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Mercury Makes SOA Buy
By Clint Boulton

January 9, 2006

Mercury Interactive has offered to buy Systinet for $105 million in cash to get a foothold in the market for managing distributed computing systems.

Mercury decided to acquire Systinet to help its customers manage business services in service-oriented architectures (SOA) and Web services .

While known for its intuitive management software for applications and general IT governance, Mercury lacked an offering for managing distributed computing environments that rely on SOAs and Web services.

In Systinet, Mercury will benefit from two main products: a registry that serves as a sort of Web yellow pages for customers looking for business services, and a software engine that facilitates policy creation and management to ensure that only conforming services are published.

Both products help customers establish contracts and service level agreements over the Internet.

Mercury CEO Tony Zingale said his company is acting now to capitalize on the growing market for SOA applications, which IDC said nearly doubled in 205 to over $4 billion. IDC further expects the market will grow 45 percent a year to top $14 billion by 2009.

“SOA allows you to break applications into small, configurable, reusable components,” Zingale said on a conference call today, noting that there is a significant push afoot to help customers gain more business value from IT. “These components, or services, hold great promise for the industry.

“We intend to be the leader in helping customers gain business value from SOAs,” he said.

Mountain View, Calif.’s, Mercury will have its hands full with competition from IBM, CA and HP, all of whom have some degree of SOA management software from acquisitions or in-house development.

But none of those rivals have the combination of registry and policy enforcement Mercury will gain should the deal succeed this quarter as planned and the company’s ongoing fiscal restatements from 2002-2004 for the SEC don’t interfere.

Many industry experts had been predicting acceleration of consolidation in the SOA governance space, given its importance to enterprises and the fact that some larger management software vendors don’t have SOA-specific pieces.

ZapThink Research analysts said that because SOA governance overlaps with other markets, “a convergence of capability is the recipe for significant consolidation resulting in a shakeout of the market that will lead certain vendors to merge or get acquired…”

“The SOA governance space is clearly ripe for consolidation, and Systinet was the obvious next domino to fall,” said ZapThink analyst Jason Bloomberg.

He noted that consolidation has happened many times in the SOA marketplace, including the native XML data storage space in 2003, the Web services management space in 2004 and the XML acceleration appliance market in 2005.

At the end of the day, Mercury is the latest larger management software vendor trying to fill a hole.

Just last week, CA agreed to purchase application management software player Wily Technology for $375 million in cash.

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