade reflected a poor product direction choice on the part of Flamenco, rather than a problem with its core technology.

“Fundamentally, Flamenco’s core technology is sound, and will enable Digev to provide greater value to its customers,” Bloomberg told internetnews.com.

Flamenco CEO John Hanger will be assisting with the transition but not joining Digital Evolution. However, all other Flamenco employees are joining Digital, which will maintain offices in Atlanta, with product research and development to continue as planned.

Customers and partners of Flamenco will now join Digital Evolution’s customer base, which includes Farmer’s Insurance, Mercury Insurance, Nissan North America and Zenith Insurance.

The purchase wraps up a solid couple of months for Digital Evolution, a Santa Monica, Calif., maker of Web services management and security software, which two weeks ago bagged $15 million in series C funding. The company is backed by investors, including Redpoint, Mellon Ventures, Paladin Capital Group, and Palisades Ventures Fund.


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