Non-linear changes in software industry technology and economics are up-ending the traditional notions of competitive barriers and valuation parameters. Agile development techniques are dislodging traditional economic assumptions of the buy vs. build decision. New mobile and social platforms are challenging software suppliers technologically, while SaaS and the cloud are shaking their sense of economic certainty. Will the future of the traditional software industry can end up being that of an asset in decline, or one experiencing explosive growth and a dramatic increase in valuations? In this context, MGI coverage of Software focuses on the interplay between incumbent and emerging software trends, technologies and vendors.
- Which established vendors are best positioned to succeed in the current software environment? Which are most at risk?
- Can innovation propel legacy software vendors into the new world of Software 2.0?
- Is social media an opportunity or a threat to software providers?
- What does the M&A landscape look like for vendors, investors, and users?
- Is the Buy vs. Build debate back form the dead? What is the new economic landscape?
- How will Microsoft, Oracle, Salesforce, and SAP drive the competitive landscape in software? Will a new $1 billion vendor appear?
- What can CIOs do to avoid lock-in into obsolete software technologies?
- What are the emerging best practices for software licensing and procurement?
Companies covered include Microsoft, CA, BMC Software, Salesforce.com, SAP, Oracle, Adobe and many others - public and private.
Today's announcement of the $246 million jury verdict against i2/JDA Software highlights the hidden legal risks that are often poorly understood by technology investors and management. The size of this jury award is unprecedented in the software industry and will likely have broad ramifications beyond the scope of JDA Software as a mid-size provider of enterprise applications.
In a case involving a former employee turned whistleblower, Oracle was yesterday sued by the US Department of Justice for alleged violations of GSA software contracts. Given the current economic climate and the budget challenges facing governments at all levels, we would not be surprised to see more cases like the one in question to be brought forward by other jurisdictions and involving other vendors.
The sudden departure of its CEO and other senior executives are symptoms of a larger problem at SAP - namely the lack of a clear strategic direction. In MGI's view, SAP is at a crossroads unlike anything it has faced in the recent past, and this crisis comes at a time when the company faces a deficit in an area that used to be its core strength - the depth of its management team. This research note explores SAP's challenges, risks, and opportunities, and outlines possible scenario outcomes and what they mean for investors, partners, competitors, and customers.
For investors with interest in CA one key question stands out: How does this company generate meaningful returns on a go forward basis? Is it likely to return to its acquisition strategy or has it itself become a target? In June of 2009, we were significantly positive on CA shares and highlighted that CA had similar operating characteristics to BMC Software (BMC) and near identical MGI-X measurements but at the time, the company was trading at a discount to BMC's EV/Revenue multiple. Since then, CA shares have moved up from $17.62 on June 25th 2009 to $22.44 on September 23rd 2009, or a gain of about 27% (+$0.04 dividend) while BMC shares have appreciated by 11% during the same period. In this note, we look at various value creation scenarios for CA.
Page 1 of 3